The effect of immigration on public finances
Ian Preston 05 November 2014
Data on social attitudes show that the perceived burden of immigration on a nation’s public finances is one of the strongest economic concerns associated with hostility to immigration. Yet recent official reports suggest an important positive role for immigration in the long-run health of public finances. This column argues that there can be no general conclusions applicable in all circumstances about whether immigration is favourable or unfavourable for public finances. But evidence is emerging on particular cases through studies of immigrant composition and use of services, and the effects of immigration on native outcomes.
Much attention of researchers and policy-makers has been directed at the effects of immigration on the wages and employment of natives in the host country (for example, Friedberg and Hunt 1995; Manacorda et al 2012; Dustmann et al 2013). But most empirical studies have failed to find any convincing evidence of substantial negative impact.
immigration, public finances
The labour market effects of immigration and emigration in OECD countries
Frédéric Docquier, Çağlar Özden, Giovanni Peri 06 October 2014
Researchers have devoted little attention to the effects of emigration from OECD countries, and the absence of detailed emigration data is the main culprit. Using a new and improved migration database, this column analyses the effect of migration on the wages of less educated native workers. The results suggest that, as far as labour market outcomes of less educated workers are concerned, governments should worry less about new arrivals and more about the potential consequences of their high emigration rates.
The basis of the debate about migration into European countries is the perception that immigrants are unskilled and poor. Hence, the narrative goes, their arrival hurts the wages and employment prospects of less educated natives. At the same time, very little discussion is devoted to the patterns and economic consequences of emigration from European countries to other developed countries. The recent high-profile book by Collier (2013) is a typical example of this approach. Yet, the data indicate this might all be misguided.
Education Labour markets Migration
OECD, migration, immigration, emigration, wages, complementarities, education
How immigration benefits natives despite labour market imperfections and income redistribution
Michele Battisti, Gabriel Felbermayr, Giovanni Peri, Panu Poutvaara 08 August 2014
Immigration continues to be a hotly debated topic in most OECD countries. Economic models emphasising the benefits of immigration for natives have typically neglected unemployment and redistribution – precisely the things voters are most concerned about. This column analyses the effects of immigration in a world with labour market rigidities and income redistribution. In two-thirds of the 20 countries analysed, both high-skilled and low-skilled natives would benefit from a small increase in immigration from current levels. The average welfare gains from immigration are 1.25% and 1.00% for high- and low-skilled natives, respectively.
A fierce policy debate with little insight from economists
Labour markets Migration
Labour Markets, unemployment, wages, immigration, redistribution, welfare, Skill Complementarities
Culture: Persistence and evolution
Francesco Giavazzi, Ivan Petkov, Fabio Schiantarelli 16 June 2014
The persistence of cultural attitudes is an important determinant of the success of institutional reforms, and of the impact of immigration on a country’s culture. This column presents evidence from a study of European immigrants to the US. Some cultural traits – such as deep religious values – are highly persistent, whereas others – such as attitudes towards cooperation and redistribution – change more quickly. Many cultural attitudes evolve significantly between the second and fourth generations, and the persistence of different attitudes varies across countries of origin.
Are a person’s values and beliefs persistent, or do they evolve – possibly rather quickly – in response to the economic and institutional environment? This is a central question, for instance, if one is interested in assessing the likelihood of success of reforms that change rules within a country. Are such reforms doomed because a country’s culture cannot be changed, or can they succeed because they can change cultural attitudes by altering incentives, and if so, over what time horizon?
Frontiers of economic research Institutions and economics Migration
US, immigration, religion, values, Culture, attitudes, beliefs
Public opinion on immigration: Has the recession changed minds?
Timothy J Hatton 07 June 2014
In the recent European Parliament elections, right-wing populist parties made significant gains. Commentators have linked the rise of these parties to growing anti-immigration sentiment in the wake of the crisis. This column examines the extent to which public opinion has in fact shifted against immigration. Survey data shows that there was no Europe-wide surge in anti-immigration opinion between 2006 and 2010, although there was a marked change in Spain, Greece, and Ireland. This suggests that populist parties’ success cannot be attributed to anti-immigration sentiment alone.
Migration Politics and economics
democracy, immigration, politics, populism, European parliament
How highly educated immigrants raise native wages
Giovanni Peri, Kevin Shih, Chad Sparber 29 May 2014
Immigrants to the US are drawn from both ends of the education spectrum. This column looks at the effect of highly educated immigrants – in particular, those with degrees in Science, Technology, Engineering, or Mathematics – on total factor productivity growth. The authors find that foreign STEM workers can explain 30% to 60% of US TFP growth between 1990 and 2010.
Immigration to the US has risen tremendously in recent decades. Though media attention and popular discourse often focus on illegal immigrants or the high foreign-born presence among less-educated workers, the data show that immigrants are drawn from both ends of the education spectrum. At the low end, immigrants grew from 5% of workers with a high school degree or less in 1970 to 20.8% in 2010. At the high end, the figure rose from 7.3% to 18.2% for those with graduate degrees over the same period.1
Labour markets Migration Productivity and Innovation
US, growth, productivity, wages, immigration, innovation, complementarities, STEM
New evidence on the durability of social norms
John Helliwell, Shun Wang, Jinwen Xu 12 March 2014
Social norms have been shown to have important effects on economic outcomes. This column discusses new evidence showing that social norms are deeply rooted in long-standing cultures, but do evolve in reaction to major changes. It draws on a fully global sample involving migrants in more than 130 countries, using seven waves of the Gallup World Poll.
Recent studies find that individuals’ social norms – as evidenced by their opinions and behaviour – can be transmitted from one generation to the next within the same cultural setting (Algan and Cahuc 2010, Bjørnskov 2012, Dohmen et al. 2012, Guiso et al. 2006, Rainer and Siedler 2009, Rice and Feldman 1997). Studies also find that the current environment – such as institutions – plays an important role in shaping an individual’s social norms (Dinesen 2012, Nannestad et al. 2014, Alesina and La Ferrara 2002, Bjørnskov 2007, Glaeser et al. 2000, Helliwell and Wang 2011, Kosfeld et al.
Frontiers of economic research Migration
institutions, immigration, social attitudes, trust, migration, Culture, social norms
Migration and wage dynamics: Evidence from the Mexican peso crisis
Joan Monras 22 December 2013
The impact of low-skilled migration on US wages is high on the US economic and political agenda. This column discusses new evidence on the migration-wages link that is based on a natural experiment – the unexpectedly large inflow of Mexican immigrants to the US following the 1995 peso crisis. States that received large inflows of Mexican immigrants saw low-skilled wages decrease significantly in the short run. These local shocks spread rapidly across the US due to interstate labour reallocation.
Despite the large inflows of immigrants experienced in a number of OECD countries, there is no consensus among economists about the causal effect of low-skilled immigration on native labour market outcomes. The reason is simple. Migrants decide when and where to go, and the implied changes in labour market outcomes determines how natives respond to immigration inflows. Overcoming this reverse causality problem is difficult. A natural experiment turns out to help.
Labour markets Migration
immigration, peso crisis
The fiscal effects of immigration to the UK
Christian Dustmann, Tommaso Frattini 13 November 2013
The immigration debate has focused on immigrants’ net fiscal impact – whether they receive more in welfare payments and other benefits than they pay back in taxes. This column summarises research showing that – contrary to popular belief – immigrants who arrived in the UK since 2000 have contributed far more in taxes than they have received in benefits. Compared with natives of the same age, gender, and education level, recent immigrants are 21% less likely to receive benefits.
The impact of immigration on the tax and welfare system and the net fiscal consequences is perhaps the single most prominent economic issue in the public debate over the pros and cons of immigration.
Migration Welfare state and social Europe
welfare state, immigration, migration, benefits, UK, fiscal burden
Language barriers? The impact of non-native English speakers in the classroom
Charlotte Geay, Sandra McNally, Shqiponja Telhaj 14 September 2013
Are children who are non-native speakers making education worse for native speakers? Presenting new research on England, this column uses two different research strategies showing that there are, in fact, no spillover effects. These results support other recent studies on the subject. The growing proportion of non-native English speakers in primary schools should not be a cause for concern.
In the UK, as in other countries, there has been a rapid increase in the number of non-native speakers. In England the number of non-native speakers has increased by a third in the last decade. Now, roughly one in nine children between the ages of five and 11 do not speak English as a first language. A significant driver of this change has been immigration, though the trend has also been influenced by higher birth rates among ethnic minority groups.