mobility

1. mobility

2. Preface • Using data from China, if you estimate an agriculture production function as: • The coefficient of labor is zero. This suggests a minimal marginal productivity of labor. • This is mainly because labor market in agricultural sector is highly inefficient due to labor immobility under the concurrent property rights system in China.

3. In Taiwan • There are around a million of foreigners in Taiwan: 4-500K are foreign brides, while another 500K foreign workers. • At the same time, around one million Taiwanese are working in China.

4. 3 major destination countries • US, Canada, and Australia. • C and A adopt a point system as the main channel to receive immigrants, while the US put more weight on family unionization.

5. Immigration Policy in Canada • Immigrants are individuals not born in the country that they reside in • Both the number of immigrants and the source countries of immigrants have changed considerably over the last 50 years

6. The number of immigrant arrivals fluctuated a lot, and currently has steadied out to around 250,000 per year

7. Immigrants from Europe have declined and immigrants from Asian have increased substantially since the 1980s

8. Immigrants from Europe have declined and immigrants from Asian have increased substantially since the 1980s

9. Of immigrant arrivals in 2002, most reside in Toronto, Vancouver, and Montreal

10. 4 ways to immigrate to Canada • Family reunification: no consideration of skills or success in labour market: let in based on closely related to family members already in Canada • Refugees: also no consideration of skills: let in based on humanitarian grounds – to facilitate escape from political persecution or violence • Point system: assessed based on likely contribution to country • Business investors/entrepreneurs: enough money to and business plan that leads to new employment

11. The point system:what characteristics do immigrants score points on: • Age (21-44 generate maximum points) • Education (15 points for BA, 16 points for advanced degree) • Specific vocational training and occupation: individuals not eligible to immigrate if no perceived demand for occupation • Pre-arranged Job • Language Ability, interview performance, and family living in Canada

12. Many economic and social issues related to immigration • What is the impact of immigrants on native outcomes? • How do immigrants perform in the labour market? • What is the overall fiscal impact of immigrants (how do they affect government revenues and transfers)? • Who should be admitted to Canada? Does it matter? (this is more a normative issue)

13. What is the economic impact of immigrants? • Specifically, what happens to native Canadian’s wages when more immigrants arrive? • Recall our labour demand and supply model • Wage for native born depends on where labour supply = labour demand

14. How to think about effect of immigration on labour market • We often model immigration as an increase in the labour supply for workers with similar characteristics as immigrants • In the case of Canada or Australia, we also tend to focus on local immigration – the arrival of 100,000 immigrants in Toronto, for example, likely does not increase the labour supply in Prince George by very much • For exposition, consider immigration affects the labour supply of low-skilled workers in a particular city

15. S1 W1 N1 Immigration increases the labor supply of local workers with similar skills – the elasticity of labor demand helps determine how much this increase in supply lowers wages e.g. Impact on low-skilled labor Supply S0 W Change in wage depends on elasticity of labor demand W0 D0 N N2 N0

16. Immigration also leads to a economy-wide scale effect • More people in a local area will push up demand for products • The increase in local demand for products depends on how the extent to which citizens consume products locally and from other areas • The increase in demand for consumption by more immigrants may increase demand for workers • The increase in local labor demand also depends on what types of local products are demanded

17. This scale effect from larger local population may offset fall in wages among local native workers Impact on Supply and Demand The scale effect may not completely offset the fall in wages The effect will be larger the more citizens consume local goods S0 W S1 D1 D0 N N0 N1

18. What about local workers not exactly similar to immigrants? • Labor demand depends on cross-price elasticity from fall in wages of immigrant type workers • If immigrant workers are substitutes, labor demand will decreases with immigration (sort of another way of looking at previous case) • Labor demand will increase with immigration if complements • Scale effect still applies

19. Impact from immigration on local workers that are substitutes Substitution towards lower wage immigrant workers shifts demand left, pushing some natives out of the labor force Scale effect offsets this to some degree Impact on Supply and Demand S0 W S1 D0 D2 D1 N N0 N1

20. Impact from immigration on local workers that are complements Lower wage immigrant workers pushes up demand for other workers needed in immigrant-related production goods and scale effect also increases demand Impact on Supply and Demand S0 W S1 D2 D1 D0 N N0 N1

21. Do more immigrants lower wages? • Our discussion suggests looking at average native wages within cities before and after changes in immigration • E.g. compare change in native wages Toronto (40% immigrants) and Montreal (15% immigrants) over the last 15 years • Text gives good discussion about problems with this approach

22. Another approach: a ‘natural’ experiment • In 1980, approximately 125,000 cubans allowed to immigrate to the United States • Allowed to immigrate for political reasons, not economic reasons • Most immigrants arrived and settled in Miami, increasing the low-educated work-force by about 10 percent

23. David Card examines what happened to wages and unemployment of low-educated workers in Miami before and after 1980, and compares Miami with Atlanta, Houston and LA • In Miami: Unemployment in 1979: 8.3 Unemployment in 1981: 9.6 Difference: 1.3 • In comparable cities: Unemployment in 1979: 10.3 Unemployment in 1981: 12.6 Difference: 2.3 Difference in difference: -1.0

24. What does most of the current research suggest about the impact of immigrants on native wages and unemployment? • Generally many studies conclude possibly small negative, or zero effect on wages and unemp. From immigration • For example, one study estimates 10 percent more immigrants in city lowers wages by .2 percent • More recently, one study that matches immigrants by education and experience estimates 10 % more immigrants in city lowers wages by 3-4%

25. Gainers and losers Consumers as gainers • As wages are reduced and employment increases, the goods and services produced by this labor are increased in quantity and reduced in price. • Arecent study suggests that the influx of low-skilled immigrants (who presumably provide household and childcare services) has made it easier for American college-educated women to pursue careers while simultaneously rearing children.

26. Gainers and losers Employers as gainers • Employers of low-skilled labor are obviously benefited, at least in the short run.

27. Gainers and losers Complement labors as gainers • Any type of labor that is complementary with unskilled labor in the production process—supervisory workers, for example— can expect to gain from an influx of unskilled immigrants.

28. Two main things to consider in assimilation • Initial (entry) wage • Wage growth Let’s see some statistics and graphs

29. Hypothetical assimilation profile Earnings Immigration Entry effect Native-born Age 20 (YSM=0) 65 (YSM=45) T

30. Assimilation analysis • Who do we compare immigrants with: all natives? Natives with same education level? • Not clear in text • Typically control for education, total years of experience, and sometimes ethnic group • For example, given education and experience, do Asians that arrive in 20s catch up, in terms of wages, to native born Asians

31. Problems with measuring assimilation • If only 1 year of data, immigrants with more years since arrival are not the same as immigrants that recently arrived – may have strong (immigration) cohort effects. • To compare same immigrants over time (i.e. to net out the cohort effects), requires data over time

32. Avg. Percentage Wage Difference Between Immigrants arriving at age 25 and natives, by age group and year of observation

35. Methodology

36. Methodology (con’t)

37. Assimilation of US immigrants from Taiwan • Immigrants from Taiwan have been performing well in the US in the past decades. • Since 1980, the relative wages of Taiwanese immigrants have been growing faster than those of immigrants from other parts of the world.

38. Assimilation of US immigrants from Taiwan • Immigrants from Taiwan have been performing well in the US in the past decades. • Since 1980, the relative wages of Taiwanese immigrants have been growing faster than those of immigrants from other parts of the world.

40. Assimilation of US immigrants from Taiwan • Education and experience appear to play an important role in the widening gaps in earnings. • More recently arriving cohorts have outperformed older ones since 1980.