Research in Economics

Migration’s response to increasing temperatures

Cattaneo, Cristina and Giovanni Peri

Climate change can affect agricultural productivity and the incentives of people to remain in rural areas. This column looks at the effects of warming trends on rural-urban and international migration. In middle-income economies, higher temperatures increased emigration rates to urban areas and to other countries. In very poor countries, however, higher temperatures reduced the probability of emigration to cities or to other countries, consistent with the presence of liquidity constraints.

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Labour versus leisure preferences and employment in Europe

Moriconi, Simone, and Giovanni Peri

Unemployment rates vary widely across EU countries. While national institutions and policies explain much of the variation, cultural values, attitudes, and beliefs may also play a role. This column uses survey data from 26 EU countries to investigate the existence of culturally transmitted preferences for work. Country-specific preferences for work are found to have a positive effect on emigrants’ labour market outcomes, with those from countries with an above-average preference for work having higher employment rates abroad. Cultural preferences are significant enough that EU countries may never converge to the same employment rate.

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The United States, home to many of the world’s top universities, is a higher education destination for talented students from across the globe. When foreign-born students are able to find work in local economies after graduation, the positive economic effects extend beyond their incomes, especially since many pursue degrees in sought-after science, technology, engineering, and mathematics (STEM) fields.

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The Labor Market Effects of Reducing Undocumented Immigrants

Peri, Giovanni, and Andri Chassamboulli

A key controversy in US immigration reforms is how to deal with undocumented workers. Some policies aimed at reducing them, such as increased border security or deportation will reduce illegal immigrants as well as total immigrants. Other policies, such as legalization would decrease the illegal population but increase the legal one. These policies have different effects on job creation as they affect the firm profits from creating a new job. Economists have never analyzed this issue. We set up and simulate a novel and general model of labor markets, with search and legal/illegal migration between two countries. We then calibrate it to the US and Mexico labor markets and migration. We find that policies increasing deportation rates have the largest negative effect on employment opportunities of natives. Legalization, instead has a positive employment effect for natives. This is because repatriations are disruptive of job matches and they reduce job-creation by US firms. Legalization instead stimulates firms’ job creation by increasing the total number of immigrants and stimulating firms to post more vacancies some of which are filled by natives.

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Openness and Income: the Roles of Trade and Migration

Peri, Giovanni, and Francesc Ortega

This paper explores the relationship between openness to trade, immigration, and income per person across countries. To address endogeneity concerns we extend the instrumental-variables strategy introduced by Frankel and Romer (1999). We build predictors of openness to immigration and to trade for each country by using information on bilateral geographical and cultural distance (while controlling for country size). Since geography may affect income through other channels, we also control for climate, disease environment, natural resources, and colonial origins. Most importantly, we also account for the roles of institutions and early development. Our instrumental-variables estimates provide evidence of a robust, positive effect of openness to immigration on long-run income per capita. In contrast, we are unable to establish an effect of trade openness on income. We also show that the effect of migration operates through an increase in total factor productivity, which appears to reflect increased diversity in productive skills and, to some extent, a higher rate of innovation.

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The Effect of Income and Immigration Policies on International Migrations

Peri, Giovanni, and Francesc Ortega

This paper makes two contributions to the literature on the determinants of international migration flows. First, we compile a new dataset on annual bilateral migration flows covering 15 OECD destination countries and 120 sending countries for the period 1980-2006. We also collect data on time-varying immigration policies that regulate the entry of immigrants in our destination countries over this period. Second, we extend the empirical model of migration choice across multiple destinations developed by Grogger and Hanson (2011) by allowing for unobserved individual heterogeneity between migrants and non-migrants. Our estimates show that international migration flows are highly responsive to income per capita at destination. This elasticity is twice as high for within-EU migration, reflecting the higher degree of labor mobility within the European Union. We also find that tightening of laws regulating immigrant entry reduce rapidly and significantly their flow.

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Immigrants and Native Workers: New Analysis Using Longitudinal Employer-Employee Data

Peri, Giovanni, and Mette Foged

Using longitudinal data on the universe of workers in Denmark during the period 1991-2008 we track the labor market outcomes of low skilled natives in response to an exogenous inflow of low skilled immigrants. We innovate on previous identification strategies by considering immigrants distributed across municipalities by a refugee dispersal policy in place between 1986 and 1998. We find that an increase in the supply of refugee-country immigrants pushed less educated native workers (especially the young and low-tenured ones) to pursue less manual-intensive occupations. As a result immigration had positive effects on native unskilled wages, employment and occupational mobility.

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The Effects of Foreign Skilled Workers on Natives: Evidence from the H1B Visa Lottery

Peri, Giovanni, Kevin Shih, and Chad Sparber

Scientists, Technology professionals, Engineers, and Mathematicians (STEM workers) are the fundamental inputs in scientific innovation and technological adoption. Innovation and technological adoption are, in turn, the main drivers of productivity growth in the U.S. In this paper we identify STEM workers in the U.S. and we look at the effect of their growth on the wages and employment of college and non-college educated labor in 219 U.S. cities from 1990 to 2010. In order to identify a supply-driven and heterogenous increase in STEM workers across U.S. cities, we use the dependence of each city on foreign-born STEM workers in 1980 (or 1970) and exploit the introduction and variation (over time and across nationalities) of the H-1B visa program, which expanded access to U.S. labor markets for foreign-born college-educated (mainly STEM) workers. We find that H-1B-driven increases in STEM workers in a city were associated with significant increases in wages paid to both STEM and non-STEM college-educated natives. Non-college educated show no significant wage or employment effect. We also find evidence that STEM workers caused cities to experience higher housing prices for college graduates, increased specialization in high human capital sectors, and a rise in the concentration of natives in cognitive occupations. The magnitudes of these estimates imply that STEM workers contributed significantly to total factor productivity growth in the U.S. and across cities and — to a lesser extent — to the growth in skill-bias between 1990 and 2010.

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The Labor Market Effects of Immigration and Emigration in OECD Countries

Peri, Giovanni, Frédéric Docquier, and Ça˘glar Ozden

In this paper, we simulate the labor market effects of net immigration and emigration during the 1990's in all OECD countries. To accomplish this, we are the first to employ a comprehensive database of migrant stocks, grouped by education level and country of origin/destination, for the years 1990 and 2000. Due to the much higher international mobility of college graduates, relative to all other individuals, we find that net migration flows are college-intensive, relative to the population of non-migrants. Using the consensus aggregate model of labor demand and supply we simulate the long-run employment and wage effects of immigration and emigration. We use a range of parameter values spanning most of the estimates in the literature. In all cases we find that immigration had a positive effect on the wage of less educated natives. It also increased or left the average native wages unchanged and had a positive or no effect on native employment. To the contrary, emigration had a negative effect on the wage of less educated native workers and it contributed to increase within country inequality in all OECD countries. These results still hold true when we correct for the estimates of undocumented immigrants, for the skill-downgrading of immigrants, when we focus on immigration from non-OECD countries, and when we consider preliminary measures of more recent immigration flows for the period 2000-2007.

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What Happens to the Careers of European Workers When Immigrants 'Take Their Jobs?'

Peri, Giovanni, Frédéric Docquier, and Ça˘glar Ozden

In this paper we use a dataset that follows a representative sample of native Europeans, resident of 11 countries, over the period 1995-2001, in order to identify the effect of inflows of immigrants on their career, employment, location and wage. We use the 1991 distribution of immigrants by nationality across European labor markets to construct an imputed inflow of the foreign-born population that is exogenous to local demand shocks. We also control for a series of fixed effects that absorb individual, country-year and sector-year effects. We find that native Europeans are more likely to upgrade their occupation to one associated with higher skills and better pay, when a larger number of immigrants enter their labor market. They are also more likely to start a self-employment activity. As a consequence of this upward mobility their income increases or stays the same in response to immigration. We find no evidence of an increased likelihood to leave employment or to leave their region of residence. These effects take place within 2 years and some persist over 4 years. Hence it appears that immigrants push native European workers on a faster career track rather than reducing their employment opportunities.

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STEM Workers, H1-B Visas, and Productivity in US Cities

Peri, Giovanni, Kevin Shih, and Chad Sparber

Scientists, Technology professionals, Engineers, and Mathematicians (STEM workers) are fundamental inputs in scientific innovation and technological adoption, the main drivers of productivity growth in the U.S. In this paper we identify the effect of STEM worker growth on the wages and employment of college and non-college educated native workers in 219 U.S. cities from 1990 to 2010. In order to identify a supply-driven and heterogeneous increase in STEM workers across U.S. cities, we use the distribution of foreign-born STEM workers in 1980 and exploit the introduction and variation of the H-1B visa program granting entry to foreign-born college educated (mainly STEM) workers. We find that H-1B-driven increases in STEM workers in a city were associated with significant increases in wages paid to college educated natives. Wage increases for non-college educated natives are smaller but still significant. We do not find significant effects on employment. We also find that STEM workers increased housing rents for college graduates, which eroded part of their wage gains. Together, these results imply a significant effect of foreign STEM on total factor productivity growth in the average US city between 1990 and 2010.

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The Economic Effects of Immigration and of the Proposed Reform

Peri, Giovanni

Immigration has always been a formidable engine of economic and demographic growth for the United States. During the last decades of the 19th century, immigrants contributed substantially, providing labor for the industrialization and electrification of the country. That wave of immigration was ended by the very restrictive immigration laws passed in 1929. While the “Immigration and Nationality Act” of 1965 abolished national quotas and allowed the flow of immigrants to resume, it has only been during the last 30 years that the mobility of the world’s people has increased significantly. Young, motivated, and often highly educated people are on the move, and many of them would like to come to the United States. With its 41 million immigrants, the United States is by far the largest magnet for international migrants. Moreover, according to Gallup World Polls, there are about 150 million more people who say that they would migrate to the United States (from every country on the planet) if they had the opportunity.

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Immigration, Jobs, and Employment Protection: Evidence from Europe Before and During the Great Recession

Peri, Giovanni, and Francesco D'Amuri

In this paper we analyze the impact of immigrants on the type and quantity of native jobs. We use data on fifteen Western European countries during the 1996-2010 period. We find that immigrants, by taking manual-routine type of occupations pushed natives towards more "complex" (abstract and communication) jobs. Such positive reallocation occurred while the total number of jobs held by natives was unaffected. This job upgrade was associated in the short run to a 0.6% increase in native wages for a doubling of the immigrants' share. These results are robust to the use of two alternative IV strategies based on past settlement of immigrants across European countries measured alternatively with Census or Labor Force data. The job upgrade slowed, but did not come to a halt, during the Great Recession. We also document the labor market flows behind it: the complexity of jobs offered to new native hires was higher relative to the complexity of lost jobs. Finally, we find evidence that such reallocation was significantly larger in countries with more flexible labor laws and that his tendency was particularly strong for less educated workers.

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