the changing structure of immigration to the oecd: what ... · motivation & facts model results...

Motivation & factsModelResults

Conclusion

The Changing Structure of Immigration to theOECD: What Welfare E¤ects on Member States

M. Burzynski, F. Docquier, H. Rapoport

ZiF Conference on "In Search of the Global Labour Market"

Bielefeld, Oct 16-18, 2017


Conclusion

What do we do?

I ∆ structure of immigration ( ∆ origin mixI E¤ect on natives�welfare (real income) in the OECD memberstates over last 25 years (1990-2015):

I Non-estimation paper: quantitative theoryI Combination of channels of transmissionI Comparative study on 20 selected OECD countriesI Comparison of three recent immigration waves !!!

I Shed light on...I Dynamics of welfare e¤ects of immigrationI Comparison between the post crisis and pre-crisis wavesI Di¤erences across countries vs across immigration waves


Conclusion

Map of the talk

1. Motivation & facts2. Model

3. Results

4. Concluding remarks


Conclusion

Origin mix!

" The most recent waves have signi�cantly lower earnings and labor force

participation rates, work fewer weeks, and have higher unemployment

propensities than earlier waves. [...] One single factor, the changing national

origin mix of the immigrant �ow, is mostly responsible for these historical

trends" (Borjas, 1993)

"A few source country characteristics explain over two-thirds of the variance of

welfare recipiency rates across national origin groups, and changes in the

average source country characteristics of the foreign-born population between

1970 and 1980 can account for most of the rise in immigrant welfare use that

occurred over the decade" (Borjas-Trejo, 1993)

Context: drastic policy reform!


Conclusion

Origin mix!

Immigration to the United States19th Century + 1920-1965 After 1965

National Origins Formula 1965 Immig & Nat Act

Immigration of Europeans Immig from Mexico, Asia, Africa


Conclusion

Origin mix!

Similar context: immigration to Australia1901-1945 After 1970

White Australia Policy Multiculturalism

Immigration of Europeans Immigration from Asia


Conclusion

Origin mix?

Origin mix in last 25 years: other factors?

I Schengen (1990) + EU enlargment (2004)I Points-based system (e.g., Canada 1980�s, UK 2008-10)I Civil wars and con�icts (e.g., European migrant crisis, 2015)I Economic imbalances (rather stable)I Demographic imbalances: Dev/HI population ratio

I 3.0 in 1960I 5.3 in 2016 !!!!


Conclusion

Facts

Changing size and origin mixRising in�ows from LDCs

Data for EU15 (black), USA (red), Canada, Australia, Japan & Switz.


Conclusion

Facts

Immigration to OECD member states:

I Sharp rise in the share of immigrants btw 1960 and 2010I From 4.5% to 11% (+6.5 pp), on average

I And changing origin-mixI Immig from HIC: stable 3%I Immig from LDC: from 1.5% to 8%I Share from LDC: from 1/3 to 3/4

=) More and more invididuals originating from countries that areeconomically, geographically, institutionally, culturally distant=) Does it matter? How is it perceived?


Conclusion

Perceptions

Changing origin mix =) xorit /xdesttLower education and productivity at origin?


Conclusion

Perceptions

Changing origin mix =) xorit /xdesttLower participation rates at origin?


Conclusion

Perceptions

I Common portrayal of recent immigrants (opinion polls):I Less and less educated, less and less productiveI Remain poor and inactive: access to welfare systemsI Induce wage/job losses, increasing inequality, �scal de�citsI Induce contamination or epidemiological e¤ects...

I But migrants self-select on many attributes:I DIOC database on population structure in OECD member states

I By dyad (220 origin and 20 destination countries)I By age, education, labor market status

I Let�s focus on the stock of immigrants in 2010...


Conclusion

Back to facts

Selection by education and participationOrigin (X) versus Dyad (Y)


Conclusion

Back to facts

Ori/Dyad correlation and corridor sizeCorr (Ori, Dyad) = 0.22(edu) vs 0.05(lab) ( 6= for top-50 corridors)


Conclusion

Back to facts

I Correlations "origin/dyadic" characteristics are smallI Sign of self-selection and/or partial assimilationI Still, they are >0 and larger for main dyads (0.30(edu), 0.55(lab))I Large enough for changing origin mix to a¤ect welfare?

I Develop a model accounting for...I Dyadic disparities in immigrant characteristicsI Main channels of transmission of migration shocksI Impact of successive immigrant cohorts (∆ origin mix)


Conclusion

MechanismsParameterization

Map of the talk

1. Motivation & facts

2. ModelI MechanismsI Parameterization

3. Results



Conclusion


General structure

I Static modelI No trade, no physical capitalI Country = independent entity with

I Heterogeneous individualsI Heterogeneous �rmsI �Passive�government

I Exogenous demographic size: Noa,sI With o = n vs.o = (f 1, f 2, ..., f F ), s = (h, l), a = (y , o)

I Endogenize the e¤ect of ∆Noa,s on the state of the economy


Conclusion


General structure

I Channels of transmission in the benchmarkI Labor market: endogenous wages (Ottaviano-Peri) + endogenousparticipation rates + exogenous unemployment rates

I Public �nances: endogenous income tax rate (Storesletten)I Market size: endogenous prices (Krugman; Aubry et al.)

I Robustness with less consensual mechanismsI Schooling externalities + Cultural diversity + Diaspora

I Microfoundations...


Conclusion


Individuals

I Max utility

Uoa,s = Coa,s �

φoa,s (1� γoa,s )1+η

1+ η

I Subject to

C oa,s =

�Z B

0coa,s (i)

ε�1ε di

� εε�1

Z B

0coa,s (i)p(i)(1+ υ)di = (1� γoa,s )w

os + T

oa,s

I where wos = (1� uos )wos (1� τ) + uos δwosI This determines (C oa,s ,γ

oa,s ,U

oa,s ) and aggregate labor supply


Conclusion


Firms

I Continuum of monopolistic producers with a measure B:I Nested CES production framework

y(i) = Aq(i) = A�

θ1h(i)σ1�1

σ1 + (1� θ1)l(i)σ1�1

σ1

� σ1σ1�1

h(i) =

�θ2hn(i)

σ2�1σ2 + (1� θ2)hf (i)

σ2�1σ2

� σ2σ2�1

l(i) =

�θ2ln(i)

σ2�1σ2 + (1� θ1)l f (i)

σ2�1σ2

� σ2σ2�1

I Max pro�t s.t. techno + demand: price + labor demandI Entry costs = ψ units of q(i): B and aggregate labor demand


Conclusion


Government

I Government budget constraint:

(v + τ)Y = δ ∑o ,a,s Noa,s (1� γoa,s )u

os w

os +∑o ,a,s N

oa,sT

oa,s

I Consumption tax = v (exo); Income tax = τI Unemployment replacement rate = δ (exogenous)I Public cons + Group-speci�c transfers: T oa,s (exogenous)

I This determines τ


Conclusion


Monopolistic equilibrium

De�nition

For a set of common param. fε, η, σ1, σ2g, a set of dest-speci�cvar.

�u0s , θ1, θ2,A,ψ, δ,T

na,s ,T

fa,s/T na,s , v

, a set of dyadic var.�

φoa,s ,Noa,s

, the monopolistically competitive equil. is a set�

wos , coa,s ,γ

oa,s , `

n, hn, `f , hf , y , p,P,B, τof endogenous var. that

satis�es the following conditions:

(i) individuals maximize their utility(ii) optimal employment and zero-pro�t conditions hold(iii) labor markets clear(iv) the government budget is balanced


Conclusion


Map of the talk


2. ModelI MechanismsI Parameterization

3. Results



Conclusion


Parameterization

Common parameters (consensus levels from 9 literature):I ES between varieties of goods: ε = 7.0 (Feenstra, 1994)I ES between HS and LS: σ1= 2.0 (Ottaviano-Peri, 2012)I ES between Nat and Immig: σ2= 20.0 (Ottaviano-Peri, 2012)I Elasticity of labor supply: 1/η = 0.1 (Evers et al, 2008)


Conclusion


Parameterization

Other parameters: calibration on the year 2010 to exactly �t

I Population and labor force data (Noa,s ): DIOCI Labor force data (1� γoa,s , u

os ): DIOC

I Income data (Y ,wos ): OECD.Stat + Educ at a glance + Buchel et

al. (2008)

I Fiscal data (v , τ, δ,T oa,s ): Annual national accounts + SOCX +

household surveys + OECD (2007)


Conclusion


Parameterization

Parameters with some country variations:

I Disutility of labor (φoa,s ) matches participation rates by dyad/skillI Technological parameters (θ1, θ2) match wage distributionI TFP (A) matches GDPI Entry cost (ψ) = nb of days to create a �rm (US=1)

I Fiscal parameters (v , τ, δ,T na,s ) match OECD/SOCX dataI Transfers to immigrants (T fa,s/T

na,s ) match �scal contribution of

immigration (OECD, 2007)


Conclusion


Parameterization

Table 1. Country-speci�c parametersParam Description Mean s.d. Source/Moment

φoa,s Lab disutility (�US) 1.675 1.487 Matches γoa,suos Unemp rates 0.095 0.072 Matches DIOC

θ1 Firms�pref HS 0.557 0.050 Matches wh/w lθ2 Firms�pref native 0.527 0.040 Matches wns /w fsA TFP (�US) 0.894 0.294 Matches GDP

ψ Cost of entry (�US) 1.435 0.952 Nb. days

δ Replacement rate 0.600 0.300 Un. Exp/GDP

T na,s Pub transf (�GDPpc) 0.321 0.089 Gov. Exp/GDP

T fa,s Pub transf (�T na,s ) 1.066 0.467 Fiscal cont. im.

v Cons tax rate 0.173 0.042 OECD data


Conclusion

Welfare e¤ectsChannelsOrigin mixCaveatsRobustness

Map of the talk


2. Model

3. ResultsI Welfare e¤ectsI ChannelsI Origin mixI CaveatsI Robustness



Conclusion


Welfare e¤ects

I Assessing the "causal" impact of immigration usingcounterfactuals:

I Eliminating immigrants arrived in 2001-2010 (pre-crisis 1)I Eliminating immigrants arrived in 1991-2000 (pre-crisis 2)I Adding immigrants arrived in 2011-2015 (post crisis)

I Welfare e¤ect for the native population in 2010I Shocks have di¤erent sizes ) semi elasticity

∆Una,s/Una,s∆m

=(Una,s )WithMig � (Una,s )NoMig

∆m.(Una,s )NoMig


Conclusion


Welfare e¤ects

Welfare and inequality e¤ects:

I Average welfare e¤ect on natives (∆C nyCny

/∆m)

I Inequality e¤ect ((∆C ny ,hC ny ,h

� ∆C ny ,lC ny ,l

)/∆m)


Conclusion


Welfare e¤ects

Semi-elasticiy of average real income to m

(i) Last 3 waves have increased the average real income of natives

(ii) Strong and persistent variations across countries

(iii) Post-crisis is usually less bene�cial


Conclusion


Welfare e¤ects

Semi elasticity of HS-to-LS income ratio

(i) Heterogeneous inequality e¤ects of immigration

(ii) Increasing inequality in continental EU (but no loss for LS)

(iii) Post-crisis wave is more inegalitarian in 2/3 of countries


Conclusion


Channels

What are the channels of transmission?

I Inequality e¤ect is due to wage e¤ect (skill-speci�c)I As for average welfare gains...

I Average price index (∆PP /∆m)

I Aggregate employment rates (∆e/∆m)I Income tax rate (∆τ/∆m)


Conclusion


Channels

E¤ect on the price index (∆PP /∆m < 0)

Virtually una¤ected: very strong persistence, bene�cial everywhere


Conclusion


Channels

E¤ect on employment rates (∆e/∆m ? 0)

Slightly smaller in 2011-15: very strong persistence


Conclusion


Channels

E¤ect on income tax rates (∆τ/∆m < 0)

Bene�cial everywhere... but usually less bene�cial in 2011-15


Conclusion


Immigration waves

Why have bene�cial e¤ects decresed over time...

I Mechanical e¤ect of immigration onI Support ratio (young-to-retiree) (∆s/∆m)I Proportion of college-educated workers (∆h/∆m)


Conclusion


Immigration waves

E¤ect on support ratio (∆s/∆m� 100)

Virtually una¤ected: always >0, especially in countries with low Ret/Pop


Conclusion


Immigration waves

E¤ect on human capital (∆h/∆m� 100)

Strong persistence across waves... but post-crisis wave usually less educated


Conclusion


Caveats

I Comparability of waves?I 1991-2000 vs 2001-2010: older migrants (less educated) + negativeselection in return migration (those who stayed are more educated)

I 2001-2010 vs 2011-2015: calibrated using of ∆stock instead ofstock by year of entry + using the origin mix to predict theeducation structure + smaller size

I More...


Conclusion


Caveats

I Comparability of waves?I 1991-2000 vs 2001-2010I 2001-2010 vs 2011-2015

I Role of origin mix? Does the changing origin mix between

1991-2000 and 2001-10 predict the ∆ in skill structure?

I Size: non linearities? If we multiply the 2011-15 immigration wave

by two, does it change the semi-elasticity of average real income to m?

I Endogeneity of migration? Mt can a¤ect Mt-1 or Mt+1


Conclusion


Caveats

Role of origin mix: hmig91�00 Non linearities: ∆U/(U∆m)

CF: bhmig91�00 = ∑i ωi91�00h

i01�10 Assuming 2016-20 = 2011-15

Corr(hmig91�00,bhmig91�00) =. 97 Corr(2011-15,2011-20) =.99


Conclusion


Robustness

Do the welfare e¤ects depend on...

I Common elasticities (ε, σ2, η)I Potential technological externalities (schooling, birthplacediversity, diaspora)

I Immigrant characteristics (φ, u, h) identical to natives

Focus on the 2001-2010 wave!


Conclusion


Robustness

Sensitivity to elasticities

Larger gains if ε large, η smaller - Negligible e¤ects on inequality


Conclusion


Robustness

Sensitivity to TFP externalities

Schooling externalities matter in some countries - No e¤ects on inequality


Conclusion


Robustness

Sensitivity to immigrants�characteristics

What matters for inequality: skill composition of immig. population


Conclusion

Map of the talk


2. Model

3. Results



Conclusion

Conclusion

Welfare impact of immig. over last 25 years:

I Large variations across destinations and skill groups

I Variations across countries > Variations across waves (limitedimpact of origin mix over the last 25 years)

I In relative terms, the post crisis is usually less bene�cialI Due to changing origin-mix ) lower h, smaller �scal gainsI Still, no negative e¤ect on native citizens in virtually all countries

I Gradual squeeze of welfare gain from immigration?


Conclusion

Thanks for your attention

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Conclusion

Appendix

Size of immigration waves (∆m)

the changing structure of immigration to the oecd: what ... · motivation & facts model results...

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