Compensation or Retrenchment?—The Paradox of

Immigration and Public Welfare Spending in U.S. States

 Ping Xu

University of Rhode Island

Email: pingxu@uri.edu

Ping Xu University of Rhode Island 2015 SIRC @ Shanghai

Outline

• Research Question

• Previous Literature

• Theory and Hypotheses

• Data and Methods

• Findings and Implications

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Research Question

• How has immigration influenced public welfare spending in the US?

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Previous literature

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Globalization compensation theory

Race/Ethnicity theory

Ping Xu University of Rhode Island 2015 SIRC @ Shanghai

Globalization compensation theory

• Globalization increased competition in labor market increased economic insecurity and risks vulnerable individuals demand more welfare spending (Stolper and Samuelson 1941; Cameron 1978; Garrett 1995; 1998).

• Immigrants job loss and reduced wages and salary for low-skill workers more welfare spending (Borjas 1994; 2004; Topel 1994)

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Race/Ethnicity theory

• Racial/ethnic diversity reduced solidarity due to out-group prejudice lower welfare support less generous welfare state (Gilens 1996; 1999; Alesina and Glaeser 2004; Bay and Pedersen 2006, etc.)

• Immigrants-led diversity lower welfare support less welfare spending (Eger 2010; Mau and Burkhardt 2012)

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Two Competing theories

Immigration Welfare Spending

•Compensation theory: +

•

Race/ethnicity theory: -

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Conditions for two theories

• Compensation theory: Unemployment

• Race/ethnicity theory: Welfare inclusion of immigrants

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When does which theory work?

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+

-Null

Null

Theory

{

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Immigration The American Welfare State

State context Labor market conditionImmigrant welfare policy

Ping Xu University of Rhode Island 2015 SIRC @ Shanghai

Data and methods (I)

• Methods– CSTS: American states 1996-2009

– Error Correction Models (ECMs) with Panel Corrected Standard Errors (PCSEs)

• Dependent variable– Public welfare spending as a % of gross state products

• Independent variables– % foreign-born population

– State unemployment rate

– State immigrant welfare inclusiveness

– Two-way and three-way interactions

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Data and methods (II)

• Controls– Political controls

• State government ideology

• Mass liberalism

• Union density

– Socioeconomic controls• % Black

• Female labor force participation

• Per capita growth

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Three-way Interaction Model

Ping Xu University of Rhode Island 2015 SIRC @ Shanghai

Interactive effect

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+

-Null

Null

Implications

•Immigration does influence the American welfare state.

•Applicability of “compensation” or “race/ethnicity” theory depends on state context (labor market, policy environment).

•The public is fairly rational (Page and Shapiro 1992).

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Questions?

Comments!

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