NBER WORKING PAPER SERIES

IMMIGRATION AND ECONOMIC GROWTH

George J. Borjas

Working Paper 25836http://www.nber.org/papers/w25836

NATIONAL BUREAU OF ECONOMIC RESEARCH1050 Massachusetts Avenue

Cambridge, MA 02138May 2019

This paper was first presented at the “Prospects for Economic Growth Conference” held at Rice University’s Baker Institute in December 2018 and will be published in Prospects for Economic Growth in the United States, edited by John W. Diamond and George R. Zodrow (Oxford University Press). The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.

NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

© 2019 by George J. Borjas. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.

Immigration and Economic GrowthGeorge J. BorjasNBER Working Paper No. 25836May 2019JEL No. J6,O4

ABSTRACT

Immigration is sometimes claimed to be a key contributor to economic growth. Few academic studies, however, examine the direct link between immigration and growth. And the evidence on the outcomes that the literature does examine (such as the impact on wages or government receipts and expenditures) is far too mixed to allow unequivocal inferences. This paper surveys what we know about the relationship between immigration and growth. The canonical Solow model implies that a one-time supply shock will not have any impact on steady-state per-capita income, while a continuous supply shock will permanently reduce per-capita income. The observed relationship between immigration and growth obviously depends on many variables, including the skill composition of immigrants, the rate of assimilation, the distributional labor market consequences, the size of the immigration surplus, the potential human capital externalities, and the long-term fiscal impact. Despite the methodological disagreements about how to measure all of these effects, there is a consensus on one important point: Immigration has a more beneficial impact on growth when the immigrant flow is composed of high-skill workers.

George J. BorjasHarvard Kennedy School79 JFK StreetCambridge, MA 02138and NBERgborjas@harvard.edu

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ImmigrationandEconomicGrowth

GeorgeJ.Borjas*

From1990to2014,U.S.economicgrowthwouldhavebeen15percentagepointslowerwithoutthebenefitofmigration.

--CitiResearch(2018)

There’sawayforPresidentTrumptoboosttheeconomybyfourpercent,butheprobablywon’tlikeit…Forevery1percentincreaseinU.S.populationmadeofimmigrants,GDPrises1.15percent.SoasimplewaytogettoTrump’s4percentGDPbump?Takeinabout8millionnetimmigrantsperyear.

--ProPublica(2017)1.Introduction

Therehasbeenaworldwidesurgeininternationalmigrationinrecentdecades.In

theU.S.context,theimmigrantshareofthepopulationalmosttripledfromahistoriclowof

4.7percentin1970to13.7percentby2017.

Itissometimesclaimedthattheimmigrationsurgehasbeenakeycontributorto

economicgrowth,andthatanevenlargernumberofimmigrantswouldincreaseour

nationalwealthevenmore—althoughtheseclaimstendtoappearinreportsproducedby

thinktanks,policyadvocates,andbusinessassociations.Infact,fewacademicstudies

documentthedirectlinkbetweenimmigrationandgrowth.Andtheevidenceonthe

outcomesthatthestudiesdoexamine(suchastheimpactonwages,employment,and

governmentreceiptsandexpenditures)isfartoomixedandunsettledtojustifyblanket

*RobertW.ScrivnerProfessorofEconomicsandSocialPolicy,HarvardKennedySchool;and

ResearchAssociate,NationalBureauofEconomicResearch.Thispaperwasfirstpresentedatthe“ProspectsforEconomicGrowthConference”heldatRiceUniversity’sBakerInstituteinDecember2018andwillbepublishedinProspectsforEconomicGrowthintheUnitedStates,editedbyJohnW.DiamondandGeorgeR.Zodrow(OxfordUniversityPress).

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statementsthatimmigrationaccountsforasubstantialpartofeconomicgrowth(or,

conversely,thatitdoesnotcontributetoeconomicgrowthatall).

Despitetherelativescarcityofcredibleresearchonthelinkbetweenimmigration

andgrowth,thereisnodoubtthatimmigrantscontributesignificantlytoaggregateoutput.

In2016,16.6percentofworkersintheU.S.labormarketwereforeign-born.Thelarge

immigrantpresenceintheworkforceinevitablyimpliesthatforeign-bornlaborwas

directlyresponsibleforasizablefractionofGDP.And,bydefinition,theimmigrationsurge

musthaveledtoacorrespondinglylargeincreaseinGDP.Itisfarlessclear,however,that

theimmigrantsupplyshocknecessarilyincreasedper-capitaincome.

Thispaperpresentsatheoreticalandempiricalsurveyofwhatitisthatweknow

aboutthelinkbetweenimmigrationandeconomicgrowth.ThecanonicalSolowgrowth

modelhasstrikingimplicationsaboutwhathappensastheeconomyadjuststosupply

shocks.Aone-timesupplyshockincreasesoutputanddecreasesper-capitaincomeinthe

shortrun.Astheeconomyadjusts,therewillberelativelyrapid“catch-up”growth.Inthe

end,however,per-capitaincomeendsupinexactlythesamesteadystatethatwouldhave

beenobservedhadtherebeennoimmigration.Incontrast,apermanentincreaseinthe

rateofgrowthoftheworkforceduetoapersistentimmigrantflowwillleadtoincreased

outputbutatapermanentlylowerper-capitaincome.

Iusetheseinsightstoframethediscussionofwhateconomicshastosayabout

immigrationandgrowth.Thelinkobviouslydependsonmanyvariables,includingthe

skillsthatimmigrantsbringtothecountry;therateatwhichimmigrantsbecomemore

productive(whichistypicallythoughtofas“economicassimilation”);theimpactof

immigrationontheemploymentopportunitiesofnativeworkers;theimpactimmigrants

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haveonthetotalincomeaccruingtothepre-existingpopulation(i.e.,the“immigration

surplus”);andthefiscalimpactofimmigration,asmeasuredbyacomparisonofthetaxes

immigrantspaywiththecostoftheservicestheyreceive.Thenetimpactofimmigrationon

economicgrowthwilldependonthedirectionandmagnitudeofalloftheseeffects.

Despitetheuncertaintyaboutthemeasurementofeachoftheseeffects,thereisa

consensusononeimportantpoint:Immigrationhasamorebeneficialimpactwhenthe

immigrantinfluxiscomposedofhigh-skillworkers.Intheend,thereislittledoubtabout

thetypeofimmigrationpolicyacountryshouldpursueifitwishedtouseimmigrationasa

tooltospurgrowth:Admithigh-skillimmigrants.(Althoughtheliteratureistotallysilent

onjusthowmanyhigh-skillimmigrantsshouldbeadmitted).Thereis,however,an

importantnormativequestionthateconomics—andeconomists—cannotanswer:Should

spurringeconomicgrowthbethesoleobjectiveofimmigrationpolicy?

2.ImmigrationintheSolowModel

Itisusefultofixideasbyillustratingthelinkbetweenimmigrationandgrowthin

thecanonicalSolowmodel(BarroandSala-i-Martin,1999).Themodelissummarizedby:

𝑌" = (𝐾")'(𝐴"𝐿")*+', (1)

𝐾"̇ = 𝑠𝑌" − 𝛿𝐾", (2)

𝐿" = 𝐿4𝑒6", (3)

𝐴" = 𝐴4𝑒8". (4)

Equation(1)givesthelinearhomogeneousCobb-Douglasproductionfunctionwhere

Ytdenotesoutputattimet;Ktthecapitalstock;and(AtLt)thenumberofefficiencyunitsin

thelabormarket,withAtbeingtheefficiencyparameterandLtthenumberofworkers.

Equation(2)givestheequationofmotionforthecapitalstock,withconstantsavingsrates

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anddepreciationrated.Finally,equations(3)and(4)specifythatthenumberofworkers

growsatrategandtheefficiencyofaworkergrowsatrateh.

Letktdenotethe“effective”capital-laborratio,Kt/AtLt.Incomeperefficiencyunit

(whichisnotobserved)canbewrittenas:

𝑦" =𝑌"𝐴"𝐿"

= 𝑘"', (5)

whiletheobservedper-capitaincome𝑦>"is:

𝑦>" =𝑌"𝐿"= 𝐴"𝑘"' (6)

Finally,thewage(w)andtherentalrateofcapital(r)attimetaregivenbythe

marginalproductivityconditions:

𝑤" = (1 − 𝛼)𝐴"𝑘"', (7)

𝑟" = 𝛼𝑘"'+*. (8)

Equation(2)canberewrittenintermsoftheeffectivecapital-laborratioas�̇� =

𝑠𝑦" − (𝛿 + 𝜂 + 𝑔)𝑘" .Thisimpliesthatthesteady-stateeffectivecapital-laborratiois:

𝑘∗ = I𝑠

𝛿 + 𝜂 + 𝑔JK

KLM. (9)

Notethattherentalrateofcapitalisconstantinthesteadystate.Iflaborefficiencyis

increasingatrateh>0,however,boththewageandper-capitaincomewillalsoincreaseat

ratehinthesteadystate.

Supposetheeconomyisinsteadystate,andimmigrationproducesaone-time

increaseinthesizeoftheworkforce.Considerthespecialcasewherethesizeofthe

workforcewasconstantpriortothesupplyshock(g=0).Aone-timeinfluxofimmigrants

whoareperfectsubstituteswithpre-existingworkerscanthenbemodeledasasimple

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shiftinL.Theone-timesupplyshockproducesanimmediatedropintheeffectivecapital-

laborratio(whichinturn,increasestherentalrateofcapitalandreducesthewage).It

followsthattheimmediateimpactonoutputandper-capitaincomearegivenby:

𝜕𝑌"𝜕𝐿

= (1 − 𝛼)𝑦>" > 0, (10)

𝜕𝑦>"𝜕𝐿

= 𝛼𝐴"𝑘"'+*𝜕𝑘"𝜕𝐿

< 0, (11)

Theone-timesupplyshocktriviallyincreasesGDP(moreworkersproducemoreoutput).

Butthesupplyshockreducesper-capitaincomeintheshortrun.

Thisshort-rundropisattenuatedastheeconomyadjuststothelargerworkforce.

Thedeclineinthecapital-laborratioincreasestherateofreturntocapital,inducingan

increaseinthecapitalstock.Asequation(9)shows,however,thesteadystateeffective

capital-laborratiodoesnotdependonthesizeoftheworkforce.Asaresult,theone-time

supplyshockdoesnotchangethesteadystatelevelofper-capitaincome:

𝜕𝑦>∗

𝜕𝐿= 0. (12)

Oncethesteady-stateequilibriumisreestablished,theeconomyhasalargerGDP,andper-

capitaincomecontinuestogrowatthesamerateh.1

Themodelcanalsobeusedtoanalyzetheimpactofacontinuoussupplyshock,

whichcanbemodeledasanincreaseing,therateofgrowthinthesizeoftheworkforce.

Thispersistentshockhaslong-termconsequences.Equation(9)impliesthatitreducesthe

steadystateleveloftheeffectivecapital-laborratio(¶k*/¶g<0).Itthenfollowsthat:

1Thetransitionaldynamicsaftertheone-timeshockareinteresting.Per-capitaincomewasgrowing

ataconstantrateofhpriortotheshock.Aftertheshock(andbeforetheeconomyisre-equilibrated),thegrowthrateincreasesto(η + 𝛼�̇�/𝑘),where�̇� > 0.Thegrowthspurtisshort-lived.Itonlyreflectsthattheshockimmediatelyreducedper-capitaincomeandtheeconomyisrevertingtotheoriginalsteadystate.

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𝜕𝑦>∗

𝜕𝑔 = 𝛼𝐴"𝑘"'+* 𝜕𝑘

∗

𝜕𝑔 < 0,(13)

Inshort,apersistentimmigrantflowpermanentlyreducesper-capitaincome.

AnaugmentedversionoftheSolowmodel(Mankiw,Romer,andWeil,1992;Dolado,

Goria,andIchino,1994)canbeusedtoderivetheimplicationsifimmigrantsalsoincrease

thecountry’shumancapitalstock(H).Thelinearhomogeneousproductionfunctioninthe

augmentedmodelistypicallywrittenas:

𝑌" = (𝐾")'(𝐻")V(𝐴"𝐿")*+'+V, (14)

andtheequationsofmotionforthephysicalandhumancapitalstocksare:

𝐾"̇ = 𝑠W𝑌" − 𝛿𝐾", (15)

𝐻"̇ = 𝑠X𝑌" − 𝛿𝐻" + 𝑀"𝜋 I𝐻"𝐿"J , (16)

wheresKandsHarethe(constant)investmentratesforphysicalandhumancapital,

respectively;thedepreciationratedisassumedtobethesameforbothtypesofcapital;Mt

isthenetnumberofimmigrants;andpmeasurestherelativecontributionofanimmigrant

tothehumancapitalstock.Theimmigrantisasskilledasapre-existingworkerifp=1.

Thechangeinthenumberofworkersis𝐿"̇ = 𝑔𝐿" + 𝑀" .Supposethatthenumberof

immigrantsincreasesatthesamerateasthenativepopulation,sothatthenetmigration

ratem=Mt/Ltisconstant.Theworkforcethengrowsatconstantrate(g+m),andthe

equationsofmotionfortheeffectivecapital-laborratiosaregivenby:

�̇� = 𝑠W𝑦" − [𝛿 + 𝜂 + 𝑔 +𝑚]𝑘", (17)

ℎ̇ = 𝑠X𝑦" − [𝛿 + 𝜂 + 𝑔 + (1 − 𝜋)𝑚]ℎ". (18)

Thesteadystateisdefinedby�̇� = 0andℎ̇ = 0.Theeffectivecapital/laborratiosin

thesteadystateare:

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𝑘∗ = I𝑠W

𝛿 + 𝜂 + 𝑔 +𝑚JKL_

KLML_I

𝑠X𝛿 + 𝜂 + 𝑔 + (1 − 𝜋)𝑚J

_KLML_

, (19)

ℎ∗ = I𝑠W

𝛿 + 𝜂 + 𝑔 +𝑚J

MKLML_

I𝑠X

𝛿 + 𝜂 + 𝑔 + (1 − 𝜋)𝑚J

KLMKLML_

. (20)

Thesteadystatecapital-laborratiosinequations(19)and(20)areconstant.Asa

result,effectiveper-capitaincome(givenby𝑦 = 𝑘'ℎV)willalsobeconstant.Incontrast,

actualper-capitaincome(𝑦> = 𝐴𝑘'ℎV)willstillgrowatarateofh(aswasthecaseinthe

simplerversionoftheSolowmodel).

Equations(19)-(20)implythatimmigrationalterssteady-stateper-capitaincome:

𝜕 log 𝑦>∗

𝜕𝑚= −

𝛼(1 − 𝛼 − 𝛽)𝐶

−𝛽

(1 − 𝛼 − 𝛽)𝐷[1 − 𝜋], (21)

where𝐶 = [𝛿 + 𝜂 + 𝑔 +𝑚];and𝐷 = [𝛿 + 𝜂 + 𝑔 + (1 − 𝜋)𝑚] > 0.Per-capitaincomewill

certainlydeclineifp£1(acaserelevantfortherecentU.S.contextwithhighnumbersof

low-skillimmigrants).Infact,thediminishingmarginalproductivityoflaborimpliesthat

per-capitaincomemightfallevenifimmigrantsarerelativelymoreskilled(withpbeing

slightlyabove1).Equation(21)showsthatimmigrationcanspurlong-termgrowthonlyif

theinfluxisveryskilled,withsufficientlyhighvaluesofp.

AnimportantlessonfromthisbriefoverviewoftheSolowmodelisthatpersistent

immigrationwilloftenreduceper-capitaincomeinthesteadystate,particularlywhenthe

immigrantsareperfectsubstitutesorlessskilledthanthenatives.Immigrationmayspur

long-termgrowthonlyifthesupplyshockiscomposedofveryhighlyskilledworkers.In

fact,suchasupplyshockcouldincreaseper-capitaincomesbyfarmorethanthemodel

suggestsiftheimmigrantsalsoproducehumancapitalexternalitiesthatpermanently

increasetheproductivityofnativeworkers.

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3.ImmigrationandGDP:Evidence

Despitethecontentiouspolicydebateoverimmigration,onlyahandfulofstudies

studytheempiricallinkbetweenimmigrationandlong-termgrowth.2Hence,itisusefulto

beginbyillustratingtherelationshipbetweenGDPandimmigrationtrendsintheUnited

States.

Eachdecennialcensussince1850reportsthenumberofforeign-bornpersons,

allowingthecalculationofnetimmigrationineachdecade.Definethenetmigrationratein

thedecadebetweenyearstandt+10asthenetnumberofimmigrantsarrivinginthat

decadedividedbythepopulationattimet.Forexpositionalconvenience,Imultiplythenet

migrationrateby100sothatitgivesthenumberofnewimmigrantsper100persons.As

Figure1shows,therehavebeenperiodsofveryhighandofverylowimmigration.Between

1900and1910andbetween1990and2000,thenetmigrationratewasabout4persons

perdecade.Incontrast,thenetmigrationratewasnegativebetween1930and1970.

Thetwopanelsofthefigurealsoshowthedecadalrateofchangein(real)GDPand

inper-capitaGDP.Itisvisuallyobviousthatthesimplecorrelationimpliedbythehistorical

recorddoesnotsuggestthattherewasmorerapideconomicgrowthduringthoseperiods

ofhighimmigration.Infact,theslopeofaregressionthatrelatestherateofchangeinGDP

2SeeBoubtane,Dumont,andRault(2016),Dolado,Goria,andIchino(1994)andKaneandRutledge

(2018).RelatedworkbyPeri(2012)correlatesimmigrationwithtotalfactorproductivity(TFP),whereTFPisaresidualfromaregressionthatlinksstate-levelGDPtothesizeoftheworkforceandmeasuresofthecapitalstock.ItisparticularlydifficulttointerpretthecorrelationbetweenTFPandimmigrationasmuchdependsontheregressionspecification,andonwhatexactlyisincludedandleftoutofthefirst-stageregression.

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tothenetmigrationrateis0.008(withastandarderrorof0.014),whiletherespective

coefficientintheper-capitagrowthregressionis-0.010(0.012).

Obviously,theseweakcorrelationsdonotprovetheabsenceofacausallink

betweenimmigrationandgrowth.Therearefartoomanyotherfactorsthatinfluencethe

evolutionofeconomicoutputandFigure1doesnotcontrolforanyofthesefactors.Itis

possible,however,toexaminethecausalrelationshipbylinkingtrendsinstate-level

economicgrowthandimmigrationduringthe1960-2017period.

Specifically,Iusethedecadalcensusdatatocalculatetheimmigrantshareinthe

workforceofeachstaterattimetandestimatetheregressionmodel:3

log 𝑦f" = 𝜃f + 𝜃" + 𝛽𝑝f" + 𝛾ℎf" + 𝜖, (22)

whereyrtisameasureoftheGrossStateProduct(GSP)instaterattimet;qrandqt

representvectorsofstateandyearfixedeffects,respectively;prtgivestheratioofthe

numberofworkingimmigrantstothesizeoftheworkforceinthestate(´100);andhrt

measuresthehumancapitalofthestate’sworkforce(whichIproxybythelogmeanyears

ofeducationandbythefractionofworkersaged25and54).

ThetoppanelofTable1reportsthecoefficientsestimatedbyordinaryleast

squares.Thereisapositive(andsignificant)correlationbetweenimmigrationandGSP

acrossstatesandovertime.Anincreaseintheimmigrantshareof1percentisassociated

witha3.2percentincreaseinGSP.Note,however,thatthecoefficientbecomesinsignificant

whentheregressionusesper-capitaGSPasthedependentvariable.

3KaneandRutledge(2018)conductasimilaranalysisforthe1980-2015period.Thepanelusedin

Table1consistsofsevencross-sections(1960,1970,1980,1990,2000,2010,and2017)and50states(theDistrictofColumbiaisexcludedfromtheregressions).Ialsoestimatedtheregressionsusingafirst-differencespecification.Theresultsarequalitativelysimilartothosereportedbelow.

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Theregressionmodelinequation(22),whichisexactlyanalogoustothepanel

regressiontypicallyestimatedtomeasurethewageimpactofimmigration(Borjas,2014),

suffersfrompotentialendogeneitybias.Income-maximizingimmigrantswilllikelysettlein

statesthatoffervibranteconomicconditions,buildinginapositivecorrelationbetweenyrt

andprt.ThebottompanelofTable1reportsthecoefficientsestimatedfromIVregressions

thatusethegeneric“shift-share”instrumenttocontrolfortheendogeneity(Card,2001).

Inparticular,Iusedthe1960censustoobservethegeographicsettlementof

immigrantswhooriginatedinaparticularcountry.Thekeyassumptionoftheshift-share

instrumentisthatthisinitialgeographicdistributioninfluencesthesettlementoflater

wavesofimmigrantsfromthatsamecountry.Futureimmigrantswillfinditcheaperto

settleinthosepartsofthecountrywhereethnicnetworksfacilitatethemove.Theshift-

shareinstrumentusesthe1960geographicdistributiontogeographicallyallocatethe

immigrantsfromthatcountryobservedinasubsequentcross-sectiont.Thepredicted

numberofimmigrantslivinginstaterattimetisthenobtainedbyaddingupacross

countriesoforigin,andthispredictionisusedtocalculatethepredictedfractionof

immigrantsintheworkforce.Note,however,thatiftheeconomicconditionsthatinduced

the1960immigrantstosettleinparticularstatespersistovertime,theshift-share

instrumentdoesnotsolvetheendogeneityproblem(Jaeger,Ruist,andStuhler,2018).

TheIVestimatesofthe“causal”linkbetweenimmigrationandGDPreportedin

Table1areagainpositiveforthelevelofGSPbutturnnegative(andinsignificant)when

lookingatper-capitaGSP.Aone-pointincreaseintheimmigrantshareisassociatedwitha

1.9percentincreaseinGSP,andwitha0.7percentdecreaseinper-capitaGDP.

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Theprudentinferencefromtheexercisesreportedinthissectionseemstobethat

thecorrelationbetweenimmigrationandper-capitaincomeis,atbest,zero.Thedatado

notprovideanysupportforthehypothesisthatthetwovariablesarestronglyand

positivelycorrelated,eitherhistoricallyoracrossregions.Itseemsthatafindingofstrong

positiveeffectswillrequiremuchmoredatamanipulation(andmanymoreassumptions).

4.TheImmigrationSurplus

Thenegativeshort-runimpactofimmigrationonwagesandthepositiveimpacton

thereturntocapitalimplythatimmigrationhasdistributionalconsequences.Theyalso

raisethepossibilitythatthegainstofirmsexceedthelossestoworkers,andtheremightbe

animmigrationsurplus,anetincreaseinthewealthofthe“native”population.

Thesimplestmodeloftheimmigrationsurplusassumesthatimmigrantsand

nativesareperfectsubstitutes(Borjas,1995).TheworkforcehasNnativeandMimmigrant

workers,withL=N+M.TheaggregateproductionfunctionY=f(K,L)islinear

homogeneous.Supposefurtherthatnativesownthecapitalstockandthatthesuppliesof

bothnativesandimmigrantsareperfectlyinelastic.

Eachfactorpriceequalstherespectivevalueofmarginalproductinacompetitive

labormarket.Therentalrateofcapitalinthepre-immigrationequilibriumisr0=fK(K,N)

andthepriceoflaborisw0=fL(K,N),whereoutputpriceisthenumeraire.Linear

homogeneityimpliesthattheentireoutputisdistributedtotheownersofcapitalandto

workers.Inthepre-immigrationregime,thenationalincomeaccruingtonatives,YN,is

givenbyYN=r0K+w0N.

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Figure2illustratesthisinitialequilibrium.ThevalueofYNisgivenbytheareaunder

themarginalproductoflaborcurvefL,ortrapezoidABN0.Intheshortrun,thecapitalstock

isfixed.TheentryofMimmigrantsshiftsthesupplycurveandlowersthewagetow1.The

areainthetrapezoidACL0givesnationalincomeinthepost-immigrationeconomy.Partof

theincreaseinnationalincomegoestoimmigrants(whoearnw1Mdollar).Theareainthe

triangleBCDgivestheimmigrationsurplus,theincreaseinincomethataccruestonatives.

Theimmigrationsurplus,asafractionofnationalincome,approximatelyequals:

Δ𝑌l𝑌 = −

12 𝑠m𝜀𝑝

o, (23)

wheresLislabor’sshareofincome(sL =wL/Y);eisthewageelasticity(e=dlogw/dlogL);

andpistheimmigrantshareoftheworkforce(p=M/L).

Equation(23)givesasimpleformulafordoinga“back-of-the-envelope”calculation

(summarizedinTable2).Theshareoflaborincomehashoveredaround70percentfor

sometime,andthefractionofimmigrantsintheworkforceis16.6percent.Supposefurther

thatthelinearhomogeneousproductionfunctionisCobb-Douglas.Itistheneasytoshow

thattheabsolutevalueofthewageelasticityeequalscapital’sshareofincome,orabout

0.3.Theimmigrationsurplusisthen0.29percentofGDP.In2017,GDPwas$19.5trillion,

sothattheshort-runimmigrationsurplusisabout$56billionayear,arelativelysmall

numberinthecontextofaverylargeeconomy.

Figure2showsthatimmigrationredistributesincomefromlabortocapital.Native

workerslosetheareaintherectanglew0BDw1,andthisquantityplusthesurplusaccrues

toemployers.Table2alsoreportstheimplieddollarvalueoftheselossesandgains(see

Borjas,1995,foralgebraicdetails).Native-bornworkersloseabout2.9percentofGDP,

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whilenative-ownedcapitalgainsabout3.2percentofGDP.The$19.5trillionGDPimplies

thatworkerslose$567billionwhileemployersgain$623billion.Thesmallsurplusof$56

billionmasksasizableredistributionfromworkerstotheusersofimmigrantlabor.

Notethattheimmigrationsurplus,whichmeasuresthedollargainsaccruingto

“natives,”isconceptuallydifferentfromthetotalincreaseinGDP.AsTable2alsoshows,a

supplyshockthatincreasedtheworkforcebyalmost17percentgeneratedaverysizable

increaseinGDP,ofover$2trillion.Almostallofthisincrease,however,goestothe

immigrantsthemselvesaspaymentsfortheirservices.

Finally,theshort-runsurplusderivedinFigure2assumedthatcapitalwasfixed.

Theriseinthereturnstocapitalencouragescapitalinflowsuntiltherentalrateisagain

equalizedacrossmarkets.Theassumptionofconstantreturnsimpliesthattheexpansionin

thecapitalstockreestablishesthepre-immigrationcapital/laborratio.Intheend,

immigrationdoesnotalterthepriceoflabororthereturnstocapital,andnativesneither

gainnorlosefromimmigration.Inthelongrun,theimmigrationsurplusmustbezero.

HeterogeneousLabor

Figure2assumednativesandimmigrantsareperfectsubstitutes.Theremayexist

productioncomplementaritiesbetweenthetwogroupsthatcanincreasethegains.

Supposetherearetwotypesofworkers,low-skill(LU)andhigh-skill(LH).Thelinear

homogeneousproductionfunctionisnowY=f(K,LU,LH).Supposefurtherthesupplyshock

isnot“balanced”acrossskillgroups(i.e.,immigrantsarepredominantlylow-skillorhigh-

skill).Thelong-termadjustmentinthecapitalstockwouldnotleadtoanewequilibrium

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withtheeconomysimplyoperatingataproportionatelyhigherscaleforallinputs.4The

potentialcomplementaritiesbetweenimmigrantsandnativeswouldhelpproducealarger

immigrationsurplus.

Notsurprisingly,capital-skillcomplementaritysuggeststhattheshort-runsurplus

mightbelargeriftheimmigrantflowwascomposedofhigh-skillworkers.Byassumption,

nativesownthecapitalstockandcapital-skillcomplementarityimpliesthatthereturnsto

capitalincreasemorewhenimmigrantsarehigh-skill.Infact,simulationsofthemodel

suggestthatestimatesoftheshort-runimmigrationsurplusmightdoubleiftheUnited

Statesadmittedonlyhigh-skillimmigrants(Borjas,2014,p.158).However,thelong-run

capitaladjustmentswouldattenuatetheimportanceofcapital-skillcomplementarityand

greatlyreducethegainsfromhigh-skillsupplyshocks.

HumanCapitalExternalities

Thecalculationoftheimmigrationsurpluswithalinearhomogeneousproduction

functionsuggeststhatevenalargesupplyshockofhigh-skillworkersmaynotgenerate

relativelylargegainsforthenativepopulation.Nevertheless,thereisawidespread(and

unshakeable)perceptionthatsometypesofimmigration,andparticularlytheimmigration

ofhigh-skillworkers,canbehugelybeneficial.Thisperceptionreliesonacrucialdeparture

fromthetextbookmodel,thebeliefthathigh-skillimmigrantsgeneratehumancapital

4Inthehomogeneouslaborcase,anincreaseofxpercentinthenumberofworkersinducesanx

percentincreaseinthecapitalstocksothatthelong-runequilibriumhastheeconomyoperatingatalargerscalewiththesameproportionateincreaseincapital,labor,andoutput.Intheheterogeneouslaborcasewithanunbalancedsupplyshock,theinputratioswouldbedifferentinthepre-andpost-shockequilibriums.

17

externalities.Thesuddenpresenceofhigh-skillimmigrantsexposesnativestonewforms

ofknowledge,increasestheirhumancapital,andmakesthemmoreproductive.

Itiseasytoillustratehowexternalitieschangetheimmigrationsurplus.Ifhigh-skill

immigrantshadpositivespillovereffectsonnativeproductivity,aninfluxofimmigrants

producesanoutwardshiftinthelabordemandcurvebecausethevalueofmarginal

productforeverynativeworkerrises.Immigrationthenshiftsnotonlythesupplycurve,

butalsoshiftsthedemandcurvetoFLinFigure3.Thechangeinincomeaccruingtonatives

isthengivenbythesumofthetriangleB¢C¢D(orthetraditionalimmigrationsurplus)plus

theshadedareaofthetrapezoidA¢B¢BA,whichmeasurestheimpactofimmigrationonthe

totalproductofnativeworkers.Itisobviousthatiftheexternalitiesaresufficiently

important,high-skillimmigrationcouldbeanimportantdriverofeconomicgrowth.

Figure3suggestsatrivialback-of-the-envelopecalculationthatillustratejusthow

importanttheexternalitiescanbe.Supposeahigh-skillsupplyshockraisesthemarginal

productofeverynativeworkerbyjpercent,sothatthenewdemandcurveFL=(1+j)fL.

Thisformulationimpliesthatthegainsproducedbytheexternalitiesequaljpercentofthe

originalGDP.Table2suggeststhatthepre-immigrationGDP,measuredbytrapezoidABN0

inFigure3,isabout$17trillion.Iftheexternalityincreasesmarginalproductby1percent,

thegainsproducedbyhigh-skillimmigrationwouldbeabout$170billion.Inshort,the

gainsfromhumancapitalexternalitiescaneasilydwarfthosemeasuredbythetraditional

immigrationsurplus.Moreover,theselargegainsdonotdisappearinthelongrun,asthe

increasedproductivityofthenativeworkforceisapermanentfixtureofthelabormarket.

5.TheDistributionalImpactofImmigration

18

Intheabsenceofhumancapitalexternalities,thecanonicalmodelofthelabor

marketsuggeststhataone-timesupplyshockwilldepressthewageofcompetingworkers

intheshortrun,andthatthisnegativeeffectisattenuatedovertimeastheeconomy

adjuststothelargerworkforce.Despitetheintuitiveappealoftheseinsights,theliterature

thatestimatesthewageelasticity(thecrucialparameterforcalculatingboththegainsfrom

immigrationandthedistributionalimpact)hasinsteadproducedaconfusinglabyrinth,

withestimatesthatoftendependonthemethodologicalapproach,thesampleused,andthe

periodexamined.

Becauseimmigrantsclusterinarelativelysmallnumberofgeographicareas,many

studiesexploitthegeographicdispersionofimmigrantstomeasurethewageeffect.These

studiescomparenativeearningsincitieswheretheimmigrantshareoftheworkforceis

large(forexample,LosAngeles)withearningsincitieswheretherearerelativelyfew

immigrants.Anegativespatialcorrelationwouldthenbeinterpretedasshowingthatthe

supplyshockreducedthewageofsubstitutablenatives.

Theregressionmodelistypicallygivenby:

logwrt=βprt+g Xrt+e (24)

wherewrtisthemeanwageofnativeworkersincityrattimet,andprtistheimmigrant

share.ThevectorXtypicallyincludesvariablesthatalsogeneratewagedispersionacross

citiesandovertimeandareoftenproxiedbycityandyearfixedeffects.

ItiswellknownthattheOLSestimateofbdoesnotmeasurethecausaleffectof

immigration.Immigrantstendtosettleinhigh-wagecities.Theendogenousgeographic

distributionthengeneratesapositivespuriouscorrelationbetweenimmigrationand

nativewages.Asnotedearlier,moststudiesuseashift-shareinstrumenttoaddressthe

19

problem.Thisinstrumentgivesthepredictednumberofimmigrantsinacityattimet

basedonthegeographicdistributionofearlierwaves.Theshift-shareinstrument,however,

isvalidonlyiftheeconomicconditionsthatmotivatedearlierwavestosettleinparticular

citiesareuncorrelatedwiththeconditionsinthosecitiestoday.

Somestudiesavoidtheendogeneityproblembysearchingfornaturalexperiments

wherelargenumbersofimmigrantsarerandomly“droppedoff”inaparticularlocationata

particulartime,withtheMarielboatliftbeingtheclassiccontext.OnApril20,1980,Fidel

CastrodeclaredthatCubanswishingtomovetotheUnitedStatescouldleavefreelyfrom

theportofMariel.BySeptember1980,about125,000Cubanshadacceptedtheinvitation,

andMiami’slaborforcehadunexpectedlygrownby8percent.

Card(1990)concludedthattheaveragewageinMiamiwasbarelyaffectedbythe

Marielsupplyshock(relativetowagetrendsincomparablecities).Borjas(2017),however,

notedthattherefugeeswerepredominantlylow-skill.Nearlytwo-thirdsoftheMarielitos

didnothaveahighschooldiploma,increasingthenumberofhighschooldropoutsin

Miamibynearly20percent.ItwouldthenmakesensetolookfortheimpactofMarielin

Miami’slow-skilllabormarket.Figure4ashowsthewagetrendsrevealedbytheMarch

CurrentPopulationSurveys(CPS)inthesampleofnon-Hispanicmen,aged25-59,whodid

nothaveahighschooldiploma.TherelativewageofthisgroupinMiamitookanosedive

after1980,andittookadecadeforthewagetorecover.

Severalsubsequentstudieshavearguedthatotherdefinitionsofthe“low-skill”

workforceandthatadjustingforsamplingissuesintheCPSyielddifferentresults.Periand

Yasenov(2015),forinstance,examinethewagetrendsinalow-skillsamplegivenbynon-

Cubanworkers,aged16-61,whodidnothaveahighschooldiploma.AsFigure4bshows,

20

thewagetrendsinthissamplesuggestthatMarieldidnotaffectthelow-skillwage.5The

questionthenbecomes:whichsamplebestcapturesconditionsinMiami’s“lowskill”labor

market?Asanexampleofthenuancesinvolved,theadditionofworkersaged16-18tothe

low-skillsampleimpliesthathighschoolstudentsareclassifiedas“highschooldropouts”

becausetheydonotyethaveahighschooldiplomaandtheCPS(atthetime)didnot

provideinformationonwhetherapersonwasenrolledinschool.Theverylargenumberof

highschoolstudentsoverwhelmsthedataandpotentiallycontaminatesthewagetrend.6

Spatialcorrelationsmightalsobeproblematicbecausenativesmayrespondto

supplyshocksmigrationbymovingtootherlabormarkets.Iftheentryofimmigrantsintoa

particularcitylowersthewage,nativesmightmovetoplacesunaffectedbyimmigration

thatnowofferrelativelyhigherwages,diffusingtheimpactofimmigrationoverthe

nationaleconomy.BeginningwithBorjas(2003),manystudieshavemovedawayfrom

geographiccomparisonsandinsteadexaminedwagetrendsforspecificskillgroupsinthe

nationallabormarket.The“skill-cellapproach”triestodetermineifthewageofspecific

skillgroupsisrelatedtothenumberofimmigrantsthatenteredeachofthosegroups.

Figure5illustratesakeyempiricalimplicationofthisapproach.Defineaskillgroup

asthesetofworkerswithaparticularcombinationofeducationalattainmentandlabor

marketexperience(forexample,highschooldropoutswith6-10yearsofexperience,or

5ThisisthesampleusedintheoriginaldraftofPeriandYasenov(2015).RecentworkbyClemens

andHunt(2019)notesanadditionalproblemwiththeMarchCPSsample:thefractionofthelow-skillworkforcethatisblackjumpeddramaticallyin1979,potentiallycontaminatingthewagetrend.Borjas(2019),however,documentsthatmuchofthewagedeclinedocumentedinFigure4aactuallyoccurredduringatimewhenthefractionofblackworkersintheCPSsamplewasrelativelyconstant.

6ThereconciliationoftheMarielevidencewilllikelyrequiredatathatexaminesaspectsoftheMiamilabormarketnotmeasuredbytheCPS.Anastasopoulosetal(2018)examinetrendsinthenumberofjobvacancies(asmeasuredbytheConferenceBoardHelp-WantedIndex)anddocumentasizablepost-Marieldeclineintherelativenumberofhelp-wantedclassifiedsintheMiamiHerald.

21

collegegraduateswith20-24yearsofexperience).Eachpointinthescatterdiagramrelates

thewagegrowthexperiencedbyaparticularskillgroupofnativesoveraparticulardecade

tothechangeinthepercentofthegroupthatisforeignborn(usingdecadalCensusdata

from1960through2010).Thereisanobviousnegativecorrelationbetweenthetwo

variables,andtheregressionlinesuggeststhata10percentincreaseinthesizeoftheskill

groupreducesthewageofthatgroupby3to4percent.

Asthisbriefoverviewofahugeliteraturesuggests,therearemethodologicaland

samplingchoicesthatoftenleadtoverydifferentconclusions.ArecentNationalAcademy

ofSciences(NAS)reportontheeconomicimpactofimmigration(BlauandMackie,2016)

summarizedthevalueofthewageelasticityestimatedinthemainstudies.Table3shows

thatthepointestimatesarealloverthemap,andcanbepositive,zero,ornegative.

Theskill-cellapproachcanbeexpandedtoaddressalimitationofthegeneric

regressionmodelinequation(24).Asupplyshockinaparticularskillgroupaffectsthe

wageofworkersinthatskillgroupandthewageofotherskillgroupsaswell.Giventhe

vastnumberofpotentialskillgroupsintheworkforce,thecross-effectscanonlybe

estimatedbyspecifyingastructuralmodeloftheproductiontechnologythatlimitsthe

allowableinteractions.Borjas(2003)introducedthenestedCESframework:

𝑄" = q𝜆W"𝐾"s + 𝜆𝐿"stKu (25)

𝐿" = vw𝜃x"𝐿x"V

x

y

K_

, (26)

𝐿x" = vw𝛼xz"𝐿xz"8

z

y

K{

, (27)

22

whereQtisoutput,Ktiscapital,Ltdenotesthenumberofefficiencyunitsintheaggregate

labormarket;d=1–1/sKL,withsKLbeingtheelasticityofsubstitutionbetweencapital

andlabor;Lstgivestheeffectivesupplyofworkerswitheducationsattimet;b=1–1/sS,

withsSbeingtheelasticityofsubstitutionacrosstheseeducationaggregates;Lsxtgivesthe

numberofworkersineducationgroupsandexperiencegroupxattimet;h=1–1/sX,with

sXbeingtheelasticityofsubstitutionacrossexperienceclasses.

Thestructuralapproachshowsthattheelasticitiesofsubstitutionamongdifferent

typesofworkersarethe“fundamentals”thatdeterminethewageimpactofimmigration.

The(log-linear)marginalproductivityconditionsimpliedbythenestedCESallowforeasy

estimationoftheseelasticitiesusingdataonwagesandemploymentfortheskillcells.

Table4,alsodrawnfromtheNASreport,usestheestimatedelasticitiestosimulatethe

wageimpactoftheimmigrantswhoenteredbetween1990and2010(whoaretreatedasa

one-timeshock).Evenafteraccountingforallpotentialcross-effects,thissupplyshock

reducedthewageoftheleastskilledworkersby6.3percentintheshortrunandby3.1

percentinthelongrun.

Subsequentextensionsoftheframeworkinequations(25)-(27)emphasizethe

importanceoftwoadditionalelasticitiesofsubstitutionthatmaychangetheimplicationsof

thenumericalsimulation.OttavianoandPeri(2012)relaxedtheassumptioninequation

(27)thatimmigrantsandnativeswhohavethesameeducationalattainmentandthesame

labormarketexperienceareperfectsubstitutes.Thepotentialcomplementaritybetween

observationallyequivalentimmigrantsandnativeswouldattenuateanynegativewage

23

effect.Card(2009)arguedthathighschooldropoutsandhighschoolgraduatesareperfect

substitutes,changingthedefinitionofthelow-skillworkforce.

ThevariouspanelsofTable4showhowthealternativeassumptionschangethe

simulatedwageimpact.TheOttaviano-Peri(2012)estimateofanelasticityofsubstitution

of20betweenobservationallyequivalentimmigrantsandnativesistoolargetomatter

muchinthesimulation.Theshort-runimpactonthewageofhighschooldropoutsis-4.9

percent,whilethelong-runimpactis-1.7percent.Buttheassumptionthathighschool

dropoutsandhighschoolgraduatesareperfectsubstitutesmakesadifference.Byadding

thetensofmillionsofnativeswhoarehighschoolgraduatesintothelow-skilllabor

market,theimpactoftheentryofmillionsoflow-skillimmigrants(whooftendonothavea

highschooldiploma)isdilutedbecausethebaselineworkforcegrowsevenmore.Itisthis

“numericaltrick”thatproducesasimulationsuggestingthatimmigrationhasnoadverse

impactonthewageoflow-skillworkers.

HumanCapitalExternalities

Humancapitalexternalitiescanattenuatetheadverseimpactofimmigrationon

competingworkersandgenerateverylargeeconomicgainsatthesametime.Anumberof

recentstudiesexaminespecifichistoricaleventsinvolvinghigh-skillsupplyshocksto

determineiftherewereresultingexternalities.

TheworkofWaldinger(2010,2012)exemplifiesthemethodologicalapproach.

Immediatelyafterseizingpowerin1933,theNationalSocialistPartyenactedtheLawfor

theRestorationoftheProfessionalCivilService,whichmandatedthedismissalofallJewish

professorsfromGermanuniversities.Almost20percentofGermanmathematics

24

professorsweredismissed,includingsomeofthemostfamousmathematiciansoftheera

(suchasJohnvonNeumann,RichardCourant,andRichardvonMises).

TheJewishmathematicianshadnotbeenrandomlyemployedacrossGerman

universities,sosomedepartmentsbarelynoticedthedismissalswhileotherdepartments

lostoverhalftheirfaculty.Ifthoseexceptionalmathematiciansproducedbeneficial

externalitiesfortheirstudentsorcolleagues,thedismissalswouldhavehadadetectable

impactontheeventualproductivityofthepersons“leftbehind.”Waldinger(2010)shows

thatthestudentsleftbehindinthedepartmentsthatsufferedtheheaviestlosses

experiencedarelativedeclineintheirproductivity,suggestingthathumancapital

externalitiesdomatter.Waldinger(2012),however,documentsthatthepublication rate of

the colleagues left behind was not affected by the dismissals. The different results in the

two Waldinger studies suggest that human capital externalities are not magically

produced even when the supply shock involves exceptional workers. The outcome seems

to depend on the nature of the relationship between the immigrants and the affected

workers.

BorjasandDoran(2012)conductasimilarexaminationofanotherhigh-skillsupply

shock.Fordecadespriorto1992,therehadbeenlittleintellectualcontactbetweenSoviet

andWesternmathematicians.Asaresult,thetwogroupsspecializedinverydifferent

fields.ThetwomostpopularSovietfieldswerepartialdifferentialequationsandordinary

differentialequations.ThetwomostpopularAmericanfieldswerestatisticsandoperations

research.AfterthecollapseoftheSovietUnionin1992,severalhundredSoviet

mathematiciansleftthecountryandsettledintheUnitedStates.

25

BorjasandDoran(2012)trackedthepublicationrecordofeveryAmerican

mathematicianbeforeandafterthearrivaloftheSovietémigréstomeasuretheimpactof

thesupplyshockonthemathematicianswhohadthemostSoviet-likeresearchagenda.

Therearetwopossibleeffects.Thefirstisimpliedbythelawofdiminishingreturns.An

increaseinthenumberofmathematiciansderivingtheoremsin,say,partialdifferential

equationsmakesthecomparableAmericanmathematicianslessproductive.Thesecondis

impliedbyhumancapitalexternalities.ExposingAmericanmathematicianstonew

theoremsandtechniquescouldincreasetheproductivityofthemathematiciansworkingin

thosefields.Itturnsoutthattherewasaprecipitousdeclineinthepublicationrateofthe

groupwhoseresearchagendaoverlappedmostwiththeSoviets.

Finally,severalstudiesexaminetheimpactofthehigh-techworkersadmittedinthe

H-1Bvisaprogram.ThenumberofH-1Bvisasiscappedandthiscaphasfluctuatedover

time.TheconclusionthattheH-1Bprogramproducesexternalitiesoftencomesfrom

studiesthatestimatespatialcorrelations.BecauseH-1Bvisa-holdersclusterinasmall

numberoflocations(suchasSanFrancisco),anexogenousincreaseinthecapwouldbe

expectedtohavealargeimpactin“H-1Bdependent”cities.KerrandLincoln(2010)

showedthatanincreaseinthecapledtomorepatentsoriginatinginthosecities.The

increasedpatenting,however,camemainlyfrompersonswithIndianorChinesesurnames,

suggestingthatthosenewpatentsoriginatedwiththeimmigrantsthemselves,ratherthan

fromaspillovereffectonnativeworkers.

Someofthesubsequentstudiesthatestimatespatialcorrelationsreportlarge

beneficialeffects.Peri,Shih,andFarber(2015)relatetheH-1Binducedincreaseinthe

numberofSTEMworkerstothewageofcollegegraduatesinthecityandfindaverystrong

26

positiveeffect.Themagnitude,however,seemsimplausible;a1percentincreaseinthesize

oftheSTEMworkforceraisesthewageofcollegegraduatesby8percent(orawage

elasticityof+8.0).Mostlikely,theendogeneityplaguingspatialcorrelationsandthe

problemswiththeshift-shareinstrumentleadthedatatoregurgitatetheobviousfactthat

high-skillimmigrantsendupinplaceswherethehigh-skilllabormarketisdoingquitewell.

Doran,Gelber,andIsen(2016)avoidtheendogeneitybiasbyexamininganatural

experimentcreatedbyapeculiarityoftheH-1Bprogram.Firmscanapplyforthevisasona

first-come,first-servedbasisuntilthevisasrunout.Onsomerandomdayduringayear,the

visasrunoutandonthatdaymorefirmstypicallyapplyforvisasthantherearevisas

available.TheDepartmentofHomelandSecuritythenrunsalotterytodeterminewhich

firmsgetthevisas.Itturnsoutthatthefirmsthatwonthelotterydidnotpatentmoreand

thatnativeemploymentinthosefirmsfell.

Inshort,theevidencesupportingtheconjecturethathigh-skillimmigration

generatessizablehumancapitalexternalitiesismixed.Therearesomehistoricalevents

thatproducedsuchexternalities,buttherearealsoothereventswheretheexternalitiesare

absent.

6.ImmigrantSkills

AstheaugmentedSolowmodelsuggests,theimpactofimmigrantsoneconomic

growthdependsonthehumancapitalstocktheybringintothecountry,andonhowthat

stockchangesasassimilationtakesplace(Chiswick,1978;Borjas,1985).

The2016NASreport(BlauandMackie,2016)usedthecensuscross-sections

between1970and2010totracktheage-adjustedwageofspecificimmigrantwavesover

27

thepastfewdecades.Figure6aillustratesthetrendsintherelativewage.Thefigure

revealstwointerestingandwell-knownfindings.Thefirstisthepresenceofsizablecohort

differencesinentrywages,withthemorerecentcohortshavinglowerearningspotential

thanearliercohortsthroughtheyear2000.In1970,themostrecentimmigrantwave

earned23.5percentlessthancomparablenativesatthetimeofentry.By1990,theentry

wagedisadvantagehadgrownto33.1percent,beforecontractingto27.3percentin2000.

Figure6aalsohintsataslowdownintherateof“economicassimilation.”The

immigrantcohortsthatarrivedpriortotheearly1980sexperiencedfasterrelativewage

growththanthemorerecentarrivals.Consider,forexample,thecohortthatarrivedinthe

late1960s.Therelativewageofthisgroupimprovedfromadisadvantageof23.5percent

in1970to2.0percentby2000—agrowthofabout20percentagepointsovertwodecades.

Incontrast,therelativewageofthecohortthatenteredthecountryinthelate1980sonly

improvedfromanentrydisadvantageof33.1percentto25.2percentby2010.

Theassimilationslowdownisalsoevidentindatathatisfarlesssensitivetothe

impactoftransitoryeconomicconditionsontherelativewageofimmigrants.Figure6b

showsthecomparabletrendsinthefractionofimmigrantswhospeakEnglishverywell(or

onlyspeakEnglish).Notethat30.9percentoftheimmigrantswhoarrivedbetween1975

and1980wereEnglishproficientatthetimeofarrival,andthisfractionincreasedto46.2

percentby2000.Incontrast,theproficiencyrateofthecohortthatenteredthecountryin

thelate1980sincreasedbyonly7percentagepointsduringthefirst20years.The

evidencerevealedinFigure6,therefore,suggestthatthereisnoinevitableassimilation

processthatwillmechanicallyincreaseper-capitaincomeastheimmigrantpopulation

acquiresskillsthatattenuatetheinitialproductivitydisadvantage.

28

Itisinsightfultocomparethemodernevidencewiththehistoricalrecord.Although

itiswidelybelievedthatthehumancapitalstockoftheimmigrantswhoarrivedatthe

beginningofthe20thcenturyincreaseddramaticallyduringtheirlifetime,recentresearch

suggeststhatthewidespreadconsensusmaybewrong.Thepublicreleaseofthecensus

manuscriptscompiledatthetimeallowsmodernhistorianstotrackspecificpersonsfrom

censustocensus.Thistrackingletsusinspectthecareerpathofspecificnativesand

immigrants.Theexerciseturnsthewidespreadperceptionofrapidimprovementonits

head.AsAbramitzky,Boustan,andEriksson(2014,pp.269-270)conclude:“Thenotion

thatEuropeanimmigrantsconvergedwithnativesafterspending10to15yearsintheUS

is…exaggerated,aswefindthatinitialimmigrant-nativeoccupationalgapspersistedover

time.”Inshort,thehistoricalexperienceprovidessurprisinglylittleevidenceofanyrelative

economicimprovementfortheEllisIslandimmigrantsduringtheirlifetime.

Finally,theavailableevidencesuggestsapositivecorrelationbetweentheskillsthat

immigrantsbringintotheUnitedStatesandtherateofsubsequentgrowthinearnings.

Figure7illustratesthelinkthewageofgrowthexperiencedbyanationalorigingroupin

thefirst10yearsintheUnitedStatesandtheaverageeducationofthegroupatthetimeof

arrival.Itisevidentthatmoreskilledgroupsexperiencefasterassimilation.Theevidence,

therefore,supportstheconjectureofcomplementarityintheproductionofhumancapital:

thoseimmigrantswhoinvestedmoreinhumancapitalpriortomigrationarelikelyto

investmoreinhumancapitalaftermigration.Putdifferently,therelativeeconomic

contributionofhigh-skillimmigrantstoaggregateoutputincreasesovertime.

7.TheFiscalImpact

29

Immigrationgeneratesashort-runeconomicgainthroughtheimmigrationsurplus

andmaygeneratealong-runincreaseifimmigrantsaresufficientlyskilledorthereare

humancapitalexternalities.Theeconomicgainsthataccruethroughthelabormarket,

however,needtobecontrastedwiththefiscalimpactofimmigration.Thefiscalimpactcan

eitherbepositiveornegative,dependingonhowmuchimmigrantscontributetothe

fundingofgovernmentprogramsandhowmuchitcoststoprovideservicestothem.

Thequestionofwhetherimmigrantsusegovernmentprogramsmoreorlessoften

thannativesiscontroversialandtheanswerishighlydisputed.Infact,itisenlighteningto

illustratehowthesamedatacanbemanipulatedindifferentwaystoreachverydifferent

conclusionsabouttherelativeuseofwelfareprogramsbytheimmigrantpopulation.

Since1994,theCurrentPopulationSurveys(CPS)provideinformationon

participationinvariousassistanceprogramsforbothimmigrantsandnatives,makingit

possibletodocumentthedifferenceinwelfareparticipationrates.Forexpositional

convenience,supposethatbeing“onwelfare”meansreceivingbenefitsfromMedicaid,food

stamps,orcashbenefits.WecanthenusetheCPStodetermineifthefractionofimmigrants

onwelfareishigher,lower,orthesameasthefractionofnatives.

ThetwopanelsofFigure8showthetrendsbetween1994and2018.Note,however,

thatthetwopanelsyieldverydifferentresults.InFigure7a,thefractionofimmigrantson

welfareisfarhigherthanthefractionofnatives,whileinFigure7b,theparticipationrateis

essentiallythesameforthetwogroups.

Bothpanelsofthefigureusethesamedatabutmanipulateitindifferentways.In

particular,thetwopanelsuseadifferentunitofanalysisinthecalculations.Figure7auses

thehouseholdastheunitofanalysis,whichisthewayinwhichwelfareuseismostoften

30

analyzed.Animmigranthouseholdisonewheretheheadofthehouseholdisforeign-born,

andanativehouseholdisonewheretheheadisnative-born.Itisevidentthathouseholds

headedbyanimmigranthavehighratesofwelfareuse(definedasanyoneinthehousehold

receivingoneofthethreeprogramsunderanalysis),andthatthegapbetweenimmigrant

andnativehouseholdsincreasedovertime.By2018,35.1percentofimmigranthouseholds

wereonwelfareascomparedto22.6percentofnativehouseholds.Incontrast,Figure7b

usesthepersonastheunitofanalysis.In2018,24.5percentofforeign-bornpersonsand

23.1percentofthenative-bornreceivedassistancefromoneofthethreeprograms.

Thereasonforthedifferencebetweenthetwopanelsiseasytograspbyconsidering

atrivialexample.Ayoung,singleimmigrantwomanarrivesinthecountry.Afterafew

years,shebecomesasinglemother,hasthreechildren,andqualifiesforMedicaid.InFigure

8a,thefour-persongroupingwouldbeclassifiedasanimmigranthouseholdonwelfare.In

Figure8b,thetallywouldrecordoneimmigrantpersononwelfareandthreenativepersons

onwelfare.Andthereinliesthenumericaltrick:Becausethechildrenwereborninthe

UnitedStates,theyenteronthenativesideoftheledger.

The2016NASreportcontainsadetailedanalysisofthefiscalimpactthatgoesfar

beyondthecalculationofwelfareparticipationrates(BlauandMackie,2016,Chapters8

and9).TheNASreportaddsupboththetaxespaidandthecostoftheservicesreceivedfor

immigrantsandtheirdescendants,soastocomeupwitha“bottom-line”numberthat

summarizesthelong-runfiscalimpact.

Thislong-runperspectiveaccountsforthefactthatmanycurrentexpenditures,

suchasfundingschoolingforimmigrantchildrenorhealthcare,generatefuturereturns

throughhigherearningswhenthechildrenenterthelabormarket.Theexercisealso

31

incorporatesthepossibilitythatimmigrantsmighthelpfiscallybecausethenative

populationisaging,andfundswillbeneededtofundcurrentliabilitiesinSocialSecurity

andMedicare.TheNASuseda75-yearperiodtocalculatethelong-runfiscalimpact.

TheNASexerciseshowsthatthebottomlineofthelong-runcalculationforthe

averageimmigrantdependsentirelyontheassumptionsmade.Itiseasytogenerateeither

averypositivelong-runfiscalimpactoraverynegativeonebymakingdifferent

assumptions.Twodistinctassumptionsdrivetheconclusion.First,thecalculationneedsto

allocateexpendituresinpublicgoodsbetweenimmigrantsandnatives.Althoughitmakes

sensetoassumethatthecostofpublicgoods,suchaspoliceprotectionornationaldefense,

isunchangedifthecountryadmitsonemoreimmigrant(sothatthemarginalcostiszero),

itmakeslesssensetoassumethatthecostofpublicgoodsisunchangedifthecountry

admitsover40millionimmigrants.Similarly,anylong-runscenariomustmake

assumptionsaboutthefuturepathoftaxesandgovernmentexpenditures,anddifferent

assumptionsleadtodifferentconclusions.

Table5summarizestheresultsfromfourscenariospresentedintheNASreport.

Thelong-runfiscalimpactoftheaverageimmigrant(measuredasthepresentvalueofthe

differencebetweentaxesandexpenditures)ispositiveonlyifimmigrantsdonotaffectthe

costofpublicgoodsandwealsoassumethatfuturetaxratesandbenefitpaymentsfollow

theprojectionsmadebytheCongressionalBudgetOffice(CBO).Thepositivelong-term

impactofanimmigrant(anetpresentvalueof+$58,000)becomesaloss(potentiallyas

largeas-$119,000)ifonegetsridofeitherofthoseassumptions.

Note,however,thatthefiscalimpactofhigh-skillimmigrationisalwayspositive,

whilethefiscalimpactoflow-skillimmigrationisalwaysnegative.Althoughitisimpossible

32

toknowwhichscenario(ifany)bestapproximatesthefuture,high-skillimmigrationis

alwaysabetter“deal”fromafiscalperspective.Thelong-runfiscalbenefitfroman

immigrantwithagraduatedegreeisbetween$236,000to$547,000,whilethelong-run

fiscalburdenimposedbyahighschooldropoutisbetween-$196,000to-$301,000.

Theseestimatesimplythatachangeinimmigrationpolicythatonlypermitsthe

entryofhigh-skillworkerscanbeanimportantcontributortoeconomicgrowtheveninthe

absenceofhumancapitalexternalities.Considerthescenariothatgeneratesthesmallest

fiscalgainfortheaverageimmigrant(i.e.,thescenariothatassumesaveragecostpricing

forpublicgoodsanddisregardstheCBOprojections).Theaverageimmigrantproducesa

long-termlossof-$119,000.Suppose,however,thateveryimmigranthadbeenacollege

graduate.Thenetpresentvalueinthisscenariojumpsfromaburdenof-$119,000toagain

of+$39,000,oranetgainof+$158,000.Assuminga3percentrateofdiscount,the

annualizedgainis$4,740.Therewere44.5millionimmigrantsin2017.Ifallthese

immigrantshadbeencollegegraduates,thecountrywouldhavebeen$211billionricher.

Theprojectedgainisevenlargerinthescenariothatassumesmarginalcostpricingand

usestheCBOprojections.Theincreaseinthecountry’swealthifallimmigrantshadbeen

collegegraduateswouldbe$311billion.Inshort,high-skillimmigrationcanbean

importantdeterminantofeconomicgrowthsimplybecauseofitsfiscalconsequences.7

8.Implications

7Thisisapartialequilibriumexercisedesignedtogiveasenseofthemagnitudesinvolved.Thevery

largeincreaseinthenumberofcollegegraduateswouldhavemajorlabormarketconsequences,includingasubstantialdropintherelativewageof(andtaxespaidby)high-skillworkers.

33

TheUnitedStatesoffersexceptionalopportunitiestoanyoneluckyenoughtolive

withinitsborders.Asaresult,manymorepeoplewanttoimmigratethanthecountryis

willingtoadmit.Consider,forexample,the“diversitylottery”heldannuallysince1995.

Eachyear,somevisasaremadeavailabletopersonsoriginatingin“countrieswithlow

ratesofimmigrationtotheUnitedStates.”Personslivingintheeligiblecountriescanapply

forarandomchanceatwinningoneofthecovetedgreencards.The2018lotterydrew23.1

millionqualifiedapplicationsforthe50,000availablevisas.

Thehugeexcessdemandforentryvisasimpliesthatimmigrationpolicyoften

specifiesasetofrationingrulestopickandchoosefromthemanyapplicants.Theserules

maystressfamilyties(asiscurrentlydoneforthebulkoflegalimmigrants),ornational

origin(asusedtobedone),orsocioeconomiccharacteristics(asisdoneinother

countries).Whichtypesofimmigrantsshouldthecountryadmit?

Thecasethatcanbemadeforpreferringonetypeofimmigrantoveranother

ultimatelydependsonwhatoneassumesaboutthecountry’spolicyobjectives.Specifically,

whatshouldtheUnitedStatesseektoaccomplishfromimmigration?Differentpolicygoals

leadtodifferentchoicesaboutthecompositionoftheimmigrantflow.Ifimmigrationpolicy

strivedtorelievethetaxburdenonnative-borntaxpayers,itwouldbefiscallyirresponsible

toadmitmillionsoflow-skillimmigrantswhohaveahighpropensityforparticipatingin

assistanceprograms.Butifthegoalweretohelpthemillionsofpersonsnowlivingin

poverty-strickenregionsoftheworld,theincreasedcostoflow-skillimmigrationisthe

pricethatAmericansarewillingtopayfortheirgenerosity.

Assumethatthegoalofimmigrationpolicyistoachieveahighrateofeconomic

growth.Averystrongcasecanbemadethattherewouldbefastereconomicgrowth,

34

particularlyasdefinedbythetrendinper-capitaincome,iftheUnitedStatesadoptedan

immigrationpolicythatlimitedentrytohigh-skillworkers.

Theargumentinfavorofthispolicycontainstwodistinctparts.Considerfirstthe

roleofthefiscalimpactofimmigration.Thereisnodoubtthathigh-skillimmigrantsearn

more,payhighertaxes,andrequirefewerservices.Putsimply,high-skillimmigration

increasestheafter-taxincomeofnatives,whilethetaxburdenimposedbytheimmigration

oflow-skillworkersreducesthenetwealthofnativetaxpayers.AndtheNationalAcademy

estimatessuggestthatthefiscalbenefitsgeneratedbyhigh-skillimmigrationcanbequite

large.

Thesecondpartofthecaseforhigh-skillimmigrationreliesonhowimmigrants

altertheproductivityofthenativeworkforceandofnative-ownedfirms.Intheshort-run,

theeconomicpieexpandsthroughtheimmigrationsurplus.Manystudiessuggestthat

thereismorecomplementaritybetweenhigh-skilllaborandcapitalthanbetweenunskilled

laborandcapital.Capital-skillcomplementarity,therefore,suggeststhattheimmigration

surpluswouldbelargeriftheimmigrantflowwerecomposedofskilledworkers.

Theseshort-rungains,however,wouldbedissipatedastheeconomyadjuststothe

largerworkforce.Inthelong-term,theimmigrantcontributiontoeconomicgrowthwould

dependonthepossibilitythatimmigrantsintroducehumancapitalexternalities,which

permanentlyincreasetheproductivityofnatives.High-skillimmigrantsarealsomore

likelytobringinknowledge,skills,andabilitiesthatnativeslack,andnativesmaybeable

tosomehowpickupthisknow-how.Althoughtheevidenceonthemagnitudeofthese

externalitiesismixed,thepotentialfortheexternalitiestoevenexistislargerwhenthe

immigrantinfluxiscomposedofexceptionalworkers.

35

Inshort,thereislittledoubtthattheimmigrantcontributiontoeconomicgrowth

wouldbefarmoreimportantiftheimmigrantinflowwascomposedofhigh-skillworkers.

Ifareceivingcountrywishedtopursueanimmigrationpolicythatmaximizedlong-term

growth,therefore,thereislittleuncertaintyaboutthepaththatcountryshouldfollow.Itis

farfromclear,however,thatimmigrationpolicyshouldbesetsolelyonthebasisof

economicconsiderations.

36

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Card,David.2009.Immigrationandinequality.AmericanEconomicReview99:1-21. Chiswick,BarryR.1978.“TheeffectofAmericanizationontheearningsofforeign-bornmen,”JournalofPoliticalEconomy86:897-921. Clemens,MichaelA.,andJenniferHunt.2019.“TheLaborMarketEffectsofRefugeeWaves:ReconcilingConflictingResults,”IndustrialandLaborRelationsReview,inpress. Dolado,Juan,AlessandraGoria,andAndreaIchino,1994.“Immigration,HumanCapitalandGrowthintheHostCountry:EvidencefromPooledCountryData,”JournalofPopulationEconomics7:193-215. Doran,Kirk,AlexanderGelber,andAdamIsen.2015.“TheEffectsofHigh-SkilledImmigrationPolicyonFirms:EvidencefromH-1BVisaLotteries,”NBERWorkingPaperNo.20668. Jaeger,DavidA.,JoakimRuist,andJanStuhler.2018.“Shift-ShareInstrumentsandtheImpactofImmigration,”NBERWorkingPaperNo.24285. Kane,TimandZachRutledge.2018.“ImmigrationandEconomicPerformanceAcrossFiftyU.S.Statesfrom1980-2015,”HooverInstitutionWorkingPaperNo.18112. Kerr,WilliamR.,andWilliamF.Lincoln.2010.“Thesupplysideofinnovation:H-1BvisareformsandU.S.ethnicinvention,”JournalofLaborEconomics28:473-508. Mankiw,N.Gregory,DavidRomer,andDavidN.Weil.1992.“AContributiontotheEmpiricsofEconomicGrowth,”QuarterlyJournalofEconomics107:407-437. Ottaviano,GianmarcoI.P.,andGiovanniPeri.2012.“Rethinkingtheeffectofimmigrationonwages,”JournaloftheEuropeanEconomicAssociation10:152-197.

Peri,Giovanni.2012.“TheEffectofImmigrationonProductivity:EvidenceFromU.S.States.”ReviewofEconomicsandStatistics94:348–358. Peri,Giovanni,KevinShi,andChadSparber.2015.“STEMWorkers,H-1BVisas,andProductivityinUSCities,”JournalofLaborEconomics33:S225-S255. Peri,GiovanniandYasenov,Vasil.2015.“TheLaborMarketEffectsofaRefugeeWave:SyntheticControlMethodMeetstheMarielBoatlift,”NBERWorkingPaperNo.21801.

Waldinger,Fabian.2010.“Qualitymatters:TheexpulsionofprofessorsandtheconsequencesforPh.D.studentoutcomesinNaziGermany,”JournalofPoliticalEconomy118:787-831.

38

Waldinger,Fabian.2012.“Peereffectsinscience:EvidencefromthedismissalofscientistsinNaziGermany,”ReviewofEconomicStudies79:838-861.

39

Figure1.Immigrationandeconomicgrowthindecadaldata,1850-2017

A. GDP

B. Per-capitaGDP

Notes:ThehistoricalGDPserieswasobtainedfromMeasuringWorth.comandthenetmigrationdatawasdrawnfromthedecennialcensuses.Thedatafor2010-2020areextrapolationsfromthechangesobservedbetween2010and2017.ThereportedregressioncoefficientistheslopefromanOLSregressionofthedecadalGDPgrowthrateonthenetmigrationrate(withstandarderrorsinparentheses).

-3

-2

-1

0

1

2

3

4

5

6

7

8

0

0.1

0.2

0.3

0.4

0.5

0.6

1850-60 1860-70 1870-80 1880-90 1890-00 1900-10 1910-20 1920-30 1930-40 1940-50 1950-60 1960-70 1970-80 1980-90 1990-00 2000-10 2010-20

Net i

mm

igra

tion

rate

(per

100

per

sons

)

GDP

grow

th ra

te

Decade

GDP growth rate

Net migration rate

Regression coefficient = 0.008(0.014)

-3

-2

-1

0

1

2

3

4

5

6

7

8

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

1850-60 1860-70 1870-80 1880-90 1890-00 1900-10 1910-20 1920-30 1930-40 1940-50 1950-60 1960-70 1970-80 1980-90 1990-00 2000-10 2010-20

Net i

mm

igra

tion

rate

(per

100

per

sons

)

Per-

capi

ta G

DP g

row

th ra

te

Decade

GDP growth rate

Net migration rate

Regression coefficient = -0.010(0.012)

40

FIGURE 2. The immigration surplus

Wage

EmploymentN L=N+M

A

B

0

w0

w1 CD

S¢S

fL

41

Figure3.Theimmigrationsurplusandhumancapitalexternalities

Wage

EmploymentN L=N+M

A

B

0

A¢

B¢

w0

w1 C¢D

S¢S

fL

FL

42

Figure4.Marielandthewageofhighschooldropouts

A.Non-Hispanicmenaged25-59 B.Non-Cubanworkersaged16-61

Notes:AdaptedfromBorjas(2017).Thewagedatarepresenta3-yearmovingaverageandtheshadedareaisthe95percentconfidenceinterval.

4.8

5

5.2

5.4

5.6

5.8

1972 1974 1976 1978 1980 1982 1984 1986 1988 1990

Log

wee

kly

wag

e

Year

Outside Miami

Miami

4.7

4.9

5.1

5.3

5.5

1972 1974 1976 1978 1980 1982 1984 1986 1988 1990

Log

wee

kly

wag

e

Year

Outside Miami

Miami

43

Figure5.Scatterrelatingwagesandimmigrantshare acrossskillgroupsandovertime,1960-2010

Source:Borjas(2014),p.95.Eachpointinthescatterdiagramgivesthedecadalwagechangeandthedecadalchangeintheimmigrantsharefornativeworkingmenwithaparticularlevelofeducationandlabormarketexperience.

-0.20

-0.15

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

-0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2 0.25

Chan

ge in

log

wee

kly

wag

e

Change in immigrant share

44

Figure6.Economicassimilationofimmigrants,1970-2010A.Relativewageprofiles

B.Englishproficiencyprofiles

Notes:BlauandMackie(2016),Table3-12,p.110,andFigure3-16,p.115.

-0.35

-0.3

-0.25

-0.2

-0.15

-0.1

-0.05

0

0 5 10 15 20 25 30

Log

wag

e re

lativ

e to

nat

ives

Years since migration

1975-79 cohort

1985-89 cohort

1995-99 cohort

0.3

0.32

0.34

0.36

0.38

0.4

0.42

0.44

0.46

0.48

0.5

0 5 10 15 20 25 30

Frac

tion

spea

king

Eng

lish

very

wel

l

Years since migration

1975-79 cohort

1985-89 cohort

1995-99 cohort

45

Figure7.Economicassimilationandeducation

Source:Borjas(2016),p.101.

Canada

Mexico

Costa Rica

El Salvador

Guatemala

Honduras

Nicaragua

Cuba

Dominican Rep.Haiti

Jamaica

Argentina

Brazil

Chile

Ecuador

Guyana

Peru

Venezuela

U.K.

Ireland

France

Netherlands

Albania

Italy

Bulgaria

Czechoslovakia

Germany

Poland

RomaniaYugoslavia

RussiaChina

Hong Kong

Taiwan

Japan

Korea

Indonesia

ThailandVietnam

India

Bangladesh

PakistanSri Lanka

Iran

Iraq

Israel

Syria

Turkey

Egypt

Morocco

GhanaEthiopia

Kenya

Somalia

South Africa

Australia

-40

-20

0

20

40

60

80

6 8 10 12 14 16 18

Perc

ent w

age

impr

ovem

ent i

n fir

st d

ecad

e

Years of education at time of arrival

46

Figure8.Trendsinwelfareparticipationrates,1994-2018

A. Households B. Persons

Source:Author’scalculationsfromtheCurrentPopulationSurveys,AnnualSocialandEconomicSupplement.Welfareparticipationisdefinedintermsofuseofcashbenefits,foodstamps,orMedicaid..

0

5

10

15

20

25

30

35

40

1990 2000 2010 2020

Perc

ent r

ecei

ving

ass

istan

ce

Year

Natives

Immigrants

0

5

10

15

20

25

30

1990 2000 2010 2020Pe

rcen

t rec

eivi

ng a

ssist

ance

Year

Natives

Immigrants

47

Table1.ImmigrationandGSPacrossstates,1960-2017 LogGSP Logper-capitaGSPCharacteristicsofworkforce (1) (2) (1) (2)A. OLS Immigrantshare 0.032 0.031 -0.002 -0.000 (0.008) (0.008) (0.005) (0.003)Logyearsofschooling --- -0.702 --- 1.358 (0.745) (0.302)Percentprimeage --- -0.045 --- 1.113

(1.317) (0.743) B. IV Immigrantshare 0.027 0.019 -0.012 -0.007 (0.011) (0.013) (0.005) (0.005)Logyearsofschooling --- -1.497 --- 0.920 (1.042) (0.526)Percentprimeage --- 0.299 --- 1.091

(1.128) (0.715)Notes:Standarderrorsreportedinparenthesesandclusteredatthestatelevel.Allregressionsincludestateandyearfixedeffects.Thepre-2000GSPdatawasobtainedfromusgovernmentspending.com,andthepost-1997datafromtheBureauofEconomicAnalysis.Theimmigrantsharewascalculatedusingdatafromthe1960-2000decennialcensusesandthe2010and2017AmericanCommunitySurveys.Themeanschoolingandprime-agevariablesarecalculatedinthesampleofnativeworkers.TheIVregressionsusethe1960censustoconstructaninstrumentbasedonthegeographicsettlementofimmigrantsatthattime(withineachnationalorigingroup);seetextforadditionaldetails.TheOLSregressionshave350observations,andtheIVregressionshave300observations.

48

Table2.Theshort-runimmigrationsurplus,2017

InbillionsofdollarsImmigrationsurplus 56.4 Losstonativeworkers 566.9 Gaintonativefirms 623.3

TotalincreaseinGDP 2,322.3 Paymentstoimmigrants 2,265.9

Source:UpdatedfromBorjas(1995).Thecalculationassumethatlabor’sshareofincomeis0.7andthattheimmigrantshareoftheworkforceis16.6percent.ThevalueofGDPin2017was$19.5trillion.

49

Table3.EstimatesofthewageelasticityStudy Elasticity NativesampleLlull(2015) -1.7 Men AltonjiandCard(1991) -1.7 Dropouts,blackmen -1.0 Dropouts Borjas(2016b) -1.4 Dropouts,non-Hispanicmen -0.5 Dropouts,non-Hispanicmen Monras(2015) -0.7 Highschoolgraduatesorless,non-Hispanic Borjas(2003) -0.6 Men Cortes(2008) -0.6 Dropouts,HispanicwithpoorEnglish -0.3 Dropouts,Hispanic -0.1 Dropouts CardandPeri(2016) -0.2 Men -0.1 Men Card(2001) -0.1 Men +0.1 Women PeriandYasenov(2015) +0.3 Dropouts,non-CubanSource:BlauandMackie(2016),Table5-2,p.242.SeetheNASreportfordetailedcitationstothestudiesincludedinthetable.

50

Table4.Simulatedpercentwageeffectsof1990-2010immigrantsupplyshockonnativeworkers

HighSchoolDropouts

HighSchoolGraduates

SomeCollege

CollegeGraduates

Post-College

AllNatives

Percentsupplyshift 25.9 8.4 6.1 10.9 15.0 10.6 Basicsimulation: Shortrun -6.3 -2.8 -2.3 -3.3 -4.1 -3.2Longrun -3.1 0.4 0.9 -0.1 -0.9 0.0

Similarimmigrantsandnativesarecomplements: Shortrun -4.9 -2.3 -2.0 -2.7 -3.3 -2.6Longrun -1.7 0.9 1.2 0.5 -0.1 0.6

Andhighschooldropoutsandhighschoolgraduatesareperfectsubstitutes:

Shortrun -2.1 -3.0 -2.0 -2.7 -3.3 -2.7Longrun 1.1 0.2 1.2 0.5 -0.1 0.5

Source:BlauandMackie(2016),Table5-1,pp.236-237.Thesimulationresultsthatassumestatisticallysimilarimmigrantsandnativesarecomplementsassumeanelasticityofsubstitutionbetweenthetwogroupsequalto20.

51

Table5.Long-runfiscalimpactofimmigration

Futurepathoftaxesandspendingprojectedby

theCBO

Currentpathoftaxesandspendingcontinues

intofutureMarginalcostpricingforpublicgoods

Allworkers +$58,000 -$36,000Highschooldropouts -196,000 -219,000Highschoolgraduates -47,000 -112,000Somecollege 99,000 -10,000Bachelor’sdegree 280,000 123,000Graduateeducation 547,000 318,000

Averagecostpricingforpublicgoods

Allworkers -$5,000 -$119,000Highschooldropouts -259,000 -301,000Highschoolgraduates -109,000 -193,000Somecollege 34,000 -96,000Bachelor’sdegree 216,000 39,000Graduateeducation 485,000 236,000

Source:BlauandMackie(2016),Table8-12,pp.430-433.Allestimatesarein2013dollars.