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The Impact of Immigration on the New Zealand Labour Market
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Transcript of The Impact of Immigration on the New Zealand Labour Market
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The Impact of Immigration on the New Zealand Labour Market
Michael Tse & Sholeh A. Maani
The University of AucklandEconomics Department
Paper presented at ‘Economic Impacts of Immigration and Population Diversity, International Workshop’, 11-13 April 2012
Question & Motivation• A large segment of the NZ population is
foreign-born (almost a quarter).
• A key policy question is whether or not immigration affects the labour market opportunities of the existing workforce?
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The direction of the impact on existing
workers is dependent on a number of factors. These include:
• Substitutability between immigrants and natives. Are immigrants and the native-born with similar educational qualifications complete substitutes?
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Elasticity of substitution
• If immigrants and natives are substitutes, then the inflow of immigrants would reduce wages in the labour market (Borjas, 2003; Orrenius & Zavodny, 2007)
• If immigrants complement native workers, then we would expect positive changes to earnings from immigration (Ottaviano & Peri, 2007; Borjas, Grogger & Hanson, 2008)
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Immigrant education and experience
• The value placed on education and experience acquired abroad is often less than the value placed on domestic education and experience (Lalonde & Topel, 1991; Duleep & Regets, 2002; Akresh, 2006; Antecol, Kuhn & Trejo, 2006)
International literature • Altonji & Card 1991 and Borjas 2003: 10
% point increase in fraction of immigrants reduces the wages of less skilled by 3-4 %.
• Card 2005, Addison and Worswick 2002 : Mare’ and Stillman 2009, no significant adverse effect
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Modelling approaches of wage effects for the native-born
• 1. Spatial approach(Card, 1990, 2001, 2005; Altonji & Card, 1991; Dustmann, Fabbri &
Preston, 2005).
• 2. Factors of production approach• (Borjas, et al., 1996, 1997; Jaeger, 2007Leamer, 2000; Orrenius &
Zavodny, 2007, Mare’ and Stillman, 2009).
• 3. National level analysis (skill group)(Borjas, 2003, 2004, 2005; Orrenius & Zavodny, 2007).
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Data• New Zealand Income Survey (NZIS), 2002
to 2007 • This is an individual level data released
under the Confidentialised Unit Record File (CURF) format.
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Modelling Approach• National level analysis based on skill and
work experience categories
• Wage effects of immigrant supply shocks
Extensions:• We add spatial regional controls• We incorporate ‘effective immigrant
experience’
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• Immigrant supply shock:
• Pijt immigrant supply shock• M (Immigrant), N(Native-born)• i educational qualification• j experience group • t year
• 4 educational categories:
• No schooling• School qualification (high-school
completion)• Post-school• Bachelor or higher degree
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Model
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• Immigrant shock, fixed-effects and interaction effects on earnings and hours worked:
• Pijt immigrant supply shock• i educational qualification• j experience group • t year
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Index of Congruence
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a native-bornb immigrantc occupation (two-digit
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Borjas (2003), Welch (1999)
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Results
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• Immigrant shock, fixed effects and interaction effects:
• Pijt immigrant supply shock• i educational qualification• j experience group • t year
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Spatial Correlation• each cell is now defined as (r, i, j, t). That
is, each cell is determined by a specific region, education level, experience group, and year.
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Defining Effective Experience
Let X be the effective experience of an immigrant worker:
• A age• Am age at migration• AT age of labour force entry
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• We estimate the three coefficients above in a standard immigrant assimilation regression of the form:
• Ic = 1 immigrant entered as a child
• Id = 1 if entry as adult• N native born 24
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a = 0.4 experience overseas conversionm = 0.7 experience after migration t = 1.1 experience of child immigrants
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Conclusions
We extend the standard national level approach to incorporate local government regions in the analysis.
• We defining groups by region-education-experience, and it has some impact on the results, but the effect is small.
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• We adjust for the value firms place on experience acquired abroad, and ‘effective experience’ for each worker.
• Based on this experience framework the estimates of wage effects continue to be small.
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