The Impact of Skill-Based Immigration Restrictions: The ......acted, the Chinese Exclusion Act of...

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The Impact of Skill-Based Immigration Restrictions: The Chinese Exclusion Act of 1882 Joyce J. Chen The Ohio State University This paper considers the impact of skill-based immigration restrictions, using the Chinese Exclusion Act as a natural experiment. I find that restrictions reduced the average occupational standing of Chinese immigrants, suggesting substitution between observed and unobserved skills. Conversely, children of restricted immi- grants have greater human capital than those of unrestricted immigrants, despite restricted immigrants themselves having lower skill. This suggests particularly strong intergenerational transmission of skill among Chinese immigrants of the exclusion era. More generally, the findings indicate that the effects of skill-based restrictions are not always straightforward and may be heterogeneous across groups. I. Introduction Restrictions imposed on Chinese immigrants mark two watershed mo- ments in the history of US immigration policy. The Page Law of 1875, which barred any persons from entering the country “for lewd and im- moral purposes” and referred specifically to “any subject of China, Japan, or any Oriental country,” constituted the first legislated restriction on immigration to the United States. This act established the precedent for direct federal regulation of immigration, including the authority to deny entry to certain undesirable persons. Earlier statutes had regulated vari- ous aspects of the immigration process but had placed no explicit restric- tions on immigration. 1 The next piece of immigration legislation to be en- I would like to thank Claudia Goldin, Guillermina Jasso, Alex Keyssar, Mark Rosenzweig, participants of the Northeast Universities Development Consortium Conference, and two anonymous referees for helpful comments and suggestions. Support from the Center for In- ternational Development at the Kennedy School of Government is gratefully acknowledged. All remaining errors are my own. 1 Legislation enacted between 1790 and 1875 covered the following: regulation of the naturalization process, registration of aliens entering the country, recognition of the govern- ment’s right to deport aliens deemed dangerous to the country, vessel occupancy standards to safeguard the health and safety of passengers both entering and exiting the country, and prohibition of the transportation of “coolies” on American vessels. [ Journal of Human Capital, 2015, vol. 9, no. 3] © 2015 by The University of Chicago. All rights reserved. 1932-8575/2015/0903-0002$10.00 298

Transcript of The Impact of Skill-Based Immigration Restrictions: The ......acted, the Chinese Exclusion Act of...

Page 1: The Impact of Skill-Based Immigration Restrictions: The ......acted, the Chinese Exclusion Act of 1882, was the first in US history to differentiate by national origin and began a

The Impact of Skill-Based ImmigrationRestrictions: The Chinese ExclusionAct of 1882

Joyce J. ChenThe Ohio State University

This paper considers the impact of skill-based immigration restrictions, using theChinese Exclusion Act as a natural experiment. I find that restrictions reduced theaverage occupational standing of Chinese immigrants, suggesting substitutionbetween observed and unobserved skills. Conversely, children of restricted immi-grants have greater human capital than those of unrestricted immigrants, despiterestricted immigrants themselves having lower skill. This suggests particularlystrong intergenerational transmission of skill among Chinese immigrants of theexclusion era. More generally, the findings indicate that the effects of skill-basedrestrictions are not always straightforward and may be heterogeneous acrossgroups.

I. Introduction

Restrictions imposed on Chinese immigrants mark two watershed mo-ments in the history of US immigration policy. The Page Law of 1875,which barred any persons from entering the country “for lewd and im-moral purposes” and referred specifically to “any subject of China, Japan,or any Oriental country,” constituted the first legislated restriction onimmigration to the United States. This act established the precedent fordirect federal regulation of immigration, including the authority to denyentry to certain undesirable persons. Earlier statutes had regulated vari-ous aspects of the immigration process but had placed no explicit restric-tions on immigration.1 Thenext piece of immigration legislation to be en-

I would like to thank Claudia Goldin, Guillermina Jasso, Alex Keyssar, Mark Rosenzweig,participants of the Northeast Universities Development Consortium Conference, and twoanonymous referees for helpful comments and suggestions. Support from the Center for In-ternational Development at the Kennedy School of Government is gratefully acknowledged.All remaining errors are my own.

1 Legislation enacted between 1790 and 1875 covered the following: regulation of thenaturalization process, registration of aliens entering the country, recognition of the govern-ment’s right to deport aliens deemeddangerous to the country, vessel occupancy standards tosafeguard the health and safety of passengers both entering and exiting the country, andprohibition of the transportation of “coolies” on American vessels.

[ Journal of Human Capital, 2015, vol. 9, no. 3]© 2015 by The University of Chicago. All rights reserved. 1932-8575/2015/0903-0002$10.00

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acted, the Chinese Exclusion Act of 1882, was the first in US history todifferentiate by national origin and began a long history of racially mo-tivated immigration restrictions, in place until the Immigration and Na-tionality Act of 1965. It was also the first law to impose restrictions on thebasis of skill, a legacy that persists in current policy. The Chinese Exclu-sion Act of 1882 prohibited immigration of all Chinese laborers, eitherskilled or unskilled, providing specific exemptions for merchants, teach-ers, students, and officials.In this paper, I utilize census data to examine the human capital of

Chinese immigrants throughout history, using the restrictions of the Chi-nese Exclusion Act as a natural experiment. While a tremendous amountof work has been done on the effect of skill-based selection on outcomesfor both natives and immigrants, relatively little is known about the effectof skill-based restrictions. On the one hand, the effect of such restrictionsseems clear: an increase in the average skill of targeted immigrants. How-ever, if skills aremultidimensional, then restrictions on observed skills mayaffect self-selection on unobserved skills, perhaps even undermining thegoals of the original policy. From an analytic standpoint, the case of Chi-nese exclusion is particularly useful for two reasons: the restrictions wereenacted ð1Þ without accompanying quotas and ð2Þ at a time in which im-migration was essentially unrestricted ðexcepting certain “undesirables,”e.g., criminals, prostitutesÞ. Moreover, because the same restrictions werelater applied to Japan, I am able to use Japanese immigrants as a compar-ison group. This allows us to partially disentangle changes in selectivityimposed by US law from those that arose endogenously, in response to thenew restrictions, and to provide additional insight into historical differ-ences in self-selection across countries.Using microdata from the US decennial censuses, I find that occupa-

tional outcomes among Chinese immigrants worsened after skill-based re-strictions were imposed. Restricted Chinese immigrants exhibited weakerpositive selection, relative to the Japanese. More surprisingly, postexclu-sion Chinese immigrants also exhibit weaker positive selection relative totheir predecessors, who migrated without restriction. Because the Exclu-sion Act required higher levels of observed skill, the decline in aggregateskill suggests that observed and unobserved skills were substitutes in themigration decision.2 Moreover, this finding suggests that the skill-basedrestrictions of the Chinese Exclusion Act were, in some respects, ineffec-tual. Although they were successful in limiting the immigration of labor-ers, narrowly defined, they did not, in fact, elevate the average occupa-tional standing or human capital of the restricted group.In contrast, I find that children of restricted Chinese immigrants have

better outcomes ðoccupation, literacy, schoolingÞ than children of re-stricted Japanese immigrants. But, given that restricted Chinese immi-

2 Alternatively, these could be deemed targeted and untargeted skills, on the basis of thenature of the restriction.

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grants had worse occupational outcomes and lower literacy rates, this can-not be explained solely by the intergenerational transmission of skill, ei-ther observed or unobserved. Rather, it seems that Chinese immigrantsof the exclusion era invested particularly heavily in the human capital oftheir children, as is commonly found among immigrant populations ð Jassoand Rosenzweig 1990, 409Þ. This helps to explain the evolution of the Chi-nese stereotype from cheap, exploitable contract laborers to a successful“model minority” in less than 100 years. But skill-based restrictions cannotbe credited with this upward progress because, among the Japanese, chil-dren of restricted immigrants fare worse than children of unrestricted im-migrants, despite the fact that restricted Japanese had better occupationaloutcomes. The findings of this paper suggest that, where skill prices anddistributions are such that there is significant scope for substitution be-tween different types of skill, restrictions based on a single skill type may,in fact, have adverse effects on the average skill of targeted groups, in ei-ther the first or the second generation.The following section briefly describes the historical context. Section III

presents the empirical approach and data, and results are discussed inSection IV. Section V considers the intergenerational transmission of skill,and Section VI presents conclusions.

II. Historical Context

A. Chinese Immigration

Prior to 1854, immigration of Chinese had been fewer than 50 persons peryear. In 1854, this number jumped to 13,100, in response to the discoveryof gold in California, and then stabilized somewhat to a range of 3,000–7,000 for the next 10 years ðsee fig. 1Þ. Chinese immigration declinedsteadily from 1864 to 1866 as gold discoveries slowed. However, construc-tion of the transcontinental railroad and the adoption of the BurlingameTreaty led again to increasing numbers of Chinese immigrants through1870. Completion of the railroad led to temporary high unemploymentamong Chinese in the United States and the passage of several anti-Chinese laws and ordinances, which depressed immigration for a shorttime before it again spiked in 1873. Extensive agricultural developmentand land reclamation in the western states, spurred by lower transportcosts and expanded product markets, supported relatively high Chineseimmigration through 1876. At this time, the national economy began toslump and anti-Chinese sentiment was renewed, leading to a period ofdepressed immigration during 1877–79.In 1880, the American and Chinese governments signed a migration

treaty, known as Angell’s Treaty, which granted the US government per-mission to regulate, limit, or suspend the immigration of Chinese labor-ers but not prohibit it entirely ðTsai 1988, 23Þ. Political discussions of anact to exclude Chinese immigrants altogether started almost immediately,andmany Chinese seized this opportunity to migrate. The Chinese Exclu-

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sion Act was signed into law on May 6, 1882, and Chinese immigrationdeclined precipitously from 39,579 in 1882 to 8,031 and 279 in 1883 and1884, respectively, with formal enforcement of the act commencing in1884. Immigration of Chinese laborers, “both skilled and unskilled . . . andChinese employed in mining,” was suspended for a period of 10 years,beginning 90 days after the passage of the law. “Diplomatic and otherofficers of the Chinese Government traveling upon the business of thatgovernment . . . and their body and household servants” were explicitlyexempted from the provisions of the act, while “teachers, students, mer-chants . . . together with their body and household servants” were des-ignated exempt classes per Angell’s Treaty. Various amendments wereadded over the next decade, and in 1904, all laws regarding Chinese im-migration were reenacted and extended indefinitely.To enforce these statutes, Chinese persons wishing to enter the United

States for the first time were required to possess documentation fromthe Chinese government, endorsed by diplomatic representatives of theUnited States, verifying their occupation and eligibility for immigration. Amerchant applying for such certification was required to “state the nature,character, and estimated value of the business carried on by him prior toand at the time of his application” ðNational Archives 1882Þ, but the ver-ification process used by the Chinese government is not clear. However,upon arriving in the United States, Chinese immigrants were detainedand subjected to lengthy interrogations. Those claiming to be merchantswere expected to be “wealthy, educated, and refined gentlemen” withhigh levels of literacy and business knowledge. At the Angel Island immi-gration station, officials would even inspect the applicant’s hands and feet

Figure 1.—Immigration to the United States, 1850–1930. Source: US Department ofLabor ð1930Þ.

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for calluses indicative of manual labor ðLee 2003, 89–90Þ. Immigration sta-tistics ðreproduced in table 1Þ confirm that the restrictions of the ChineseExclusion Act were strictly enforced. Of the incoming immigrants report-ing occupations between 1884 and 1891, over 80 percent were merchantsand none were laborers. In 1890 and 1891, there were larger numbers ofprofessional and skilled workers, but throughout this period there arevery few “servants” or other household workers. There are a significantproportion reporting no occupation; these are predominantly the chil-dren and spouses of men in the exempt classes.3

B. Japanese Immigration

Immigration from Japan to the continental United States began gradu-ally in the 1890s, increasing rapidly in 1900 ðsee fig. 1Þ.4 These immigrantswere largely contract laborers, recruited to fill the void in the agriculturalsector left by excluded Chinese laborers. However, natives soon expressedsimilar animosity toward the Japanese, and immigration of unskilled la-borers from Japan was prohibited by the Gentlemen’s Agreement of 1907.With this treaty, enacted in 1908, the Japanese government agreed to vol-untarily limit emigration ðInui 1925Þ and to immediately begin enforcingthese limits by denying passports to laborers intending to enter theUnitedStates for the first time.5 Japanese immigration falls dramatically in 1909but begins to rebound relatively quickly in 1911 before stabilizing around1914. In 1921, as a final attempt to mitigate anti-Japanese sentiment inthe United States, the Japanese government announced that it wouldstop issuing passports to “picture brides” ðDaniels 1988, 147Þ.6 A markeddecline in Japanese immigration is immediately evident, and annual im-migration remains low from that point on ðfig. 1Þ.Although the entry of laborers, skilled and unskilled, was prohibited

for both the Chinese and the Japanese, there are several notable differ-ences between the Chinese Exclusion Acts and the Gentlemen’s Agree-ment. First, the Chinese Exclusion Act specified four exempted categoriesðdiplomats, teachers, students, and merchants, together with their “bodyand household servants”Þ, while the Gentlemen’s Agreement referredonly to “nonlaborers,” noted in immigration law as “persons whose workisneitherdistinctivelymanualnormechanical, but ratherprofessional,mer-cantile, or clerical.” Second, enforcement of the Gentlemen’s Agreement

3 Immigration reports during this era typically label the category as “no occupation in-cluding women and children.”

4 An estimated 30,000 Japanese contract laborers came to Hawaii to work on the sugarplantations between 1884 and 1898 ðDaniels 1988, 100Þ. However, Hawaii is not included ingovernment records ðincluding census and immigrationÞ until after annexation in 1898.

5 According to the 1910 annual report of the Superintendent of Immigration, “Withrespect to Hawaii, the Japanese Government of its own volition stated that, experimentallyat least, the issuance of passports to members of the laboring classes proceeding to thatTerritory would be limited to ‘former residents’ and ‘parents, wives, or children of residents.’ ”ðUS Department of Commerce and Labor 1910, 125Þ.

6 Women in Japan wed in absentia ðwith a “picture”Þ Japanese men living in America.

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was effectively conducted by the Japanese government, which assumedresponsibility for determining immigrant eligibility, while enforcementof the Chinese Exclusion Acts fell entirely to US customs officials. Third,the Gentlemen’s Agreement allowed prior immigrants to return, even aslaborers, whereas returning Chinese laborers were prohibited by theScott Act of 1888, 6 years after the initial exclusionary legislation.7 Finally,the Gentlemen’s Agreement allowed parents, spouses, and children of allJapanese immigrants to enter the country, while only family members ofexempt-class Chinese immigrants were permitted.Enforcement of the Gentlemen’s Agreements is difficult to infer, as im-

migration statistics from this period began to combine returning and first-time immigrants. In the 10 years following the Gentlemen’s Agreement,returning Japanese immigrants account for 25–45 percent of all immigra-tion, and roughly 40–50 percent of these returning immigrants are la-borers. Nonetheless, there is a large decline in the number and propor-tion of laborers after 1908 ðtable 1Þ, and immigration of laborers remainsmuch lower, as a fraction of total Japanese immigration, throughout thenext decade. Beginning in 1908, the Bureau of Immigration also added asection to its annual immigration report detailing Japanese immigration,with the explicit purpose of documenting enforcement of the Gentle-men’s Agreement. And, using census records, Suzuki ð2002Þ documentsincreases in average skill levels among new Japanese immigrants begin-ning around 1908, with clear evidence for greater selection on education,work experience, and occupation during the exclusionary period.The impact of these restrictions on the relative skill distributions for

Japanese and Chinese immigrants is ambiguous. Because the Gentlemen’sAgreement did not specifically identify exempted occupations, Japaneseimmigrants in other professional or clerical occupations may have beenable to enter the United States while similar Chinese immigrants werenot. Enforcement by Japanese officials rather than US customs agentsmay also have allowed greater immigration of skilled Japanese workers,to the extent that officials in the origin country can better assess occupa-tional standing. Indeed, we see a much larger number of Japanese immi-grants in professional and skilled occupations, though, again, we cannotdetermine how many were new immigrants restricted by the Gentlemen’sAgreement. Conversely, the provisions of theGentlemen’s Agreement per-mitting return migration and migration of immediate family members,for both laborers and exempted categories, almost certainly reduced theaverage skill level of Japanese immigrants relative to Chinese immigrants.Although many wives and children of Japanese immigrants likely enteredin the “no occupation” category, immigration reports also suggest a sub-stantial number of first-time immigrants in the “laborer” category. For ex-ample, 1,511 Japanese laborers entered the United States in 1909, but

7 Roughly 20,000 Chinese who were out of the country at the time the Scott Act was en-acted were unable to return, and 600 who were currently in transit to the United States withgovernment-issued return certificates were denied entry ðChang 2003, 135Þ.

Impact of Skill-Based Immigration Restrictions 303

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TABLE1

OccupationofIncomingImmigrants,BeforeandAfterEnforcementofSkill-BasedImmigrationRestrictions

Chinese,

Before

1875

1876

1877

1878

1879

1880

1881

1882

1883

Merch

ants

38

2...

53

838

73Professionals

4523

3628

3820

4310

58

Skilled

452

481

411

309

462

400

560

407

334

Servan

ts/domestics

714

16

37

1213

1Lab

orers

15,287

21,902

10,281

8,28

68,98

45,53

011

,466

38,701

7,80

1Other

291

218

40...

618

...

3Nooccupation

1,12

81,19

346

867

670

556

165

268

840

2

Total

16,437

22,781

10,594

8,99

29,60

45,80

211

,890

39,579

8,03

1

Chinese,

After

1884

1885

1886

1887

1888

1889

1890

1891

1894

Merch

ants

226

1214

425

891,22

92,53

01,03

6Professionals

2...

2...

...

...

8943

5Sk

illed

...

...

...

...

...

...

351

89Se

rvan

ts/domestics

2...

...

1...

...

72

...

Lab

orers

...

...

...

...

...

...

...

...

37Other

...

...

...

...

...

...

...

...

732

Nooccupation

4910

245

129

356

260

16

Total

279

2240

1026

118

1,71

62,83

61,91

5

(continued

onnextpage)

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Japan

ese,

Before

1899

1900

1901

1902

1904

1905

1906

1907

1908

Merch

ants

601

797

652

1,20

51,18

477

763

277

268

5Professionals

9256

316

722

237

328

025

661

037

8Sk

illed

121

1,79

360

31,04

764

135

832

954

645

7Se

rvan

ts/domestics

5322

318

117

331

720

719

516

628

5Lab

orers

1,05

75,83

283

02,00

98,24

96,62

69,27

021

,970

7,91

0Other

912

2,71

32,23

15,41

137

456

11,11

52,90

52,12

1Nooccupation

559

707

585

4,38

83,24

42,21

22,44

63,85

54,58

2

Total

3,39

512

,628

5,24

914

,455

14,382

11,021

14,243

30,824

16,418

Japan

ese,

After

1909

1910

1911

1912

1913

1914

1915

1916

1917

Merch

ants

295

327

359

447

584

660

718

753

811

Professionals

279

424

469

489

518

499

782

801

613

Skilled

146

189

143

362

427

479

595

636

616

Servan

ts/domestics

188

223

188

176

200

152

166

277

316

Lab

orers

1,51

11,53

01,99

53,09

74,76

84,69

93,76

34,70

24,79

8Other

667

607

670

1,29

01,98

72,31

72,61

62,54

72,63

7Nooccupation

839

825

2,61

72,72

83,18

84,21

03,59

72,99

13,49

7Total

3,92

54,12

56,44

18,58

911

,672

13,016

12,237

12,707

13,288

Returningim

migrants

1,03

497

91,55

92,51

34,11

84,98

64,95

15,38

25,68

2Returninglaborers

505

433

644

1,18

92,15

32,42

12,11

02,42

52,67

1

Source.—USBureau

ofIm

migrationð189

2–94

,18

95–190

5Þ;USDep

artm

entofCommerce

andLab

orð190

6–13Þ;USDep

artm

entofLab

orð191

4–18,

1930

Þ;USBureau

ofStatistics

ð188

4–89

Þ.Note.—

TheChineseExclusionAct

was

enforced

beginningin

1884

.Effective

enforcem

entoftheGen

tlem

en’sAgreemen

tbegan

inmid-190

8.Lab

orers

includes

farm

andnonfarm

;other

includes

farm

ersan

dother

miscellan

eous.

305

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only 505 of those were returning immigrants; therefore, over 1,000 labor-ers must have entered the United States as family members of returningor exempted immigrants. Given the uncertain effect of the differingrestrictions on Chinese and Japanese immigrants, we return to this issuein our empirical analysis below.

III. Empirical Approach

To determine how human capital among Chinese immigrants is relatedto selection on skill, we can utilize exclusionary legislation, which imposeda specific form of skill-based selection, as a natural experiment.8 But, asChiswick ð1986Þ suggests, immigrants may be self-selected not only on ob-served skills ðe.g., literacy, occupationÞ but also on unobserved skillssuch as ambition and initiative, which are also positively correlated withinvestments in human capital. In that case, exclusionary legislation mayhave altered, rather than obviated, patterns of self-selection among Chi-nese immigrants.

A. Theoretical Framework

To help fix ideas, suppose that wages in the source and host countries canbe expressed as

w0 5 m0s 1 ε0k and w1 5 m1s 1 ε1k;

with s ∼ Nðc, j2Þ and k ∼ N ð0; j2kÞ, where s and k represent observed and

unobserved skills, and m and ε are the country-specific ðfixedÞ prices paidfor these skills. As in a typical Roy ð1951Þmodel, assume that an individualmigrates on the basis of net wage gains, where p represents the cost ofmigrating:

I 5 1 if m1s 1 ε1k 2 p ≥ m0s 1 ε0k: ð1ÞNote that, with a fixed moving cost, observed and unobserved skills aresubstitutes in this simplified framework, and immigrants from the samesource in the same year will display a mix of the two attributes. The Chi-nese Exclusion Act of 1882 ðand its successorsÞ ensured that any new im-migrants would be admitted solely on the basis of high observed skill, ef-fectively legislating s ≥ s and shifting the skill composition of immigrantstoward observed skill and away from unobserved skill. Therefore, theweaker the selection on observed skill ðand the stronger the selection onunobserved skillÞ prior to exclusion, the larger the change in average un-observed skill after exclusion.Assuming that immigration restrictions were binding, the average

change in wages among immigrants, before and after skill-based restric-tions, can be expressed as

8 This paper does not utilize data on the human capital of native Chinese and thereforedoes not address the question of positive/negative selection of immigrants. Rather, the focusis on human capital of ethnic Chinese in the United States relative to natives.

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Eðw1 j I 5 1; T 5 1Þ2 Eðw1 j I 5 1; T 5 0Þ5 m1½Eðs j I 5 1; s ≥ sÞ2 Eðs j I 5 1Þ�

1 ε1½Eðk j I 5 1; s ≥ sÞ2 Eðk j I 5 1Þ�:ð2Þ

The first term reflects legislated changes in selection on observed skill,while the second term reflects self-determined changes in selection on un-observed skill. To learn something more about the effect of exclusionarylegislation on self-selection then requires identifying a “control” group—apopulation subjected to the same immigration restrictions. The differencein wages between immigrants from China and the “control” country ð J Þ,before and after the exclusions, is

EðwC1 j I 5 1; T 5 1Þ2 EðwC

1 j I 5 1; T 5 0Þ2 Eðw J1 j I 5 1; T 5 1Þ

2 Eðw J1 j I 5 1; T 5 0Þ

5 m1f½EðsC j I 5 1; s ≥ sÞ2 EðsC j I 5 1Þ�

2 ½Eðs J j I 5 1; s ≥ sÞ2 Eðs J j I 5 1Þ�g ð3Þ

1 ε1f½EðkC j I 5 1Þ2 EðkC j I 5 1; s ≥ sÞ�

2 ½Eðk J j I 5 1Þ2 Eðk J j I 5 1; s ≥ sÞ�g:

If the two countries exhibit parallel trends in selection on observed skill,the first part of this expression will be zero, and the difference-in-differencewill exactly identify relative changes in selection on unobserved skill. Thisassumption is discussed in detail in the following subsection.

B. Empirical Specification

The simple theoretical framework outlined above suggests a difference-in-difference type approach, comparing immigrants across ethnic groups,before and during the exclusion era, and using native-born whites as acomparison group to account for secular changes in human capital accu-mulation. To abstract from issues of endogenous labor supply, I focus onlyon men, aged 30–65. The wage of individual i in ethnic group j, cohort c,at time t can be expressed as a function of some group fixed effect ðaÞ, aperiod effect ðbÞ, a cohort effect ðgÞ, age, and age squared. Additionally,I include an indicator for whether the individual was “treated” ðT Þ, mi-grated after exclusions were imposed, which is permitted to differ acrossethnic groups:

Wijct 5 aj 1 bt 1 gc 1 d � f ðAgeiÞ1 pTi 1 vðTi � ChineseiÞ1 εijct : ð4Þ

Note that this specification compares Chinese and Japanese immigrantsin the restricted and unrestricted periods but not necessarily in the same

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year, as the respective periods of immigration restriction overlap but donot fully coincide. The period and cohort effects, however, are based onChinese, Japanese, and native-born whites and will therefore account forunderlying annual changes in the occupational and skill distributions.The coefficient of interest is the interaction term between the individ-

ual’s “treatment” status and ethnic group ðvÞ. This represents the changein immigrant selectivity among the Chinese, relative to the Japanese, afterimmigration restrictions are imposed. The exact timing of these restric-tions was determined by the political and diplomatic environment ratherthan the skill composition of incoming immigrants per se. Implementa-tion did occur during periods of increased migration by unskilled work-ers, although immigration reports do not indicate any significant changein the skill composition, only the volume of immigration. From table 1,we can discern a slight increase in the proportion of arriving immigrantsreporting “laborer” as their occupation ðless than 6 percentage pointsÞand a slight increase in the proportion reporting a skilled or professionaloccupation ðless than 4 percentage pointsÞ. These trends are quite similarfor both the Chinese and the Japanese in the 5 years leading up to theimplementation of immigration restrictions. Thus, it seems plausible tointerpret v as the causal effect of the legislation. I also present an alterna-tive specification that includes the number of years before and after thelegislation was implemented to allow for differential trends.

C. Identifying Assumption

We can further interpret v as the effect of exclusionary legislation on im-migrant self-selection, net of legislated skill requirements, if Chinese andJapanese immigrants exhibited the same change in observed skill as a re-sult of the immigration restrictions. Of course, the average skill of immi-grants depends on the distribution of skill, moving costs, and skill prices.Given the geographic proximity of China and Japan and the similar tim-ing of exclusionary legislation pertaining to each country, it seems reason-able to assume that moving costs were comparable. Moreover, in bothcases, we are considering migration to the United States, which impliesthat skill prices in the host country are identical. However, historical dataon skill premia in Asia are quite limited. Van Zanden ð2009Þ and Allenet al. ð2011Þ find the average skill premium of construction workers be-tween 1750 and 1820 to be very similar between Japan and China, but itnot clear whether this can be generalized across industries and over time.Empirical evidence on the historical distributions of observed skill inChina and Japan is even more limited. Both countries began moderniz-ing their educational systems in the late nineteenth century, moving awayfrom traditional Confucian teachings toward a more Western-style curric-ulum; but access to education seems to have expanded more rapidly inJapan ðGodo and Hayami 2002Þ, suggesting greater improvements in ob-served skill throughout the population and a flatter distribution. Clearly,

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with this dearth of historical data, an assumption of common skill pricesand distributions of observed skill cannot be adequately justified. Butcomparing across ethnic groups will, at least, attenuate the direct effectof exclusion on observed skill, given that both groups were subject to thesame binding restrictions ðsee eq. ½3� aboveÞ. What remains of the directeffect will reflect differences in selection on observed skill acrosscountries, and we can sign the direction of this “bias” by looking at a mea-sure of observed skill separate from unobserved skill.Since we are interested in identifying selection on unobserved skill,

another key factor is the stability of relative prices for observed and un-observed skills. That is, the change in self-selection among Chinese rela-tive to Japanese can be attributed to the legislation as long as there wereno changes in the origin countries that would have differentially alteredthe skill composition of emigrants. The Chinese and Japanese econo-mies had already begun to diverge by the time immigration to the UnitedStates began. Both countries had been forcefully opened to internationaltrade in the mid-nineteenth century but responded in very different ways.In Japan, the openness prompted the Meiji Restoration: a period of rapidwesternization, marked by broad reform of economic and political in-stitutions. There was widespread adoption of technology and an enor-mous export-led boom facilitated by an emerging merchant class ðthe Yo-kohamaÞ. Growth of manufacturing and exports was widespread, as wereopportunities to capitalize on this growth ðOhno 2006Þ. Openness alsobrought industrialization and the beginning of modern economic growthto China, but the Qing Dynasty resisted institutional change, allowing en-trenched coalitions of merchants to stymie attempts to adopt new tech-nologies and establish new industries, largely restricting innovation andkeeping the gains from trade highly concentrated ðBrandt, Ma, and Raw-ski 2014Þ.Opportunities for innovation and entrepreneurship were broadly ac-

cessible in Japan, and industrialization remained steady through the1910s. In contrast, in China, elites and those with political influence suc-cessfully shut out the large majority of new entrants in not only the in-dustrial sector but related sectors ðe.g., transportationÞ as well. Late at-tempts to modernize political and economic institutions were largelyunsuccessful, ultimately resulting in the collapse of the Qing Dynasty, andsubsequent civil conflict left political and economic institutions unstablethrough the early 1920s. Without the needed reforms, opportunities forentrepreneurship in China remained available only to those with signifi-cant political and economic capital. This suggests that the returns to un-observed skill, relative to observed skill, were higher in Japan than inChina. However, the broad survey pieces by Ohno ð2006Þ and Brandtet al. ð2014Þ also suggest that, although there were many important dif-ferences, the fundamental characteristics of the Chinese and Japaneseeconomies remained relatively stable throughout the 1860–1920 period.Therefore, we would not expect substantial changes in selection on ob-

Impact of Skill-Based Immigration Restrictions 309

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served versus unobserved skill around the time immigration restrictionswere imposed.The relative returns to unobserved skill likely began to diverge sharply

for China and Japan around 1927. Japan experienced a severe financialcrisis in 1927, and the ensuing recession wasmarked by stark deflation andsevere rural poverty, prompting a turn toward militarism and economicpolicies influenced by Marxism ðOhno 2006Þ. In contrast, 1927 broughtthe establishment of a new Kuomintang-led government in China and arecentralization of state power marked by the goal of a transparent apo-litical bureaucracy with merit-based employment. These changes contrib-uted to a period of considerable economic growth and declining inequal-ity, but the Chinese soon engaged in war with Japan, followed by a periodof civil conflict between the Kuomintang and the Communist Party, bothof which caused significant loss of human and physical capital ðBrandtet al. 2014Þ. Given this divergence, I exclude from the analysis all immi-grants arriving in or after 1927. Additionally, I allow for differential timetrends, by ethnic group, before and during the exclusion period.

D. Data

Data are drawn from the 1860–1930 US decennial censuses of the Inte-grated Public Use Microdata Series ðIPUMS; Ruggles et al. 2010Þ with allyears pooled together. I limit the empirical analysis to males, aged 30–65, to abstract from labor supply decisions and because the terms of theexclusion acts did not apply to women and children immigrating withtheir spouses. Direct data on wages are not available during and preced-ing the exclusion era; instead, I examine the occupational income scoreðOCCSCOREÞ constructed by IPUMS. This measure maps occupationalresponses in each year to categories in the 1950 census and then assignsa score based on the median total income for each occupational categoryin 1950. The mapping of occupational responses into the 1950 categoriesis relatively straightforward. Responses prior to 1940, with the exceptionof 1910, can be coded directly into the 1950 classification system, and aseries of detailed technical reports are available to assist with the mappingfor other years ðSobek 1995Þ.But because the OCCSCORE is tied to earnings at a single point in time,

changes in the relative earnings of various occupations will not be fullycaptured. To partially address this, IPUMS employs a weighting schemewherein the score is a weighted average of the incomes of the compo-nents of each category, with weights derived from the occupation distri-bution in each census. Weighting captures some of the change in occupa-tional earnings over time, but the data prior to 1910 are not sufficientlydetailed to permit the use of this procedure. There is, however, empiricalevidence supporting the relevance of the OCCSCORE in assessing groupperformance over time. Using data collected by the US Bureau of LaborStatistics on occupation-specific income from 1890, Sobek ð1996Þ shows

310 Journal of Human Capital

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that the relative economic standing of occupations was actually quitestable throughout the twentieth century. Most of the change in individ-ual earnings occurred through changes in the occupational distributionrather than the relative standing of those occupations. And, in assessingthe economic assimilation of immigrants, Abramitzky, Boustan, and Eriks-son ð2014Þ find that analysis of the OCCSCORE yields the same qualita-tive results as analysis of comparable scores based on earnings data fromboth the 1901 Cost of Living Survey and a historical earnings series datingback to the early 1920s ðGoldin and Margo 1991Þ.Ideally, treatment status would be based on year of immigration. Un-

fortunately, this is available only in the 1900–1930 census records,9 and itis not available for residents of Hawaii in 1900 and 1910. Given this limi-tation and the likely divergence in the relative returns to unobserved skillbetween China and Japan in 1927, I limit attention to the 1860–1930 cen-sus years and to immigrants arriving in or before 1927. We know that allforeign-born Chinese and Japanese enumerated in the 1860–80 cen-suses must have arrived prior to the passage of any immigration restric-tions and can be assigned to the untreated group. And because the pro-visions of the Chinese Exclusion Act and the Gentlemen’s Agreementdid not apply in Hawaii until 1902 and 1907, respectively, we can alsoconfidently assign all foreign-born Chinese and Japanese in Hawaii in1900 to the untreated group. However, omitting the 1910 data from Ha-waii would create significant sample selection problems. Over 30 percentof all observations on foreign-born Japanese males in the 1860–1930IPUMS samples are residents of Hawaii enumerated in 1910.Thus, when year of immigration is unavailable, treatment status is de-

fined on the basis of age and birth year as follows. I examine the age dis-tribution of the foreign-born, by ethnic group, and assign individuals tothe treatment group if their age during the exclusion era falls within onestandard deviation of the mean age at immigration among unrestrictedmigrants. Among foreign-born Chinese, the mean age was 24, with a stan-dard deviation of 9; thus, all persons aged 15 and younger in 1884 areassigned to the treatment group. Similarly, foreign-born Japanese had amean age of 26, with a standard deviation of 11, so all persons aged 15and younger in 1908 are assigned to the treatment group. As a validation,we can compare treatment status based on this approach to treatment sta-tus based on actual year of immigration, where available. There is a highdegree of correspondence between the two; 93 percent of all foreign-born Chinese and Japanese men, aged 30–65, are assigned the correcttreatment status ðtable 2Þ. The measure minimizes type I error ðthe prob-ability of assigning an unrestricted immigrant to the treatment groupÞ,

9 The 1900 census asked when the individual arrived in the United States, not the year offirst arrival. Unrestricted immigrants returning after the Exclusion Act may therefore be in-correctly classified as “treated.” However, census reports on occupations of incoming immi-grants show very few laborers arriving between 1882 and 1897 ðtable 1Þ, suggesting that mis-classification of treatment status will be fairly limited.

Impact of Skill-Based Immigration Restrictions 311

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with only 4.28 percent of those actually migrating prior to restrictionsbeing incorrectly assigned to the treatment group, in favor of incorrectlyassigning restricted immigrants to the control group. Type II error is in-deed considerably higher, with 46 percent of those actually migratingduring the exclusion era being incorrectly assigned to the control group.This approach effectively dilutes the treatment group, ensuring that theestimated effects can be interpreted as a lower bound ðin absolute valueÞof the true effect of skill-based restrictions. But, given the coarseness ofthe treatment measure, I include an additional control for individualswho may have been treated ði.e., who are residing in the United Statesduring the exclusion era but do not fit the above criteriaÞ, weighted by thenumber of years since the implementation of exclusionary legislation, asa rough proxy for the probability of being treated.

IV. Main Results

Looking at the occupational score ðtable 3, panel AÞ, we see that bothJapanese and Chinese ðAsian, collectivelyÞ immigrants ranked consider-ably lower than whites, although the difference is significantly greater forthe Japanese. Exclusionary laws ðtreatmentÞ increased the occupationalscore among foreign-born Japanese, eradicating roughly 30–40 percentof the initial difference. In contrast, the average occupational score wasmuch lower for Chinese immigrants admitted during the exclusionaryera ðranging from 68 percent to over 500 percent greater than the differ-ence between native-born whites and preexclusion ChineseÞ, despiteimmigration exclusions being heavily biased in favor of high skill. Allow-ing for possible treatment among additional foreign-born Chinese andJapanese present in the United States during exclusion increases themagnitude of the point estimates, which is consistent with the conserva-tive method used to assign treatment initially. Moreover, the coefficientson possible treatment coincide with the direct effects of treatment, againsuggesting that the definition of treatment undercounts the number ofimmigrants subject to exclusionary laws. The time trends ðcol. 3Þ indicatethat Japanese immigration was becoming less selective prior to exclu-sion, while Chinese immigration was becoming relatively more selective.

TABLE 2Treatment Status, Constructed versus Actual

Unrestricted Restricted

Untreated 14,366 548ð95.7%Þ ð45.9%Þ

Treated 642 645ð4.3%Þ ð54.1%Þ

Note.—Includes foreign-born Chinese and Japanese males, aged30–65. Column percentages are in parentheses. Treated is definedon the basis of census and birth year. Restricted is defined on thebasis of year of immigration.

312 Journal of Human Capital

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TABLE3

TheEffectofExclusionontheForeign-Born,Difference-in-DifferenceEstimates

A.OccupationScore

B.Literacy

ð1Þ

ð2Þ

ð3Þ

ð1Þ

ð2Þ

ð3Þ

Asian

210

.16*

**211

.09*

**211

.45*

**2.268

***

2.318

***

2.319

***

ð.132

Þð.1

67Þ

ð.175

Þð.0

05Þ

ð.007

Þð.0

07Þ

Treated

3.13

8***

4.07

1***

4.62

4***

.204

***

.255

***

.212

***

ð.611

Þð.6

20Þ

ð1.335

Þð.0

16Þ

ð.016

Þð.0

44Þ

Possible

treatm

ent

.261

***

.312

***

.015

***

.012

***

ð.031

Þð.0

86Þ

ð.001

Þð.0

03Þ

Yearsbefore

restrictions

.792

***

.002

ð.048

Þð.0

02Þ

Yearsafterrestrictions

2.012

.003

ð.080

Þð.0

02Þ

RelativeEffects,Chinese

Chinese

5.99

3***

11.020

***

9.36

5***

.038

***

.194

***

.095

***

ð.198

Þð.2

58Þ

ð.362

Þð.0

09Þ

ð.010

Þð.0

14Þ

Treated

25.98

7***

211

.05*

**216

.16*

**2.218

***

2.376

***

2.364

***

ð.675

Þð.7

01Þ

ð1.733

Þð.0

20Þ

ð.020

Þð.0

58Þ

Possible

treatm

ent

2.500

***

2.700

***

2.021

***

2.019

***

ð.034

Þð.0

95Þ

ð.001

Þð.0

03Þ

Yearsbefore

restrictions

2.563

***

.010

***

ð.057

Þð.0

02Þ

Yearsafterrestrictions

.241

***

.002

ð.088

Þð.0

03Þ

Observations

128,50

812

8,50

812

8,50

812

9,87

712

9,87

712

9,87

7R

2.034

.034

.034

.042

.044

.045

Source.—USCen

sus,IPUMS,

version5.0,

1860

–193

0.Note.—

Controlsforperiod,cohort,andageareincluded

.Thesample

islimited

tomen

aged

30–65.

Immigrantsarelimited

tothose

arrivingpriorto

1927

.Where

timingofim

migrationcannotbedetermined

directly,treatm

entisdefi

ned

asage15

oryoungerat

timeofexclusion.P

ossibletreatm

entisdefi

ned

asresidingin

the

United

States

duringtheexclusionerað188

4–192

8forChinese;

1908

–28forJapan

eseÞ,excludingtreatedindividuals,weigh

tedbythenumber

ofyearssince

restrictionswereim

plemen

ted.

***Sign

ificantat

1percent.

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The main results indicate that Chinese immigrants of the exclusion erahad worse occupational outcomes relative not only to restricted Japanesebut to unrestricted Chinese immigrants as well. I discuss each of thesefindings in turn.Weaker performance of restricted Chinese relative to restricted Japa-

nese suggests that skill-biased restrictions resulted in weaker selection onskill for the Chinese. This is consistent with the economic conditions inthe source countries. Returns to unobserved skill were likely higher inJapan than in China, so those with high observed skill and relatively lowunobserved skill would have been more likely to emigrate, even beforeskill-based restrictions were imposed. The opposite was true in China, sounrestricted immigrants were primarily those with low observed skill andrelatively high unobserved skill, in which case restrictions based on ob-served skill would have preempted migration for a much larger segmentof the skill distribution. Consistent with this, table 1 shows that, among un-restricted immigrants, there was a much larger proportion of Japanesein skilled, professional, and merchant occupations, while the Chinesewere heavily concentrated in the laborer category.Since the Chinese and Japanese faced the same restrictions on observed

skill, the difference-in-difference estimate should predominantly capturechanges in selection on unobserved skill. But, given likely differences be-tween China and Japan in skill prices and distributions, the estimated ef-fect likely reflects changes in both observed and unobserved skill. In orderto quantify the magnitude of this potential bias, we can look at a measureof observed skill separate from unobserved skill—literacy. These resultsðtable 3, panel BÞ point to stronger selection on observed skill among theChinese, relative to the Japanese, prior to exclusion, but the opposite af-ter exclusion. However, the effect of treatment on literacy is stronger forthe Japanese and more muted for the Chinese, compared to the resultsfor occupation score: restrictions reduce ðincreaseÞ the difference in lit-eracy rates between whites and preexclusion Japanese ðChineseÞ by 66–80 percent ð6–98 percentÞ, compared to 30–40 percent ð68–550 percentÞfor occupational score. Of course, literacy is not perfectly correlated withthe “observed” skills targeted by the restrictions, and there is some ambi-guity in whether literacy refers to English or any language. Still, the re-sults suggest that, even if restrictions did weaken selection on observedskill, the effect on unobserved skill wasmuch stronger. Atmost, the weakerperformance of treated Chinese can be only partially explained bychanges in selection on observed skill; the estimated changes in literacyrates suggest that selection on unobserved skill must have played a signif-icant role as well. Moreover, it seems unlikely that selection on observedskill would have weakened at a time when immigration restrictions begantargeting observed skills.It is, however, surprising that restricted Chinese immigrants had lower

skill, on average, than unrestricted Chinese immigrants. Within the con-text of the model described above, this suggests that, for the Chinese, not

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only did skill-based restrictions cause greater negative selection on unob-served skill but, moreover, this effect entirely dominated any greater pos-itive selection on observed skill. This is likely the result of conditions inChina around the time of the Exclusion Act, which substantially weakenedthe typical positive correlation between observed and unobserved skills.Opportunities for entrepreneurship in China were limited to elites, sub-stantially reducing the average returns to unobserved skill relative to ob-served skill and, therefore, creating differential incentives to invest as wellas differential returns to migration for the two types of skill. Moreover,with a limited educational system available primarily to elites as well, manywith high unobserved skill were excluded from the acquisition of ob-served skills, further weakening the usual positive correlation between ob-served and unobserved skills.Still, de facto enforcement may not have been as successful as immigra-

tion records suggest, and this may have differed between Chinese and Jap-anese immigrants. Under the Gentlemen’s Agreement, the Japanese gov-ernment assumed responsibility for screening emigrants to the UnitedStates, agreeing to issue passports only to those eligible for entry, and Jap-anese immigrants were almost assured admission to theUnited States priorto making the journey. In contrast, under the Chinese Exclusion Acts, theChinese government was required to provide official documentation ofoccupation status, but US customs officials were granted the authority todetermine eligibility for entry. Chinese immigrants were subject to longdetainment and interrogation periods, particularly at Angel Island, andanecdotal evidence suggests that customs officials had great discretion inevaluating documents for entry ðChang 2003Þ. This essentially created adouble hurdle forChinese immigrants, resulting in amuchmore stringentburden of proof as well as greater risk inherent in the act of migration it-self, given that eligibility of Chinese immigrants was evaluated after trans-portation costs had already been sunk. Increased risk would tend to en-courage migration among those with lower reservation wages, and thismay, in fact, be driving the results. Among those who met the criteria forlegal immigration, theChinese would tend tohave lower reservation wagesðlower unobserved skill, given the floor on observed skillÞ, on average, asa result of greater uncertainty at the destination. However, among thosenot meeting the criteria for legal immigration, it seems likely that uncer-tainty and transportation costs were sufficiently high that even those withvery low reservation wages would not find it optimal to migrate. Moreover,it seems unlikely that low-skill Chinese who were otherwise ineligible forentry would disproportionately choose to immigrate after restrictionswere imposed, given the risk of being debarred, high transport costs, andthe added cost of obtaining false documents.Of course, restrictions could not prevent immigrants from switching oc-

cupations after being admitted, and census data suggest that occupationswere often subject to change after arrival ðtable 4Þ. In fact, what appearsto be driving the results is not the change in occupations legislated by the

Impact of Skill-Based Immigration Restrictions 315

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Chinese Exclusion Act and Gentlemen’s Agreement but compositionalchange in the entire occupational distribution, that is, the extent of occu-pational upgrading/downgrading among immigrants after having arrivedin the United States. This is consistent with the notion of unobserved skillsdetermining how individuals transition from the initial occupations thatare determined by observed skills. Less than 38 percent of Chinese cen-sus respondents immigrating before 1884 report being laborers, whileimmigration records indicate that over 95 percent of incoming Chineseimmigrants during this period report laborer as their occupation. Con-versely, immigration records indicate that no Chinese laborers were ad-mitted between 1884 and 1890, while 24 percent of census respondentsimmigrating after 1883 reported laborer as their occupation. There is ev-idence of movement both up and down the occupational ladder, with up-grading more common among unrestricted Chinese immigrants anddowngrading more common among restricted immigrants. Conversely,among the Japanese, occupational downgrading is more prevalent thanupgrading both before and after skill-based restrictions. To the extent thatunobserved skills are important for economic assimilation, greater occu-pational downgrading among restricted Chinese immigrants would alsobe indicative of weaker selection on unobserved skill.

A. Differences in Restrictions

There is also an important difference between the restrictions imposedon Chinese and Japanese immigrants that could be driving the results.The Chinese Exclusion Act specifically noted four exempted occupa-tional categories ðdiplomats, teachers, students, and merchantsÞ, whereasthe Gentlemen’s Agreement referred only to nonlaborers, noted in im-migration law as “persons whose work is neither distinctively manual normechanical, but rather professional, mercantile, or clerical.” Thus, agreater number of professional and clerical Japanese immigrants mayhave been granted entry during the restricted era. To account for this, I

TABLE 4Occupation of Foreign-Born Men, Aged 30–65, Before and After

Enforcement of Skill-Based Immigration Restrictions

Chinese Japanese

Unrestricted Restricted Unrestricted Restricted

Managers, officials, proprietors 5.61 13.08 3.12 7.12Professionals 1.77 1.76 .84 1.69Skilled 48.95 56.83 15.06 23.05Laborers 37.91 24.30 72.96 51.53Farmers 3.27 2.18 6.62 13.22Nonoccupational response 2.51 1.84 1.41 3.39

Source.—US Census, IPUMS, version 5.0, 1860–1930.Note.—Limited to foreign-bornmen arriving prior to 1927. Restricted is defined on the basisof year of immigration.

316 Journal of Human Capital

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repeat the estimation excluding all individuals in professional and cleri-cal occupations ðtable 3, col. 1Þ. The point estimates are remarkably sim-ilar to the main results in table 3, suggesting that the results are not drivenby more stringent restrictions for skilled Chinese immigrants.

B. Measurement Error

Given measurement error in the assignment of immigrants to the re-stricted versus unrestricted groups, I repeat the estimation using two al-ternative definitions for the treatment variable. First, I consider a narrowtreatment window such that only individuals born after restrictions havebeen imposed are assigned to the treatment group. With this definition,it is even more likely that restricted immigrants are incorrectly assignedto the control group, further diluting the estimated treatment effect. In-deed, we see that the treatment variables retain the same sign and signif-icance and are slightly smaller in magnitude ðtable 5, col. 2Þ, although notstatistically different from the main results discussed above. Another alter-native is to exclude from the analysis all those for whom treatment statusis imputed. However, as described above, given limited data on year ofimmigration, this definition of treatment excludes over 30 percent of allforeign-born Japanese males in the sample. Accordingly, the point esti-mates with this sample are quite noisy and not able to discern any signif-icant difference between restricted and unrestricted immigrants ðtable 5,col. 3Þ, although the point estimates have the same sign.

C. Cohort Composition

Alternatively, we might be concerned that the treatment effect is pick-ing up underlying differences across immigrant cohorts rather than theeffect of skill-based restrictions. To check this, I further restrict the sampleof immigrants to only those arriving within 5 years before and after re-strictions were implemented, again noting the caveat about sample attri-tion. As before, I find evidence of significantly improved selection amongrestricted Japanese immigrants and significantly weaker selection amongrestricted Chinese. The point estimates for both groups are much smallerin magnitude ðcol. 4Þ, which could indicate that, while the exact timing ofrestrictions may have been exogenous, they were enacted in response tochanging immigrant skill composition. However, restrictions are found tohave opposite effects on Japanese and Chinese immigrants, while histor-ical and immigration records suggest that both groups exhibited decreas-ing average skill prior to restrictions.

D. Return Migration

Finally, I consider whether the results may be driven by differences in thelength of time in the United States and selective return migration. To doso, I control for the number of years since immigration, which again has

Impact of Skill-Based Immigration Restrictions 317

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TABLE5

TheEffectofExclusiononOccupationScore,AlternativeSpecifications

Select

Occupations

Only

a,b

ð1Þ

NarrowTreatmen

tWindowb,c

ð2Þ

NoIm

puted

Treatmen

tb,d

ð3Þ

5YearsBefore/

After

Restrictione

ð4Þ

Lab

orMarke

tAssim

ilationb

ð5Þ

Asian

210

.80*

**211

.46*

**29.29

1***

28.12

5***

210

.86*

**ð.1

68Þ

ð.175

Þð.4

34Þ

ð.399

Þð.5

71Þ

Treated

3.81

4***

4.74

2***

2.246

1.95

9**

1.93

5**

ð1.187

Þð1.333

Þð.7

06Þ

ð.996

Þð.8

74Þ

Yearssince

immigration

.189

***

ð.049

ÞRelativeEffects,Chinese

Chinese

9.93

0***

9.52

5***

5.98

5***

4.45

4***

7.49

5***

ð.343

Þð.3

67Þ

ð.538

Þð.5

81Þ

ð.656

ÞTreated

215

.61*

**210

.54*

**21.03

723.28

6***

23.03

4***

ð1.605

Þð1.793

Þð.8

67Þ

ð1.267

Þð1.076

ÞYearssince

immigration

2.174

***

ð.055

ÞObservations

119,26

912

8,50

812

0,07

473

,184

113,66

6R

2.046

.034

.028

.017

.028

Source.—USCen

sus,IPUMS,

version5.0,

1860

–193

0.Note.—

Thesample

islimited

tomen

aged

30–65.

Controlsforperiod,cohort,andageareincluded

.Immigrantsarelimited

tothose

arrivingpriorto

1927

.aExcludes

individualsin

professional

andclerical

occupations;includes

controlsforpossible

treatm

ent.

bIncludes

controlsforyearsbefore/afterrestrictionswereim

plemen

ted.

cWheretimingofimmigrationcannotb

edetermined

directly,treatm

entisdefi

ned

asbeingborn

afterrestrictionswereim

plemen

ted.Includes

controlsforpossible

treatm

entðre

sidingin

theUnited

States

duringtheexclusionera½18

84–192

8forChinese;

1908

–28forJapan

ese�,

excludingtreatedindividuals,weigh

tedbythe

number

ofyearssince

restrictionswereim

plemen

tedÞa

ndyearsbefore/afterrestrictions.

dIm

migrantsarelimited

tothose

forwhom

timingofim

migrationcanbedetermined

directlyfrom

censusyear

and/oryear

ofim

migration.

eLim

ited

to18

80–193

0.Im

migrantsarelimited

tothose

arriving5yearsbefore/afterrestrictionswereim

plemen

ted.

**Sign

ificantat

5percent.

***Sign

ificantat

1percent.

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the caveat of restricting the sample to those for which the timing ofimmigration ðbefore/after restrictionsÞ is known with certainty. For cen-sus records prior to 1900, the first year in which year of immigration wasenumerated, I impute years since immigrationwith ageminus 15 ðone stan-dard deviation below the mean age of immigrationÞ using a lower boundof zero. Including years of immigration does not affect the main results,although the point estimates are significantly smaller in magnitude ðta-ble 5, col. 5Þ. As expected, we see that time in the United States has a sig-nificant positive effect on occupational performance, consistent with la-bor market assimilation ðChiswick 1978Þ. However, the relative effect forChinese immigrants is negative, suggesting that Chinese immigrants mayhave been slower to acquire society-specific human capital. Alternatively,the Chinese immigrants who were able to achieve the most occupationalupgrading may have also been the most likely to return. Thus, society-specific capital and/or return migration may have offset some of the pos-itive effects of skill-based restrictions, but restricted Chinese immigrantsstill exhibit worse occupational outcomes, on average, than their unre-stricted counterparts, even accounting for time spent in the United States.In summary, the results indicate that immigration restrictions—albeit

somewhat narrowly defined on the basis of occupation—had very het-erogeneous effects, even when heavily biased in favor of higher skill. Theoccupation-based restrictions applied to the Chinese and Japanese inthe late nineteenth and early twentieth centuries significantly improvedthe occupational standing of Japanese immigrants, while the occupa-tional scores of Chinese immigrants actually declined during the exclu-sion era. The results are robust to alternative specifications as well as tocontrolling for labor market assimilation. Since both groups were subjectto the same restrictions, these contrasting effects suggest that skills weremultidimensional with a relatively high degree of substitutability. More-over, for the Chinese, any increased positive selection on the targeted ðob-servedÞ skills was more than offset by changes in selection on untargetedðunobservedÞ skills. This is consistent with the differing economic condi-tions in China and Japan. The latter likely had relatively higher returnsto unobserved skill such that, with total skill held constant, the skill com-position of unrestricted emigres was already skewed in favor of observedskill. Conversely, with relatively lower returns to unobserved skill in China,emigres would have selected more strongly on unobserved skill, resultingin a larger change to the overall skill composition after restrictions wereimplemented.

V. Intergenerational Transmission of Skill

Given that human capital is transmitted intergenerationally, we can alsoestimate the longer-term effect of exclusionary legislation by examiningwages for second-generation Chinese and Japanese. Suppose, similarly toBorjas ð1993Þ, that skills are transmitted from generation t 2 1 to gener-ation t according to the following Markov process:

Impact of Skill-Based Immigration Restrictions 319

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xt 5 st 1 kt 5 riðst21 1 kt21Þ1 et ; ð4Þwhere r captures the extent of intergenerational transmission for ethnicgroup i. The average skill difference between children of restricted andunrestricted Chinese and Japanese immigrants can then be expressed as

rC ½Eðxt21;C j I 5 1; T2 5 1Þ2 Eðxt21;C j I 5 1; T2 5 0Þ�2 r J ½Eðxt21; J j I 5 1; T2 5 1Þ2 Eðxt21; J j I 5 1; T2 5 0Þ�;

where I refers to the immigration decision of the parentðsÞ, and T2 re-fers to having parents who were “treated” by exclusionary immigrationlaws. Dropping I for ease of notation and rearranging terms, we see thatthe above expression is positive if and only if

½Eðxt21;C j T2 5 1Þ2 Eðxt21;C j T2 5 0Þ�2 ½Eðxt21; J j T2 5 1Þ2 Eðxt21; J j T2 5 0Þ�

> ½ðr Jn=r

Cn Þ2 1�½Eðxt21; J j T2 5 1Þ2 Eðxt21; J j T2 5 0Þ�:

ð5Þ

The difference-in-difference then reflects both the effect of exclusion-ary legislation on parents’ skill and the extent to which these skills aretransmitted across generations. The left-hand-side expression is exactly thedifference-in-difference for first-generation immigrants, which we knowfrom the preceding analysis is negative ði.e., immigration restrictions in-crease the average skill of immigrants less for the Chinese than for the Jap-aneseÞ. Then, given Eðxt21; J j T2 5 1Þ2 Eðxt21; J j T2 5 0Þ > 0 ðrestrictedJapanese immigrants have higher skill than those who were unrestrictedÞ,if the difference-in-difference estimate for second-generation Chinese ispositive ðnegativeÞ, it must be the case that rJ

n< rC

n ðrJn> rC

n Þ. However, be-cause fertility ðF Þ is endogenous, the distribution of skill may differ acrossimmigrants with and without children, suggesting that

Eðxt21 j T2 5 1Þ5 Eðxt21 j T 5 1; F 5 1Þ ≠ Eðxt21 j T 5 1Þ: ð6ÞDetermining the sign of rC

n 2 r Jn , the difference in preferences for human

capital investments across ethnic groups, then requires estimating the re-lationship between skill and fertility, as well as how it may have been af-fected by exclusionary immigration policies.Using an approach analogous to the one for first-generation immi-

grants, I compare American-born Chinese and Japanese on the basis ofwhether their parents migrated under the exclusionary laws to estimatethe effect of parental treatment on children’s outcomes. I limit attentionto males aged 30–65 to abstract from both labor market choices and gen-der differences in the returns to human capital. Individuals are assignedto the treatment group on the basis of birth year and parents’ place ofbirth. All persons born in the United States during the exclusion period

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with at least one foreign-born parent are considered treated in the sensethat their parentðsÞ likely immigrated under the restricted laws. Analo-gous to the analysis for first-generation immigrants, I omit those born af-ter 1928 in order to compare children whose parents migrated undermore similar conditions. All third- and higher-generation Chinese andJapanese are omitted as well. Again, given the coarseness of this measure, Iinclude a measure for possible treatment ðborn during the exclusion erato parents of unknown origin, weighted by the number of years betweenthe birth year and the cutoff year of 1928Þ.Among those whose parents were unrestricted by exclusionary laws, the

Japanese have higher occupational scores than the Chinese, but amongthose whose parents were subject to exclusionary laws, the Chinese scoresignificantly higher than the Japanese ðtable 6Þ. In fact, being the child ofa treated immigrant reverses the positive gap between second-generationJapanese and native whites and completely eliminates the negative gapbetween second-generation Chinese and native whites. This result is ro-bust to including differential time trends ðbefore restrictions were imple-mented and after they were repealedÞ, as well as an alternative definitionof treatment ðborn within 10 years after restrictions were implementedÞ.Additionally, I repeat the estimation excluding a subset of observationsfrom the western states of Washington, Oregon, California, Alaska, andHawaii. As a result of World War II and the internment of 1942–45, Jap-anese Americans in these states may have experienced greater discrimina-tion in both labor markets and educational institutions, as well as inter-ruptions in their education or labor market trajectories. This would resultin relatively worse outcomes for the Japanese, particularly among the sec-ond generation who would have acquired their education and work ex-perience exclusively in the United States. To test for this, I exclude fromthe sample all individuals between the ages of 7 and 17 during the intern-ment period and residing in the states affected by internment. Estimatesfor this sample are qualitatively unchanged and quantitatively quite similaras well, suggesting that the main results are not explained by differentialtreatment and discrimination of Chinese and Japanese immigrants.That children of restricted Chinese immigrants had better occupational

outcomes than children of restricted Japanese immigrants is surprisinggiven that the reverse was true among the immigrants themselves. Fromexpressions ð5Þ and ð6Þ, we see that there are two ways to reconcile theseresults. One possibility is that exclusion allowed only a highly selectivegroup of individuals to marry and have children. This effect, if present,would likely have been more pronounced for the Chinese, as wives andminor children of Japanese laborers domiciled in the United States weregranted entry ðInui 1925Þ until the Immigration Act of 1924, while theChinese Exclusion Acts offered no such exception. Thus, Chinese immi-grants who both entered the United States and had children during theexclusion era are more likely to have immigrated with their spouses and/or families, which may be indicative of higher skill. To test for this directly,

Impact of Skill-Based Immigration Restrictions 321

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I return to the sample of immigrants and add an indicator for having atleast one child currently living in the household, interacted with ethnicgroup and treatment status ðtable 7Þ.10 While having a child at home ispositively correlated with the occupational score, and even more so forthe Chinese, I find no evidence of a change in the relationship betweenfertility and skill after exclusionary laws are implemented. Therefore, theresults do not appear to be driven by differential selection into childbear-ing, as the effect of immigration restrictions does not differ with fertility.The other possible explanation is that Chinese immigrants invested

more heavily in their children’s human capital, relative to the Japaneseðr J

n< rC

n Þ, despite being drawn themselves from the lower portion of thedistribution for unobserved skill. This is consistent with the notion of a“middlemanminority” ðBonacich 1973; Hirschman andWong 1986Þ, ami-nority racial or ethnic group that comes to occupy a “middleman” position

10 This is, unfortunately, the best proxy for fertility that is available prior to the ChineseExclusion Act of 1882. Controls for age, period, and cohort are included to help account fordifferences in home leaving and coresidence.

TABLE 6The Effect of Exclusion on Occupation Score among the Second Generation,

Difference-in-Difference Estimates

Main Samplea

ð1Þ

DifferentialTrendsa,b

ð2Þ

ExpandedTreatmentWindowc

ð3Þ

ExcludingWestern Statesa,d

ð4ÞAsian 2.219*** 21.246 1.959*** 2.321***

ð.141Þ ð.888Þ ð.170Þ ð.154ÞTreated 23.317*** 2.877 23.212*** 23.442***

ð.432Þ ð.666Þ ð.470Þ ð.445ÞRelative Effects, Chinese

Chinese 23.560*** 22.375* 23.555*** 23.898***ð.727Þ ð1.245Þ ð.681Þ ð.767Þ

Treated 4.877*** 2.463* 6.498*** 5.305***ð1.259Þ ð1.328Þ ð1.367Þ ð1.300Þ

Observations 184,223 184,223 185,167 180,601R 2 .057 .057 .057 .057

Source.—US Census, IPUMS, version 5.0, 1860–2000.Note.—The sample is limited to men aged 30–65. Controls for period, cohort, and age areincluded. Chinese and Japanese are limited to those born in the United States prior to 1927.Controls are included for possible treatment ðborn after restrictions were implemented withparents of unknown origin, weighted by difference between birth year and end of periodÞ.a Treatment is defined as being born after restrictions were implemented.b Includes controls for number of years before restrictions were implemented and numberof years after restrictions were repealed.c Treatment is defined as being born within 10 years after restrictions were implemented.Chinese and Japanese are limited to those born in the United States prior to 1939.d Excludes individuals aged 7–17 residing in Washington State, Oregon, California, Alaska,or Hawaii during Japanese American internment.* Significant at 10 percent.*** Significant at 1 percent.

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between the majority group and another, lower-status minority group.This, along with a sojourner mentality and, in the case of the Chinese, ex-clusionary laws pertaining specifically to occupation, tends to foster occu-pational concentration and intensive investment in both human and eco-nomic capital, resulting in rapid convergence and even surpassing of themajority. Of course, both the Chinese and Japanese fit this model in var-ious respects, but the results here suggest that preferences for human cap-ital investment, in addition to economic conditions and self-selection,have also played a role, with the Chinese displaying stronger preferencesfor human capital than the Japanese. However, Chiswick ð1988Þ suggeststhat what appear to be preferences may, in fact, be differences in the rela-tive prices of child quantity and quality ðe.g., as a result of urban vs. ruralresidence or greater education of mothersÞ. This does help explain dif-ferences between some groups ðe.g., Jews andMexicansÞ, but Chinese and

TABLE 7The Effect of Exclusion on Fertility among the Foreign-Born,

Difference-in-Difference Estimates

Occupation Scoreð1Þ

Number of Kidsat Home

ð2ÞAsian 211.89*** 2.800***

ð.191Þ ð.044ÞTreated 5.061*** 21.829***

ð1.336Þ ð.295ÞAny kids at home 2.329***

ð.257ÞAny kids � treatment .884

ð1.336ÞRelative Effects, Chinese

Chinese 9.967*** 2.185ð.364Þ ð.216Þ

Treated 216.53*** 1.956***ð1.725Þ ð.639Þ

Any kids at home 2.649***ð.693Þ

Any kids � treatment 1.444ð1.804Þ

Observations 128,508 70,325R 2 .035 .074

Source.—US Census, IPUMS, version 5.0, 1860–1930.Note.—The sample is limited to men aged 30–65. Controls for period, cohort, and age areincluded. Immigrants are limited to those arriving prior to 1927. Where timing of immigra-tion cannot be determined directly, treatment is defined as age 15 or younger at time ofexclusion. Possible treatment is defined as residing in the United States during the exclusionera ð1884–1928 for Chinese; 1908–28 for JapaneseÞ, excluding treated individuals, weightedby the number of years since restrictions were implemented. Number of kids at home isdefined as the number of children ever born, conditional on having at least one child. Anykids at home is defined as having at least one child currently living in the household.*** Significant at 1 percent.

Impact of Skill-Based Immigration Restrictions 323

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Japanese immigrants, for whom data are available, display similar laborforce participation rates and fertility rates in the United States, with fertil-ity actually being slightly higher for the Chinese ðChiswick 1988Þ. And,when I rerun the difference-in-differences specification with number ofchildren at home, conditional on having children, as the dependent vari-able, I find evidence of significantly higher fertility rates for restricted Chi-nese immigrants ðtable 7Þ.It is also important to note that preferences for human capital invest-

ment may apply to the first generation, the second generation, or both.That is, we could consider a richer model of human capital investment inwhich immigrants may continue to acquire skills after arriving at the des-tination. Then, with parental altruism and/or direct preferences for chil-dren’s human capital, parents’ investment decisions will incorporate thebenefit of human capital transfer across generations ðEhrlich and Kim2007Þ. Immigrant parents may even be willing to endure a period of oc-cupational downgrading at the destination in order to invest in location-specific ðunobservedÞ skills that have a high degree of intergenerationaltransmission ðMayer 2008; Gradstein 2009Þ. Empirically, it is difficult todistinguish between direct human capital investments in the second gen-eration and the transfer of postimmigration human capital investmentsmade by first-generation immigrants. Without sufficient data on actualearnings, we can discern only human capital investments that result in achange in occupational category, not those that increase earnings withinan occupation, and we cannot discern any investments that do not yielda return until the subsequent generation. And, while the ultimate effecton the second generation may be the same, these two explanations canhave very different implications: postimmigration investment in humancapital could suggest more rapid “catch-up” among immigrants them-selves, while investment in the human capital of the second generationwould imply greater intergenerational inequality, perhaps with additionalimplications for old-age support and public finance.Finally, we can look at some more direct measures of human capital for

evidence of greater investment among exclusion-era Chinese immigrants.For high school and college completion, we observe the same pattern asfor occupational score ðtable 8Þ. Among the Japanese, children of re-stricted immigrants have lower high school and college completion ratesthan children of unrestricted immigrants, while the net effect is close tozero for children of restricted Chinese immigrants. However, exclusionarylaws are found to have the opposite effect for literacy: children of re-stricted Japanese immigrants have higher literacy rates, and the relativeeffect for children of restricted Chinese immigrants is negative. This sug-gests that exclusionary laws had heterogeneous effects on different partsof the immigrant skill distribution. Among the Japanese, restrictions suc-ceeded in increasing the average skill of incoming immigrants, primarilyby increasing positive selection on observed skill ðoccupationÞ. But chil-

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dren of restricted Japanese immigrants did better than children of un-restricted immigrants only in terms of literacy, which suggests strongertransmission of skill only at the lower tail of the distribution. Conversely,among the Chinese, restrictions reduced the average skill of incoming im-migrants, likely by reducing positive selection on unobserved skill. How-ever, the intergenerational transmission of skill seems to have been muchstronger, if only at the upper tail of the distribution. While a morethorough discussion is beyond the scope of this paper, these results dosuggest differing relationships between observed and unobserved skill andthe intergenerational transmission of skill.

VI. Conclusion

Chinese immigration to the United States, as with all immigration, hasbeen highly selective over time. But, unlike many other ethnic groups, theChinese were subject to skill-based restrictions, even before numericalquotas. Per the Chinese Exclusion Act of 1882, immigration of all labor-ers was prohibited, and only merchants, teachers, students, and officialswere granted entry. However, these restrictions did not increase the av-

TABLE 8The Effect of Exclusion on Human Capital among the Second Generation,

Difference-in-Difference Estimates

OccupationScoreð1Þ

Literacyð2Þ

High Schoolð3Þ

Collegeð4Þ

Asian 2.089*** .048*** 2.162*** .140***ð.132Þ ð.003Þ ð.004Þ ð.005Þ

Treated 23.218*** .110*** 2.095*** 2.131***ð.429Þ ð.012Þ ð.015Þ ð.012Þ

Relative Effects, Chinese

Chinese .091 .031 2.003 2.039**ð.860Þ ð.021Þ ð.017Þ ð.017Þ

Treated 2.896* 2.148*** .154*** .144***ð1.478Þ ð.046Þ ð.048Þ ð.044Þ

Observations 85,575 85,575 85,491 85,208R 2 .038 .235 .26 .058

Source.—US Census, IPUMS, version 5.0, 1940–2000.Note.—The sample is limited to men aged 30–65. Information on high school and collegecompletion is available only beginning in 1940, so all outcomes are limited to this period.Controls for period, cohort, and age are included. Chinese and Japanese are limited to thoseborn in the United States prior to 1929. Treatment is defined as born after restrictions wereimplemented with at least one foreign-born parent. Because literacy is not recorded after1930, this measure is constructed from schooling attainment. An individual is consideredliterate if he or she has completed at least the fifth grade. High school and college refer tocompletion of the schooling level.* Significant at 10 percent.** Significant at 5 percent.*** Significant at 1 percent.

Impact of Skill-Based Immigration Restrictions 325

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erage skill level among new arrivals. Rather, I find that Chinese immi-grants of the exclusion era have worse occupational outcomes relative toboth Japanese immigrants, who were subject to the same restrictions, andunrestricted Chinese immigrants. This points to significant substitutionbetween observed ðtargetedÞ and unobserved skills and suggests that skill-based restrictions may not be successful in altering the overall skill compo-sition of incoming immigrants, depending on the skills that are targetedand the scope for substitution among skills.However, when we turn to the second generation, the data suggest that

there may be some truth to the “model minority” label. Among the Chi-nese, human capital accumulation was much more intensive for childrenof restricted immigrants, compared to children of unrestricted immi-grants, despite restricted immigrants themselves having lower aggregateskill. This suggests particularly strong intergenerational transmission ofskill. Moreover, we observe the opposite effect among the Japanese, sug-gesting that it is not immigrant selectivity per se driving the results; rather,group-specific preferences for human capital seem to matter as well. And,again, the impact of skill-based restrictions appears to be heterogeneous;for the group in which restrictions succeeded in increasing the skill ofimmigrants, the gains were largely undone in the subsequent generation,while for the group in which restrictions were unsuccessful, significantgains were observed in the second generation. Additionally, I find sug-gestive evidence that these effects were heterogeneous throughout theskill distribution, even within ethnic groups. Taken together, the resultssuggest that the impact of skill-based immigration restrictions is not al-ways straightforward and should be the subject of further research.

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