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The economics of migration in historical perspective

The economics of migration in historical perspective. Ran Abramitzky. Outline. International migration patterns since 1600 How do immigrants perform in the host country? Are immigrants positively or negatively selected from their sending countries?

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The economics of migration in historical perspective

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  1. The economics of migration in historical perspective Ran Abramitzky

  2. Outline • International migration patterns since 1600 • How do immigrants perform in the host country? • Are immigrants positively or negatively selected from their sending countries? • Do immigrants crowd out the native-born and reduce their wages? • Do immigrants pay their way in the welfare state? • How research on migration has progressed over time

  3. Part I: International migration patterns since 1600: Brief summary

  4. Migration under contract and coercion (1607-1783) • About 700,000 non-slave migrants • Free (unassisted) population: Not many. Came on own funds and purchased land from colonial governments • Indentured servants: 1/2 – 2/3 of white migration; mainly from England; came alone (redemptioners mainly from Germany); declined gradually with rise of slavery • African slaves: dominated the period, especially in 18th century • Prisoners: less common (but better known…). Convicts sentenced to death in England were allowed to live if they transported themselves out of England… 1788 congress forbade further transport… so, British dumped undesirable population in Australia…

  5. Convicts transported to Australia…

  6. An indentured servant in colonial America

  7. The rise of pioneer free settlers, 1790-1850

  8. Mass migration from Europe, 1850-1913

  9. Mass migration from Europe, 1850-1913

  10. Mass migration from Europe, 1850-1913 • Open borders policy for European migrants • First wave (1840s) associated with famine in Europe • Second wave associated with shift in ocean transport from sail to steam (cut transport time from 5 weeks to 12 days) • Nominal transportation costs remained constant, but decline relative to wages • Mainly British Isles, but also Germany, Scandinavia and elsewhere in Northwest Europe • About 60% of migration was to U.S, but also to Brazil and Argentina • Typically young single males

  11. Where in Europe did migrants come from?

  12. Asian emigration 1830s – 1920s • Increased demand for unskilled labor, especially following the abolition of slavery • New source of labor became Asia, mainly India (~1M), China, Japan • Came as indentured servants (typically for 5 years) • At the end, some went back home, but most stayed • They acquired some land, worked part time in plantations for wages, or migrated to urban areas

  13. Asian emigration 1830s – 1920s • Indian migrants mainly went to Mauritius and Caribbean • Chinese went to North and South America and Caribbean • Later formed Chinatowns • The Chinese Exclusion Act of 1882 led to first restriction on immigration to US based on country of origin • Japanese migrants went to Hawaii and mainland US

  14. War, depression, and restriction 1914-1945 • Mass migration fell sharply with WWI and the Great Depression • Legislation in 1917 effectively prohibited migration from Asia to US • U.S. enacted quotas in early 1920s and favored migrants from Northwest Europe

  15. Constrained mass migration, 1946-2000s • Dramatic declines in cost of travel (air) • Dramatic decline in cost of information and communication • In the 1960, U.S. shifted away from quotas that favored immigrants from Northwest Europe; complex immigration policy… • Absolute number of migrants similar to pre-WWI mass migration, but much smaller relative to destination country populations • Asia became increasingly important source of emigrants • Recently: Europe becomes a destination for immigrants from Asia; migration within Europe

  16. Where did migrants come from?

  17. Legal and illegal migration today • ~15 million immigrants entered the US legally in 2000-2010 • About 2/3 of legal migrants come for “family reunification”, and the rest mostly because of desirable skills or humanitarians reasons • Probably more entered illegally (mainly from Mexico). We will not discuss illegal migration, although this is a timely topic…

  18. Illegal migration raises the costs of migration

  19. Part II: How do immigrants perform in the host country?

  20. Why is this question important? Labor market performance of immigrants in the host country as a measure of the immigrants’ contribution to the economy Help determine the impact of immigration on the employment opportunities of native-born workers

  21. How do immigrants perform in host country? 1st generation research: optimistic view. On arrival migrants earn less than natives but catch up and overtake natives after 15 years 2nd generation research: less optimistic. Smaller catching up with natives 3rd generation research: Almost no catching up. Permanent immigrants earn as much as natives even upon first arrival Why has the answer changed so drastically?

  22. Immigrants earn less than natives upon arrival but overtake native earnings within 15 years of arrival (Chiswick 1978)

  23. What explains initial earning penalty and later catch up? • At time of arrival, immigrants earn less than natives because they lack US-specific skills (e.g. English proficiency) • As these skills are acquired, immigrants “catch up” – experience faster wage growth • But why do immigrants overtake natives? • Selection argument: immigrants are more able and more highly motivated than natives, and they work longer hours and harder • Why? Because only the most able and driven have the ambition to pack up, move and start a new life in a foreign country

  24. Methodological criticism of inferring wage convergence from a single cross section (Borjas 1985) • Example: imagine 3 immigrant waves: • First wave arrived in 1950 • Second wave arrived in 1970 • Third wave arrived in 1990 • Assume: • Immigrants enter US at age of 20 • 1950 arrival cohort is the most productive and the 1990 arrival cohort is the least productive, 1970 arrival cohort has same skills as US natives • No wage convergence between immigrants and natives • Suppose we only have data from 1990 census

  25. Wage convergence can be mixed up with decline in immigrant arrival cohort quality

  26. Why would quality of immigrant arrival cohorts decline? • 1st wave of mass migration (1860-1913): change in source countries from North/West Europe to East/South Europe • 2nd wave of mass migration (post WWII): • 1965 Amendments to Immigration and Nationality Act deemphasize role of skills in allocating entry visas, and instead allocate visas based on whether applicant has family ties with current US residents • Improving economic conditions in Western Europe would have reduced number of immigrants from these traditional source countries anyway

  27. Can we test for decline in arrival cohort quality vs. wage convergence? • Ideally, we would like to track immigrants over time to correctly measure wage convergence • However, such data are impossible to construct for modern period because of confidentiality… • As a result: literature has pursued the alternative of tracking specific immigrant waves across censuses • Findings: decline in quality of immigrant cohorts; smaller wage convergence than previously found

  28. Decline in arrival cohort quality

  29. History can provide additional insight… • Possible to track immigrants over time with historical censuses: “72-year rule” allows linking of people by name, age, birthplace • Linking migrants across population censuses • US open border policy allows us to focus on migrant decisions, free of immigrant selection policies • Joint project with Leah Boustan and Katherine Eriksson (UCLA)

  30. A Nation of Immigrants:Assimilation and Economic Outcomes in the Age of Mass Migration

  31. Switch to presentation of paper…

  32. Part III: Are immigrants positively or negatively selected from their sending countries?

  33. Migration is a selective process… • Immigrants are not randomly selected from the population of the sending country • It is widely believed that immigrants are the “best and brightest”: on average they are more skilled and more ambitious than non-immigrants • The finding that migrants eventually overtake natives in earnings reinforced this conclusion…

  34. Challenging positive selection finding • Borjas’ selection hypothesis: selection depends on differences in returns to skills between origin and destination • Lower returns to skill in origin vs. destination- expect the more skilled to migrate • Higher returns to skill in origin vs. destination- expect the less skilled to migrate • Motivated by experience of migrants from Europe (low return to skill) vs. Mexico (high return to skill) in US…

  35. But #1: migrants are usually observed at destination … • To test for selection requires comparing Mexicans who migrated with Mexicans who didn’t… • Generated tons of such research… • Findings: Mexicans who migrated to US are actually more skilled (for sure not less) than Mexicans who stayed

  36. But #2: little evidence for negative selection regardless of returns to skills • Although lack of evidence could be because of selective policy restrictions • That is, it is unclear whether less skilled people choose not to migrate or whether the destination country just won’t let them in… • Would the poor and less skilled move in higher numbers in the absence of migration policies?

  37. Test 1: Internal migration… • Look at internal migrants, who don’t face migration restrictions • Are the less skilled more likely to migrate when the origin offers higher returns to skills? • Some evidence that the answer is YES: • Puerto-Rico to US migrants (Ramos 1992) • City-to-kibbutz migrants (Abramitzky 2010)

  38. Test 2: Migration under open borders in the age of mass migration • With Leah and Katherine, we focus on Norway-to-US migration in the 19th century • Could shed light on the question: have the poor always been less likely to migrate? • Norway at the time had higher return to skill (more unequal income distribution) than US: theory predicts less skilled would be more likely to migrate

  39. Statute of liberty suggests that the poor migrated • “Keep, ancient lands, your storied pomp!” cries she With silent lips. “Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door!” Emma Lazarus, “The New Colossus” (1883) Displayed upon the Statue of Liberty in New York Harbor

  40. Would the poor migrate in larger numbers if migration restrictions were lifted? Relaxing migration restrictions could be an effective policy solution for global wealth disparities (Hanson, 2010; Clemens, 2011) Migration is a potential strategy for economic advancement in developing countries Would poorer people migrate under less restrictive policies? Or would lack of wealth still pose a barrier? This historical setting without government migration restrictions allows us to shed light on this question…

  41. Have the poor always been less likely to migrate? (Abramitzky, Boustan and Eriksson 2012a, 2012b) Assemble new data on 50,000 Norwegian men We find: Men with less-skilled occupation were more likely to migrate Men whose parents were poorer were more likely to migrate Wealth increased opportunities in source country, and was not a necessary condition to finance migration costs Migration as substitute for inheriting wealth

  42. Methodology note: on correlation vs. causality • Correlation between wealth and migration doesn’t imply that having wealth cause migration • Causality could go the other way around… • We use pre-determined variation in wealth: • Variation in parental wealth when individual was child • Expected inheritance, which varied by birth order, gender composition of siblings, and geographical location

  43. How might wealth discourage migration? Borjas selection hypotheis: Richer people are typically more skilled, thus less likely to migrate if return to skill is higher in origin The rich are less likely to migrate if higher return to wealth in the origin vs. destination 19th century Norway consistent with Borjas model: Income distribution more unequal in Norway than US in 1900(Soltow 1965, Abramitzky, Boustan, Eriksson 2012) Returns to internal migration higher for landless ~45% return for farm laborer, ~21% return for farm owner [details]

  44. How might wealth discourage migration? McKenzie and Rapoport (2007): wealth could discourage migration when migration costs are low (e.g. because of strong migrant networks) because migration takes time, which is more valuable for the rich (in terms of lost production at home) 19th century Norway is consistent with this view: Migration costs ~20% of annual earnings of a low skilled Norwegian worker Mexico-to-US migration: ~50% of annual earnings Closed borders add cost. Transport cost ≈ $500. Smuggling cost ≈ $2000 (Borger 2010) Strong migrant networks helped finance migration 40% of Norwegian migrants on pre-paid tickets (Hvidt, 1975)

  45. Can we learn about developing countries today from 19th century Norway ? Low GDP per capita $2,290 in 2010 dollars: similar to Honduras today High rates of rural-to-urban migration % urban increased from 15 to 30 percent (1865-1900). Similar to Indonesia, Nigeria, China (1975-2000) But international migration higher due to open borders 10 percent of Norwegian population emigrated in 1880s Compare Mexico (1.5%) and Philippines (0.8%) in 2000s

  46. Part IV: Do immigrants crowd out the native-born and reduce their wages?

  47. Immigrants expected to adversely affect employment opportunities of natives • Textbook model: expect migrants to “steal” jobs from natives and reduce their wages • “After World War I, laws were passed severely limiting immigration. Only a trickle of immigrants has been admitted since then . . . By keeping labor supply down, immigration policy tends to keep wages high.” Paul Samuelson, Economics [1964]

  48. In the past immigrants might have had negative effect on natives • 19th century: Some evidence for a negative relationship between immigration and wage changes across US cities (Goldin 1994, Hatton and Williamson 1995, Ferrie 1996) • Evidence of wage convergence between the origin countries (Europe) and destination countries (US, Argentina)

  49. Today migrants don’t seem to adversely affect natives • 20th century: little evidence for adverse effect of migrants on natives • Many studies test whether more immigrants in the city reduce natives’ wages and employment • No support for the hypothesis that immigrants adversely affect natives (see next slide)

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