The Economics of Immigration and Social Diversity: Volume 24

This volume is a collection of papers first presented at a conference held in June 2004 dedicated to the memory of the late Tikva Lecker, hosted by Bar-Ilan University in Ramat Gan, Israel, and co-sponsored by the University of Illinois at Chicago. A warm and lively member of the Department of Economics at Bar Ilan University, Professor Lecker's many interests included topics in labor economics, women and the economy, the economics of Judaism, the economics of migration, and every aspect of the economic experience of immigrants and their descendants.

In this paper, we study attitudinal responses of host country residents towards further immigration that are triggered by economic considerations. We develop an economic model motivating the empirical work that takes a broader view on these issues than previous papers. We provide empirical analysis that is based on data more specific and better suited to pick up the many channels of economic interest through which benefits and costs of immigration may be felt. Results support previous literature in establishing strong associations between individual characteristics and a wide range of responses to questions relating to perceived impact of immigrants on economic outcomes. Our analysis points towards harmful effects of immigration on the economy being felt through immigration being a fiscal burden rather than having adverse effects on the labour market.

In this paper, we define a tractable procedure to measure worker incomplete information in the labor market. The procedure, which makes use of earnings distribution skewness, is based on econometric frontier estimation techniques, and is consistent with search theory. We apply the technique to 11 countries over various years, and find that incomplete information leads workers to receive on average about 30–35% less pay than they otherwise would have earned, had they information on what each firm paid. Generally, married men and women suffer less from incomplete information than the widowed or divorced; and singles suffer the most. Women suffer more from incomplete information than men. Schooling and labor market experience reduce these losses, but institutions within a country can reduce them, as well. For example, we find that workers in countries that strongly support unemployment insurance (UI) receive wages closer to their potential, so doubling UI decreases incomplete information and results in 5% higher wages. A more dense population reduces search costs leading to less incomplete information. A more industrial economy disseminates wage information better, so workers exhibit less incomplete information and higher wages. Finally, we find that foreign worker inflows increase incomplete information, and at the same time reduce average wage levels, at least in the short run.

I construct a set of dynamic macroeconomic models to analyze the effect of unskilled immigration on wage inequality. The immigrants or their descendants do not remain unskilled – over time they may approach or exceed the general level of educational attainment. In the baseline model, the economy's capital supply is determined endogenously by the savings behavior of infinite-lived dynasties, and I also consider models in which the supply of capital is perfectly elastic, or exogenously determined. I derive a simple formula that determines the time discounted value of the skill premium enjoyed by college-educated workers following a change in the rate of immigration for unskilled workers, or a change in the degree or rate at which unskilled immigrants become skilled. I compare the calculations of the skill premiums to data from the US Current Population Survey to determine the long-run effect of different immigrant groups on wage inequality in the United States.

Numerous studies have concluded that immigration has very small effects on wages or unemployment, even when the immigration flow is very large. Three reasons suggested for this are that immigration: (1) is not supply-push, but may instead be driven by demand-pull factors; (2) is likely to cause some out-migration; and (3) may induce flows of other factors across the economy. Surprisingly, few studies consider another obvious explanation: immigrant workers also consume locally, which means immigration stimulates the local demand for labor. Previous researchers have generally ignored the measurement of immigration's effects on labor demand, perhaps because when immigration, out-migration, and immigrant consumption occur simultaneously in the same labor market, it is very difficult to isolate immigration's effect on labor demand. This paper measures the labor demand-augmenting effects of immigration using a two-sector model of a very special case in which the receiving economy consists of: (a) an export industry employing both immigrants and natives; and (b) a retail industry employing native labor that is driven by local demand. The model can incorporate both supply-push and demand-pull immigration as well as out-migration. The model's important implication is that since immigration is exogenous to the retail sector, an unbiased estimate of the demand effect of immigration can be obtained without having to use instrumental variables estimation or other statistical procedures that may introduce new sources of bias. Fortunately, the economy in our model matches a very convenient test case: Dawson County, Nebraska. Dawson County recently experienced a surge in demand-pull immigration due to the location of a large export-driven meatpacking plant. This exogenous capital shock pulled in many Hispanic immigrant workers, who did not immediately seek work in the retail sector because of social and language barriers. This immigration led to higher retail wages and housing prices, confirming that immigration is capable of exerting significant effects on local labor demand.

Policy strategies directed against illegal immigration have largely concentrated on border and domestic enforcement. This paper suggests that host countries could consider a more lenient approach: contributing to the deportation cost of self-reporting illegal immigrants. The increase in illegal immigration that such a reward might bring about is shown to be more than offset by the rise in the number of self-reporting illegal immigrants leaving the rich country, with a concomitant decrease in the number of remaining illegal immigrants. An added advantage of this policy is that the self-reporting immigrants would be predominantly the relatively lower socio-economic group. When adopting this policy, the rich country must choose the appropriate mix of two policy means: funds allocated to strengthening its border and domestic control; and rewards to self-reporting illegal immigrants.

This paper is an analysis of the English-language proficiency and labor market earnings of adult male Soviet Jewish immigrants to the United States from 1965 to 2000, using the 2000 Census of Population. Comparisons are made to similar analyses using the 1980 and 1990 Censuses. A consistent finding is that recently arrived Soviet Jewish immigrants have lower levels of English proficiency and earnings than other immigrants, other variables being the same. However, they have a steeper improvement in both proficiency and earnings with duration in the United States and the differences from the other European immigrants disappear after a few years. The Soviet Jewish immigrants have both a higher level of schooling and a larger effect of schooling on earnings than other immigrants, even other European immigrants.

The lower initial English proficiency and earnings, the steeper improvement with duration, and the rapid attainment of parity is consistent with the “refugee” nature of their migration, as distinct from being purely economic migrants. That the same pattern exists across three censuses suggests that the low English proficiency and earnings of those recently arrived in the 2000 Census data reflects a refugee assimilation process, and not a decline in the unmeasured dimensions of the earnings potential of recent cohorts of Soviet Jewish immigrants. The very high level of schooling and the larger effect of schooling on earnings among Soviet Jewish immigrants are similar to the patterns found among Jews born in the United States.

Soviet Jewish immigrants appear to have made a very successful linguistic and labor market adjustment, regardless of their period of entry into the United States.

This paper presents a three-generation migrant analysis, comparing the relative economic performance of various migrant generations to the native population. We develop a theoretical model to explain the relationship between the different earnings of the migrants over three generations and relate the model to the results in the literature. The empirical analysis explores the suitability of the theoretical implications based on data from the 1995 Israeli Census. We show that assimilation of the third generation into the local population is far from clear.

Looking at the Jewish population in Israel in 1995 this paper compares three multidimensional approaches to poverty measurement and checks to what extent they identify the same households as poor. Logit regressions are then estimated to understand which variables have an impact on poverty. Finally, the so-called Shapley decomposition is introduced to estimate the exact marginal impact of these determinants of poverty.

Of particular interest to this study was the combined effect of the generation to which the head of the household belongs and his/her place of birth. It turns out that the ethnic origin has a significant impact on multidimensional poverty in Israel insofar as being a head of household born in Asia or Africa, whatever the generation to which one belongs, increases, ceteris paribus, the probability of being poor.

During the 1990s, the Israeli economy experienced two major events. First, starting in the fall of 1989, a large wave of relatively highly skilled immigrants arrived from the former Soviet Union (CIS) increasing the population and the labor force by considerable magnitude. Second, the hi-tech sector has grown substantially and reached a peak in growth and level in 2000.

This paper provides a descriptive analysis of the integration of immigrants from the CIS in the Israeli labor market and, specifically, in the hi-tech sector. Based on a unique panel data that follows immigrants for up to 12 years in Israel we find a significant positive correlation between immigrants’ participation in Israeli government-provided training programs and the propensity to work as professionals in the hi-tech industry and to work in white-collar occupations in other sectors. However, this correlation diminishes with ‘time since participation’ such that recent participants face a higher probability to work in hi-tech and white-collar jobs than those who participated in training earlier.

With the signing of the Civil Rights Act of 1964, discrimination in employment with respect to the hiring, promotion and pay of minorities and women became illegal in the United States.¹ Yet, 40 years later, earnings differentials still persist between certain minorities and white non-Hispanics and between women and men. For example, although the ratio of black men's earnings to those of white men and of black women's to white women's have increased considerably over the past 50 years, the black–white ratio was still only 78% in 2003 among men and 87% among women (Fig. 1). Hispanic–white wage differentials are larger than the black–white differential among both men and women (Figs. 2 and 3). And despite a significant narrowing in the gender gap, the ratio of women's earnings to men's was about 76% in 2003 (Fig. 4).²

A well-documented human tendency is to compare outcomes with others, trying to outperform them. These tendencies vary across cultures and among different individuals in a given society. To understand the implications of such diversity in status considerations on wages, contracts, sorting and output we use a standard principal agent framework in which firms consist of two workers and a principal. We find that, in equilibrium, firms mix workers with different status concerns to enhance ‘cultural trade’. Although workers may have the same productivity, equilibrium will generate a dispersion in (expected) wages, and workers with status concerns will have more high-powered incentives, work more and earn more than workers who do not care about status. Finally, we find that a more diverse workforce can increase the total output of the economy. This increase in output is a result of the higher effort exerted by the status minded workers that offsets the reduction in effort by those who do not care about status.

The paper addresses mainly three questions. One, do workers tend to be employed by employers of the same ethnic group; two, what is the structure of the equilibrium wage contract; and three, do more ethnically homogeneous labor markets tend to have different labor contracts than more ethnically diversified ones. The answer to the first question is in the affirmative – in equilibrium all employers offer the same wage contract and workers are hired by employers of the closest ethnic affiliation. In terms of the equilibrium wage contract, its nature depends on the attitude toward risk of both sides of the market. Finally, the answer to the third question is also in the affirmative since the more homogenous the labor market, the more deterministic is the wage.

Community solidarity with return migrants is commonly observed in the rural areas of developing countries. In this paper, we briefly review the evidence from sociological studies on this issue and suggest a new economic approach to such solidarity. We show that an implicit institutional arrangement, whereby migrants have no obligations (e.g., no obligation to remit) but may nevertheless enjoy equal ownership rights on collective resources upon return, enhances economic efficiency via an optimal regulation of migration flows. We also address enforceability issues since, within each generation, time consistency problems may give rise to opportunistic behavior among non-migrants.

Models the trade-offs between education in secular subjects, formal and informal, and the formation of religion-specific human capital. Explores some implications of negative externalities between religious and secular education. Develops hypotheses about religious tensions in the American public school system and means of coping with them. Discusses some implications for social cohesion in a religiously pluralistic school system.