Immigrant versus Natives? Displacement and Job Creation

The impact of immigration on native workers is driven by two countervailing forces: the degree of substitutability between natives and immigrants, and the increased demand for native workers as immigrants reduce the cost of production and output expands. The literature so far has focused on the former substitution effect, while ignoring the latter scale effect. This paper estimates both of these effects using labor force survey data from Malaysia (1990-2010), a country uniquely suited for understanding the impact of low-skilled immigration. The instrumental variable estimates imply that the elasticity of labor demand (3.4) is greater than the elasticity of substitution between natives and immigrants (2.5). On average the scale effect outweighs the substitution effect. For every ten additional immigrants, employment of native workers increases by 4.1 in a local labor market. These large reallocation effects are accompanied by negligible relative wage changes. At the national level, a 10 percent increase in immigrants, equivalent to 1 percent increase in labor force, has a small positive effect on native wages (0.14 percent). The impact of immigration is highly heterogeneous for natives with different levels of education, resulting in substantial changes in skill premiums and hence inequality. Immigrants on net displace natives with at most primary education; while primarily benefiting those with a little more education, lower secondary or completed secondary education.

Bibliographic Details

Main Authors:	Wagner, Mathis, Ozden, Caglar
Language:	English en_US
Published:	World Bank, Washington, DC 2014-06
Subjects:	ACCOUNTING, AGE CATEGORIES, AGE GROUP, AGE GROUPS, AGRICULTURE, AVERAGE WAGE, AVERAGE WAGES, CITIZENS, CITIZENSHIP, COBB-DOUGLAS PRODUCTION FUNCTION, CONSTANT RETURNS TO SCALE, CONSUMERS, COUNTRY OF ORIGIN, DECLINING INDUSTRIES, DEMAND CURVE, DEMAND ELASTICITY, DEMOGRAPHIC CHANGES, DEMOGRAPHIC TRANSITION, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISPLACEMENT, ECONOMIC GROWTH, EDUCATIONAL ATTAINMENT, ELASTICITY, ELASTICITY OF DEMAND, ELASTICITY OF LABOR SUPPLY, ELASTICITY OF SUBSTITUTION, ELASTICITY OF SUPPLY, EMPLOYMENT, EMPLOYMENT LEVELS, EMPLOYMENT STATUS, EQUATIONS, EXCLUSION RESTRICTION, EXPORTS, FACTOR PRICES, FOREIGN WORKERS, FORMAL EDUCATION, GDP, GDP PER CAPITA, GENERAL EQUILIBRIUM, HIGH SCHOOL EDUCATION, HUMAN CAPITAL, HUMAN RESOURCES, IMMIGRANT, IMMIGRANTS, IMMIGRATION, IMMIGRATION LEVELS, IMMIGRATION POLICIES, IMMIGRATION POLICY, IMMIGRATION SYSTEM, IMPERFECT SUBSTITUTES, INCOME, INNOVATION, INTERNAL MIGRATION, INTERNATIONAL CONFERENCE ON MIGRATION, INTERNATIONAL MIGRATION, INTERNATIONAL MIGRATION REVIEW, JOB CREATION, JOBS, LABOR COSTS, LABOR DEMAND, LABOR ECONOMICS, LABOR FORCE, LABOR MARKET IMPACT, LABOR MARKET INFORMATION, LABOR MARKET OUTCOMES, LABOR MOBILITY, LABOR MOVEMENTS, LABOR SHARE, LABOR SUPPLIES, LABOR SUPPLY, LABOUR, LABOUR FORCE, LEGAL IMMIGRATION, LEVEL OF EDUCATION, LEVELS OF EDUCATION, LOCAL LABOR MARKET, LOCAL LABOR MARKETS, MARGINAL PRODUCT, MARITAL STATUS, MINIMUM WAGE, NATIONAL GOVERNMENTS, NATIONAL LEVEL, NATIONAL LEVELS, NATIVE WORKERS, OCCUPATION, OCCUPATIONS, PERMANENT RESIDENCE, POLICY BRIEF, POLICY DISCUSSIONS, POLICY RESEARCH, POLICY RESEARCH WORKING PAPER, POLITICAL ECONOMY, POTENTIAL MIGRANTS, PRIMARY EDUCATION, PRIMARY SCHOOL, PRIMARY SCHOOL EDUCATION, PRODUCT QUALITY, PRODUCTION COSTS, PRODUCTION FUNCTION, PRODUCTION FUNCTIONS, PRODUCTIVITY, PROGRESS, REAL WAGES, RESPECT, RETIREMENT, SCALE EFFECT, SECONDARY EDUCATION, SECONDARY SCHOOL, SECONDARY SCHOOL EDUCATION, SERVICE INDUSTRIES, SERVICE SECTORS, SKILL GROUP, SKILL GROUPS, SKILL PREMIUM, SKILL PREMIUMS, SKILLED LABOR, SKILLED WORKERS, SPILLOVER, SPOUSE, SUBSTITUTE, SUBSTITUTION EFFECT, SUPPLY CURVE, SUPPLY ELASTICITY, TEMPORARY WORK, TOTAL EMPLOYMENT, TOTAL WAGE, TRANSPORTATION, UNEMPLOYED, UNITED NATIONS POPULATION DIVISION, VOCATIONAL TRAINING, WAGE BILL, WAGE DATA, WAGE DISTRIBUTION, WAGE EFFECTS, WAGE GAINS, WAGE IMPACT, WAGE INCREASES, WAGE LEVELS, WAR, WORKER, WORKERS, WORKFORCE, WORKING POPULATION,
Online Access:	http://documents.worldbank.org/curated/en/2014/06/19604274/immigrant-versus-natives-displacement-job-creation https://hdl.handle.net/10986/18788
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