Immigration Reform and Fiscal Policy (Job Market Paper)
Adjustments to U.S. immigration policy have the potential to reshape the demographic and skill composition of the U.S., both today and in the future. Shifts in demographics and skill composition will lead to changes in wages and ultimately net tax receipts. I quantify such shifts and calculate the potential welfare changes and fiscal consequences of different immigration policies. To do this I use a calibrated OLG model with heterogeneity in skills, the intergenerational transmission of their skills as well as fertility rates and the labor market outcomes of children by parents' country of origin. I find that moving to a merit-based immigration system can be welfare improving for U.S. workers both with and without a college education. This is a result which is driven in part by the positive fiscal externalities generated by skilled immigrants. In addition, I show that children of immigrants are quantitatively important when considering policy changes, as is the intergenerational transmission of skills. Finally, I show that if recent changes in the composition of immigrant arrivals continues it can alleviate the predicted pressures on public finances as a result of an aging U.S. population.
Work in Progress
The Welfare Effects of Redefining High Skill Immigration
It has been shown that immigration has had a negative effect on the wages of U.S. citizens, especially those without a college degree; consequently, policy debates have concentrated on how to increase ‘high skill’ immigration. In this paper, I model the complexities of such policies and understand different definitions of high skilled immigrants. Using recent research showing that that returns to immigrants’ human capital in the U.S. vary greatly by country of origin, I am able to more accurately to quantify the contribution of immigrants to production; furthermore, I estimate the elasticity of substitution between immigrants and U.S. citizens treating country of education, field of education and country of labor market experience into account. Using a shift share instrument based upon the past population of various immigrant country of origin-education groups I find that immigrants with a college degree or more are close to perfect substitutes with U.S. natives in production.
Are refugees different from economic immigrants? Revisited
Cortes (2004) finds that refugees that arrived in the U.S. between 1975 and 1980 on average work 20% fewer hours than other immigrants, while earning the same per hour. After 10 years this difference in average hours worked disappears with refugees working the same hours as other immigrants while continuing to earn the same per hour.
This paper updates this analysis to include cohorts of refugees that arrived in the U.S. between 1985 and 1990 as well as 1992-1997. This paper finds that refugees from the 1985 to 1990 cohort earn 2% more per hour and work the same hours as other immigrants. These similarities continue both 10 and 20 years after arrival. These results are in comparison to refugees who arrived in the 1990s who earn 7% and work 7% fewer hours than other immigrants.