The macroeconomics of immigration

Kiguchi, Takehiro and Mountford, Andrew (2013): The macroeconomics of immigration.

Abstract

Immigration has been a significant part of US population growth over recent decades, with the number of ``foreign born to non-US nationals" rising from approximately 10 million in 1970 to nearly 40 million or 12.9% of the US total population in 2010. In this paper, using a VAR with sign restriction identification, we find that unexpected increases in the working population lead to temporary reductions in GDP per capita and consumption per capita as would be predicted by the standard neoclassical growth model. However they do not lead to increases in non-residential investment or short run decreases in real wages as would also be predicted. The paper shows how a neoclassical growth model with a CES production function where migrant labor and capital are complements to skilled domestic labor and substitutes to each other can produce responses closer to those in the VAR. The paper thus provide support for the microeconometric studies on the impacts of immigration which found that immigrant labor is complementary to, rather than a substitute for, most native labor.

• Item Type: MPRA Paper
• Language: English
• Keywords: Macroeconomics, Immigration
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E26 - Informal Economy ; Underground Economy; F - International Economics > F2 - International Factor Movements and International Business

References

Auerbach, A., and Y. Gorodnichenko (2012). ``Fiscal Multipliers in Recession and Expansion," NBER Chapters, in: Fiscal Policy after the Financial Crisis National Bureau of Economic Research, Inc.

Brueckner, M., and E. Pappa (2012). ``Fiscal Expansions, Unemployment and Labor Force Participation," International Economic Review, Vol 53(4), 1205-1228.

Cahuc, P., and A. Zylberberg, (2004). Labor Economics, MIT Press.

Cantore, C., F. Ferroni, and M.A. Leon-Ledesma (2012). ``The dynamics of hours worked and technology," Banco de Espana Working Papers 1238, Banco de Espana.

Canova, F. (2007). Methods for Applied Macroeconomic Research, Princeton University Press.

Christiano, L., M. Eichenbaum, and C. Evans (2005), ``Nominal rigidities and the dynamic effects of a shock to monetary policy," it Journal of Political Economy, Vol. 113(1), 1-45.

Cociuba, S., E. Prescott, and A. Ueberfeldt (2009). ``U.S. Hours and Productivity Behavior Using CPS Hours worked Data: 1947-III to 2009-III,'' Mimeo.

Doepke, M., M. Hazan, and Y. Maoz (2012). ``The Baby Boom and World War II: A Macroeconomic Analysis.” Working paper Northwestern University.

Duenhaupt P. (2011). ``The Impact of Financialization on Income Distribution in the USA and Germany: A Proposal for a New Adjusted Wage Share," IMK working Paper, Hans Bockler Foundation.

Durand, J., D. Massey, and E. Parrado (1999). ``The New Era of Mexican Migration to the United States.” Journal of American History Vol. 86(2), 518-536.

Dustmann, C., T. Frattini, and I. P. Preston (2008). ``The Effect of Immigration along the Distribution of Wages," CReAM Discussion Paper No.03/08.

Gal\'{i} J. (2011). Unemployment Fluctuations and Stabilization Policies: A New Keynesian Perspective, Princeton University Press.

Heathcote, J., F. Perri, and G. L. Violante (2010). ``Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006'', Review of Economic Dynamics, Vol13(1), 15-51.

Kiguchi, T. (2013). ``Bargaining and Immigration in a Macro Model," Mimeo, Royal Holloway, University of London.

Lutkepohl, H. (2005). New Introduction to Multiple Time Series Analysis, Springer.

Manacorda, M., A. Manning, and J. Wadsworth (2012). ``The Impact of Immigration on the Structure of Wages: Theory and Evidence from Britain," Journal of the European Economic Association, Vol. 10(1), 120-151.

Mountford, A., and H. Uhlig (2009). ``What are the effects of fiscal policy shocks?." Journal of Applied Econometrics, Vol. 24(6), 960-992.

Ottaviano G. I. P., and G. Peri (2012). ``Rethinking the Effect of Immigration on Wages," Journal of the European Economic Association, Vol. 10(1), 152-197.

Piketty T., and E. Saez (2003). ``Income Inequality in the United States, 1913-1998," Quarterly Journal of Economics, Vol. 118(1), 1-39.

Piketty, T., and E. Saez (2006). ``The evolution of top incomes: A historical and international perspective," American Economic Review, Papers and Proceedings, Vol.96(2), 200-205.

Ramey, V. (2011). `` Identifying Government Spending Shocks: It's all in the Timing," Quarterly Journal of Economics, Vol. 126(1), 1-50.

Trabandt, M., and H. Uhlig (2011). ``The Laffer Curve Revisited," Journal of Monetary Economics, Vol. 58(4), 305–327.

Uhlig, H. (1999). ``A Toolkit for Analyzing Nonlinear Dynamic Stochastic Models Easily," In R. Marimon and A. Scott, editors Computational Methods for the Study of Dynamic Economies, 30-61.

Uhlig, H. (2005). ``What are the effects of monetary policy on output? Results from an agnostic identification procedure," Journal of Monetary Economics, Vol. 52(2), 381-419.

Uhlig, H. (2010). ``Some Fiscal Calculus," American Economic Review, Papers and Proceedings, American Economic Association, Vol. 100(2), 30-34.

Wadsworth, J. (2010). ``The UK Labour Market and Immigration," National Institute Economic Review, Vol. 213(1), 35-42.