Immigration and the receiving economy.

Abstract

This paper reviews theories about the impact of immigration on the receiving economy. It presents a critical overview of empirical evidence of immigrations impact on wages employment rates unemployment rates income growth and migration patterns in the US. The authors conclude that immigration does not have significant adverse effects on the receiving economy such as reducing employment rates of the US labor force. The studies that show a negative effect on natives wages overestimate the magnitude of the effect. The field of economics does not offer specific theories of immigration economics. The basic economic model for evaluating the impact of immigration involves models of supply and demand for labor services equilibrium price and quantity transactions. The net effect of unskilled immigration on the wages of skilled natives is ambiguous and depends upon the relative sizes of scale and substitution effects. Simple trade models indicate that wages prices and return to capital will be equalized across the world. Specific country resources of labor and capital determine which goods are exported or imported. Thus factor price equalization theory predicts that immigration will not have an effect on wages in receiving or sending countries. However this model makes a variety of questionable assumptions. The wage inequality empirical literature indicates an emphasis on time series variation to explain the rise in US wage inequality. Calculations overstate the effects of the absolute wage of the unskilled due to the rise in college graduate wage and data deficiencies.