compensation or retrenchment?—the paradox of immigration and public welfare spending in u.s....

Compensation or Retrenchment?—The Paradox of

Immigration and Public Welfare Spending in U.S. States

 Ping Xu

University of Rhode Island

Email: pingxu@uri.edu

Ping Xu University of Rhode Island 2015 SIRC @ Shanghai

Outline

• Research Question

• Previous Literature

• Theory and Hypotheses

• Data and Methods

• Findings and Implications

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Research Question

• How has immigration influenced public welfare spending in the US?

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Previous literature

4

Globalization compensation theory

Race/Ethnicity theory

Ping Xu University of Rhode Island 2015 SIRC @ Shanghai

Globalization compensation theory

• Globalization increased competition in labor market increased economic insecurity and risks vulnerable individuals demand more welfare spending (Stolper and Samuelson 1941; Cameron 1978; Garrett 1995; 1998).

• Immigrants job loss and reduced wages and salary for low-skill workers more welfare spending (Borjas 1994; 2004; Topel 1994)

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Race/Ethnicity theory

• Racial/ethnic diversity reduced solidarity due to out-group prejudice lower welfare support less generous welfare state (Gilens 1996; 1999; Alesina and Glaeser 2004; Bay and Pedersen 2006, etc.)

• Immigrants-led diversity lower welfare support less welfare spending (Eger 2010; Mau and Burkhardt 2012)

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Two Competing theories

Immigration Welfare Spending

•Compensation theory: +

•

Race/ethnicity theory: -

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Conditions for two theories

• Compensation theory: Unemployment

• Race/ethnicity theory: Welfare inclusion of immigrants

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When does which theory work?

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+

-Null

Null

Theory

{

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Immigration The American Welfare State

State context Labor market conditionImmigrant welfare policy

Ping Xu University of Rhode Island 2015 SIRC @ Shanghai

Data and methods (I)

• Methods– CSTS: American states 1996-2009

– Error Correction Models (ECMs) with Panel Corrected Standard Errors (PCSEs)

• Dependent variable– Public welfare spending as a % of gross state products

• Independent variables– % foreign-born population

– State unemployment rate

– State immigrant welfare inclusiveness

– Two-way and three-way interactions

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Data and methods (II)

• Controls– Political controls

• State government ideology

• Mass liberalism

• Union density

– Socioeconomic controls• % Black

• Female labor force participation

• Per capita growth

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Three-way Interaction Model

Ping Xu University of Rhode Island 2015 SIRC @ Shanghai

Interactive effect

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+

-Null

Null

Implications

•Immigration does influence the American welfare state.

•Applicability of “compensation” or “race/ethnicity” theory depends on state context (labor market, policy environment).

•The public is fairly rational (Page and Shapiro 1992).

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Questions?

Comments!

17Ping Xu University of Rhode Island 2015 SIRC @ Shanghai