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NBER WORKING PAPER SERIES
THE LABOR MARKET CONSEQUENCES OF REFUGEE SUPPLY SHOCKS
George J. BorjasJoan Monras
Working Paper 22656http://www.nber.org/papers/w22656
NATIONAL BUREAU OF ECONOMIC RESEARCH1050 Massachusetts Avenue
Cambridge, MA 02138September 2016
Borjas: Professor of Economics and Social Policy, Harvard Kennedy School; Research Associate, National Bureau of Economic Research; and Program Director, Program on Labor Mobility, IZA. Monras: Assistant Professor of Economics, CEMFI; and Research Affiliate, IZA. We are grateful to Andrea Ichino, Joan Llull, Jan Stuhler, and four referees for valuable comments on a previous draft of this paper. The paper was prepared for presentation at the 64th Panel Meeting of Economic Policy in October 2016 in Florence, Italy. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
© 2016 by George J. Borjas and Joan Monras. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
The Labor Market Consequences of Refugee Supply ShocksGeorge J. Borjas and Joan MonrasNBER Working Paper No. 22656September 2016JEL No. J23,J6
ABSTRACT
The continuing inflow of hundreds of thousands of refugees into many European countries has ignited much political controversy and raised questions that require a fuller understanding of the determinants and consequences of refugee supply shocks. This paper revisits four historical refugee shocks to document their labor market impact. Specifically, we examine: The influx of Marielitos into Miami in 1980; the influx of French repatriates and Algerian nationals into France at the end of the Algerian Independence War in 1962; the influx of Jewish émigrés into Israel after the collapse of the Soviet Union in the early 1990s; and the exodus of refugees from the former Yugoslavia during the long series of Balkan wars between 1991 and 2001. We use a common empirical approach, derived from factor demand theory, and publicly available data to measure the impact of these shocks. Despite the differences in the political forces that motivated the various flows, and in economic conditions across receiving countries, the evidence reveals a common thread that confirms key insights of the canonical model of a competitive labor market: Exogenous supply shocks adversely affect the labor market opportunities of competing natives in the receiving countries, and often have a favorable impact on complementary workers. In short, refugee flows can have large distributional consequences.
George J. BorjasHarvard Kennedy School79 JFK StreetCambridge, MA 02138and [email protected]
Joan MonrasCEMFICalle Casado del Alisal, 528014 [email protected]
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TheLaborMarketConsequencesofRefugeeSupplyShocks
GeorgeJ.BorjasandJoanMonras*
1.Introduction
TherecentinflowofhundredsofthousandsofSyrianrefugeesintomanyEuropean
countrieshasinevitablyrekindledinterestindocumentingthedeterminantsand
consequencesofsuch“refugeesupplyshocks.”AlthoughthewarinSyriastartedin2011,
andrefugeecampsformedintheareasoonthereafter,therefugeesinitiallymovedmainly
toLebanon,Jordan,andTurkey.AstheSyrianconflictcontinuedandescalated,however,
therefugeesbegantomovetoEuropethroughGreece,withalternateroutesquickly
emerginginHungary,Austria,andtheBalkans.Itisdifficulttoenumeratepreciselyjust
howmanyrefugeeshavealreadyenteredthecontinent,butmanynewsreportsclaimthat
over1millionasylumseekersarrivedinEuropeincalendaryear2015.
Thisinflowofrefugeeshasalreadygeneratedagreatdealofpoliticalconflictinall
thereceivingcountries,andhasexposedmajorfissuresintheeconomic,social,andcultural
fabricthatholdstogethertheEuropeanUnion.Muchofthecontroversysurroundsthe
long-termimplicationsoftheopen-doorpolicyimplicitinGermanPrimeMinister’sAngela
Merkel’sunilateralassertionthat“thefundamentalrighttoasylumforthepolitically
persecutedknowsnoupperlimit”(Alexe,2015).
ThefullconsequencesoftheepochaleventsnowreverberatingthroughoutEurope
willnotbeknownformanyyears(orperhapsevendecades).Nevertheless,thepersistent
influxoflargenumbersofrefugeesraisesfundamentalquestionsabouttheirimpactthat
encouragea“revisiting”ofotherrefugeesupplyshocksinothercountriesandatother
timestodetermineifthereareuniversallessonstobelearnedfromsuchshocks.
Thispaperprovidessucharevisiting.Despitetheobviousdifferencesinthefactors
thathavemotivatedrefugeeshocksthroughouthistory—includingthesizeandtimingof
*Borjas:ProfessorofEconomicsandSocialPolicy,HarvardKennedySchool;ResearchAssociate,
NationalBureauofEconomicResearch;andProgramDirector,ProgramonLaborMobility,IZA.Monras:AssistantProfessorofEconomics,CEMFI;andResearchAffiliate,IZA.WearegratefultoAndreaIchino,JoanLlull,JanStuhler,andfourrefereesforvaluablecommentsonapreviousdraftofthispaper.Thepaperwaspreparedforpresentationatthe64thPanelMeetingofEconomicPolicyinOctober2016inFlorence,Italy.
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theflows,thehumancapitaloftherefugees,andthecountriesandlocalitiesaffectedbythe
upheaval—thereareimportantsimilaritiesaswell,andthesesimilaritiescanhelpprovide
aunifyingframeworkforhowtothinkaboutthelabormarketconsequencesofcurrentor
futuresupplyshocks.
Almostbydefinition,refugeesupplyshocksareexogenousalonganumberof
importantdimensions.Thetimingofthesupplyshocktypicallyhaslittletodowith
economicconditionsinthereceivingcountries.Thesizeofthesupplyshockdependsat
leastpartlyonthecircumstancesthatcreatedtheexogenouspoliticalturmoil.Andtheskill
compositionoftherefugeesoftenhingeonthenatureofthepoliticalconflictthat
motivatedtheexodus.Insomecases,thesepoliticaleventsleadtoanoutflowofhigh-skill
workers,whileinothercasestheyleadtoanoutflowoflow-skillworkers.
Thepaperreexaminestheevidencesurroundingsomekeyhistoricalrefugeesupply
shocks.Inparticular,wedocumentthelabormarketconsequencesoffourdistinctshocks,
eachofwhichhasbeenanalyzedseparatelyinpreviousresearch:
(1)TheflowofCubanrefugeesintheMarielboatliftin1980,asupplyshockthat
affectedmainlythecityofMiami(Card,1990;Borjas,2016,2017;PeriandYasenov,2015).
(2)TheflowofrefugeesintoFrance,bothFrenchrepatriatesandAlgeriannationals,
thatfollowedtheconclusionoftheAlgerianWarofIndependencein1962(Hunt,1991).
(3)TheflowofJewishémigréstoIsraelfollowingthecollapseoftheSovietUnionin
theearly1990s(Friedberg,2001).
(4)TheflowofrefugeesintoseveralEuropeancountriesfromthelongYugoslav
Warsduringthe1990s(AngristandKugler,2003).
Table1summarizessomeoftheessentialdetailsthatcharacterizethesesupply
shocks.Thereareobviouslylargedifferencesinthenumberofrefugeesinvolved.The
Marielsupplyshock,forexample,involvedatotalofabout120,000refugees;theexodus
createdbytheYugoslavWarsinvolved250,000persons;theshockofSovietémigrésinto
Israelinvolvedalmost500,000refugees;andnearly1.5millionrefugeesenteredFrance
aftertheendoftheAlgerianconflict.Thedifferentshocksalsodifferedsubstantiallyinthe
skillcompositionoftherefugeepopulation.TheMarielshock,forinstance,consisted
mainlyofverylow-skillworkers,withmostofthemlackingahighschooleducation;the
SovietémigrésenteringIsraelweredisproportionatelyhigh-skill,withmostofthemhaving
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atleastacollegedegree;andtherefugeeflowexitingAlgeriaconsistedofbothextremes,
withmanylow-skillAlgeriannationalsandmanyatleastmoderatelyskilledFrench
repatriates.
Althougheachoftheseshockshasbeenexaminedindependentlyinpriorresearch,
ouranalysisdiffersinthreecrucialways.Theexistingstudies“pickandchoose”a
particularmethodologicalapproach,oftenbasedonthetypeofdataavailableoronthe
idiosyncraticcharacteristicsofaparticularshock,todocumenttheirimpact.Anobvious
problemwiththispiecemealapproachisthatitisuncleariftheempiricalfindingstruly
revealuniversalinsightsabouttheimpactofrefugeesupplyshocks,orinsteadreflectthe
factthataparticularresearcherchoseaparticularmethodologicalapproachtostudythe
impactofaparticularepisode.Putbluntly,arethefindingsdocumentedintheliterature
sensitivetothechoiceofmethodologicalapproachusedtoexaminetheimpactofa
particularsupplyshock?
Ouranalysisinsteadderivesasingleempiricalapproachbasedontheimplications
offactordemandtheory.Inprinciple,thismethodologicalapproachcanbeappliedto
measuretheconsequencesofanyrefugeesupplyshock.Thetheoreticalderivation
indicatesexactlythetypeofcorrelationbetweenlabormarketoutcomesandthenumberof
refugeesthatshouldbeestimatedinanyspecificcontext.Anditalsodelineatesprecisely
theconditionsunderwhichthatobservedcorrelationcanbeinterpretedasmeasuringa
causalimpactoftherefugee-inducedincreaseinthesupplyoflabor.
Second,ouranalysisplayscloseattentiontoisolatingtheparticulargroupsthatare
mostlikelytobeaffectedbyrefugeesupplyshocks.Asnotedearlier,thesupplyshocks
sometimesconsistofhigh-skillworkers,whileinothercasestheyconsistoflow-skill
workers.Oneimportantlessonfromourexaminationoftheevidenceisthattheadverse
labormarketimpactofrefugeesupplyshockscanonlybeproperlyestimatedwhenthe
analysiscloselymatchestheskillsoftherefugeeswiththoseofthenativeworkerswhoare
mostlikelycompetinginthesamelabormarket.
Equallyimportant,theemphasisontheskilldistributionsofnativeandofrefugees
impliesthatwecanalsoexaminetheimpactofthesupplyshocksonpotentially
complementarynativegroups.Forexample,thelow-skillMarielitosmayhavehada
beneficialimpactonthewageofhigh-skillMiamians,whilethehigh-skillSovietémigrés
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mayhavehadabeneficialimpactonlow-skillIsraelis.Thesepotentialcomplementarities
areobviouslyanimportantcomponentofanycompleteassessmentofthelabormarket
consequencesofrefugeesupplyshocks.Ouranalysisofthenaturalexperimentsgenerated
bythevarioussupplyshocksprovidesthefirstestimatesofthecross-effectsof
immigrationthatarebasedentirelyonobserveddataandarenotcontaminatedbyany
extraneousassumptionsaboutthefunctionalformoftheaggregateproductiontechnology.
Finally,ratherthanrelyonproprietaryorconfidentialdata,weusethepublicly
availablecensusesmaintainedatIPUMS.Althoughthesedataaresometimeslessthanideal,
theycanbeeasilyadaptedtomeasurethelabormarketconsequencesofrefugeesupply
shocksonbothcompetingandcomplementaryworkers.Inviewoftheverycontentious
policydebateovertheeconomicimpactofimmigration,theuseofpubliclyavailabledata
hasonenon-trivialimplication:Ourresultsarefullyreproducible.
Theempiricalanalysisreportedbelowusesthetheory-derivedempirical
specificationtoestimatetheimpactoftheMarielitos,oftheFrenchrepatriatesandAlgerian
nationalsmovingtoFrance,oftheflowofSovietémigrésintoIsrael,andoftherefugees
fromtheYugoslavwarsintoseveralEuropeancountries.Despitetheobviousdifferencesin
thehistoricaleventsthatweexamine,intheskillcompositionoftherefugees,andinthe
countriesandlocalitiesaffectedbytheshocks,theuseofaunifiedempiricalframeworkto
studyeachoftheepisodesrevealsacommonthread:Exogenousrefugeesupplyshocks
haveanadverseeffectonthelabormarketopportunitiesofcompetingnativesinthe
destinationcountries.Dependingontheepisodeandthedata,wedocumentthattheshock
sometimesreducesthewageofcompetingworkers;sometimesitreducestheir
employmentrates;andsometimesitreducesboth.Atthesametime,however,the
empiricalanalysisalsorevealsthatexogenoussupplyshocksoftenhaveabeneficialimpact
ontheemploymentopportunitiesofcomplementarynativeworkers.Inshort,refugee
supplyshockshavesizabledistributionalconsequencesinthelabormarketsofreceiving
countries.
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2.Framework
Itisinstructivetobeginthediscussionbyconsideringhowonewouldgoabout
estimatingthelabormarketimpactofimmigrationifonehadanidealempiricalsettingand
idealdata.Inparticular,supposethatthereceivingcountryhasacompetitivelabormarket
andthatvolatilepoliticalconditionsabroadrandomlygenerateaflowofrefugees.Itis
crucialtoemphasizethattherefugeesupplyshockisrandomalongallrelevantdimensions,
includingthetiming,thesizeandskillcompositionoftheflow,andtheeventualgeographic
sortingoftherefugeesinthereceivingcountry.
Theeconomyofthereceivingcountryiscomposedofrisolatedlabormarkets.
Theselabormarketscanbedefinedalonganumberofcharacteristicscommonlysharedby
groupsofworkers.Tofixideas,andbecausethisisthecontextmostoftenseeninthe
existingliterature,itisusefultothinkoftheindexrasindicatingaregionallabormarket
(althoughourdiscussioncanbeeasilyappliedtoalternativeclassifications,suchasan
occupation).Inthisidealsetting,workerscannotmovefromonelabormarketrtoanother
inresponsetoeithersupplyordemandshocks.Theproductiontechnologyinthefirms
populatingeachofthesemarketsusessdifferenttypesofworkersthataredefinedalong
anothercharacteristic,suchastheireducationalattainment.Pairs(r,s)oflabormarkets
andfactortypesdefineeachofthekdifferent“cells”inwhichthenationallabormarketcan
besubdividedandforwhichdataareavailable.
Wecanderiveastandardisoelasticlabordemandfunctionforeachofthesekcells
byassumingthatcompetitivefirmsmaximizeprofitsineachmarket.Priortotherefugee
supplyshock(t=0),thereareLrs0workersinregionrofskilltypes.Thepre-shockCES
aggregateproductionfunctionforregionrisgivenby:
(1) Qr0 = α s0Lrs0
δ
s∑⎡⎣⎢
⎤⎦⎥
1/δ
,
whereδ=(σ-1)/σ;andσistheelasticityofsubstitutionacrossworkertypes.Notethat
theweightsattachedtothevariousskillgroups(i.e.,theα’s)canvaryovertime,due
perhapstotechnologicalshiftsthatmayfavoroneskillgroupoveranother.
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Profitmaximizationimpliesthatwecanwritethewagepaidtoworkersincell(r,s)
att=0as:
(2) logwrs0 = logpr0 + logα s0 + η logQr0 − η logLrs0 ,
wherepr0isthepricelevelinregionrpriortothesupplyshock,andη(=1/σ)isthewage
elasticity.
ItisusefultothinkofthevariableLrs0asgivingthenumberofpre-existingworkers
incell(r,s)priortothesupplyshock.Forsimplicity,wewilloftenrefertothispre-existing
workforceas“natives,”butitshouldbeobviousthatLrs0couldpotentiallyincludeboth
native-andforeign-bornworkers.Intheshortrun,withthequantityofotherfactorsof
productionheldconstant,economictheorypredictsthatanincreaseinthesizeofthe
workforceinaparticularregion-skillcellreducesthe“own”wage.1Notealsothatwrs0,the
equilibriumwagepriortotherefugeesupplyshock,incorporatestheimpactofall
immigration-inducedsupplyshockspriortotherandompoliticalupheavalthatgenerates
thenewflowofrefugees.
Thelabormarketsinthereceivingcountryarethen“shocked”bythepolitical
upheavalabroad.ThisupheavalsendsaninfluxofMrsnewrefugeesintoeachregion-skill
cell.Wecanwritethepost-shockmarginalproductivityconditionas:
(3)
Thewagechangeobservedincell(r,s)asaresultoftherefugeesupplyshockcan
thenbewrittenas:
1Differentiatingequation(2)withrespecttoLrs0yields∂logwrs0/∂logLrs0=−(1−κs)/σ,whereκs
istheshareofincomeaccruingtoskillgroups.
logwrs1 = logpr1 + logα s1 + η logQr1 − η log(Lrs1 +Mrs ).
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(4)
Δ logwrs = Δ log pr + ηΔ logQr + Δ logα s − η log Lrs1 +Mrs
Lrs0,
= θr + θs − η log Lrs1(1+mrs )Lrs0
,
= θr + θs − η log Lrs1Lrs0
− η mrs ,
whereθr=Δlogpr+ΔlogQr,andiscapturedbyaregion-specificfixedeffect;θs=Δlogαs,
andiscapturedbyaskill-specificfixedeffect;andmrs=Mrs/Lrs1.2Notethatmrsgivesthe
relativesizeofthesupplyshock:thepercentincreaseinthenumberofworkersduetothe
entryofrefugeesintocell(r,s).
Inadditiontothefixedeffectsθrandθs,equation(4)hastworegressors.Not
surprisingly,thewagechangedependsontherefugeesupplyshock.Althoughthereis
muchconfusioninhowthissupplyshockshouldbemeasured(compare,forexample,
Borjas,2003;andCardandPeri,2016),themarginalproductivityconditionthatisthe
foundationofthetheory-basedempiricalapproachclearlyindicatesthatthemeasureof
thesupplyshockshouldgivethepercentbywhichimmigrantsincreasedthesizeofthe
workforce,withthebasebeingthenumberofnativeworkersinthepost-shockperiod.3
Equation(4)alsoshowsthatthewageincell(r,s)mayhavechangedbecausethe
numberofnativeworkersinthatlabormarketmighthaverisenorfallenbetweenthetwo
periods.Someofthechangeinthenumberofnativesmaybeduetodemographicfactors
thatareunrelatedtochangesineconomicconditionsduringtherelevantperiod,suchas
mortalityinthepre-existingworkforce,thelabormarketentryofworkersbornmany
yearsearlier,orseculartrendsintheskillmixofthenativepopulation.Butsomeofthe
changeinLrsmaybeendogenous,inducedbytherefugeesupplyshockitself.Inother
2Thederivationofequation(4)usestheapproximationlog(1+mrs)≈mrs,whichisappropriateas
longastherefugeesupplyshockis“small.”
3CardandPeri(2016)arguethatitispreferabletousethepre-shockperiodworkforceasbase(seealsoDustmannetal.,2016).Thebiasinducedbyanyparticularspecificationisrelatedtotheendogenouslaborsupplyresponseofthenatives.Wediscussthelaborsupplyresponseingreaterdetailbelow.
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words,theentryoftheMrsrefugeesmightgeneratealaborsupplyresponseinthenative
population.
Asastartingpoint,supposethatthechangeinthesupplyofpre-existingworkersis
exogenous,duetolong-termdemographicfactors.Wehavealreadyassumedthatthe
refugeesupplyshockis,bydefinition,exogenous.Thecorrectspecificationofaregression
modelthatestimatestheimpactoftherefugeesupplyshockwouldthenrelatethewage
changeinaparticularlabormarkettothepercentchangeinsupplyinthenative
populationandtothepercentchangeinsupplyattributabletotherefugees(aswellas
regionandskillfixedeffects).Thetwo“supply”regressorsshouldhaveidentical
coefficients,andthosecoefficients,asindicatedbyequation(4),shouldequalthewage
elasticityη.
3.StatisticalDifficulties
Itisobviousthatthereal-worlddatatypicallyavailabletomeasurehow
immigrationaffectslabormarketsdonotmeettheidealconditionsoftherefugeesupply
shockdiscussedabove.Althoughthetimingoftheshockmaybeindependentfrom
economicconditionsinthereceivingcountry,theactualnumberofrefugeesaswellastheir
distributionacrossthe(r,s)cellswillbeaffectedbythoseconditions.Afterall,onlythose
personswhohavethemosttogainbyleavingwillbetheoneslikelytoendupasrefugees.
Moreover,thoseself-selectedrefugeeswilltendtosettleinthoseregionsofthereceiving
countrythatofferthemostfavorableeconomicopportunities.
Nativeswillalsorespondtotherefugeesupplyshock.Theseresponsesimplythat
theregion-skillcellscannotbethoughtofasisolatedislands,andthatsupplyshocksthat
affectonecellhavespillovereffectsonothercells.Intheshortrun,forexample,native
workersorfirmsmightmovefromoneregionallabormarkettoanothertotakeadvantage
ofthechangesinthewagestructure.Inthelongrun,thedemographicvariablesthatmay
bethe“fundamentals”determiningendowmentsofeachfactorofproductionarenolonger
exogenous,asnativesmightpursueparticulartypesofhumancapitalinvestmentsand
avoidothers.
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Inadditiontotheseendogeneityissues,thereisameasurementprobleminherentin
thistypeofanalysisthatmightgeneratesubstantialbias:Theskillsthatrefugeesacquired
priortothepoliticalupheavalmightnotbeveryvaluabletoemployersinthereceiving
country.Inotherwords,someofthoseskillsmayevaporateduringthemove.Forinstance,
acollegedegreeacquiredabroadmightnothavethesame“knowledgecontent”asacollege
degreeacquiredinthereceivingcountry.Similarly,languagedifficultiesmightimposea
barrierformigrantswishingtoentercertainoccupations.Asaresult,theobservableskills
oftherefugees,asmeasuredbyyearsofeducationalattainmentorprofessionalcertificates,
provideerroneousinformationaboutwhichspecificfactorsofproductiontheyaretruly
competingwithorcomplementing.Thismeasurementerrorinthesizeofthesupplyshock
incell(r,s)will,ingeneral,biastheestimateofthewageelasticity.
Weusetheempiricalcounterpartofequation(4)toestimatethewageeffectsofthe
refugeesupplyshockandtodiscussvariousidentificationproblems.Ourbasicempirical
regressionspecificationisgivenby:4
(5) Δ logwrs = θr + θs − η log Lrs1Lrs0
− η mrs +εrs .
Itisobviousthatakeyrequirementforcorrectlyestimatingthewageelasticityηisthatthe
residualεrsbeindependentfromboththesizeoftherefugeesupplyshockandfromthe
sizeofthenativeresponse.Itiseasytoimaginemanyreal-worldsituationsinwhichsucha
restrictionwillfailtohold.
3.1Endogenousnativelaborsupply
Akeystatisticalproblemthataffectsestimatesofthewageelasticityarisesfromthe
endogeneityofnativelaborsupply.Remarkably,theexistingliteraturehas,atbest,only
superficiallyaddressedthebiasescreatedbythistypeofnativeresponse.5
4Itispossibletoextendthediscussionofthelaborsupplydecisionbytakingintoaccountthe
probabilityoffindingajob.Inthatcase,wecanderiveanequationsimilartoequation(5)fortheunemploymentrate;seetheappendixinMonras(2015b)forsuchaderivation.
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Theendogeneityofthechangeinnativelaborsupplyinaparticularregion-skillcell,
ΔlogLrs,canariseduetotwodistinctfactors.First,theamountoflaborthatnativepersons
alreadyparticipatinginthelabormarketwilloffertoemployerslikelydependsonthe
wage.Putdifferently,therefugeesupplyshockaffectsnativelaborsupplyattheintensive
margin.Second,thenumberofnativeswhochoosetooffertheirservicesinaparticular
labormarketwillrespondtochangesinthemarketwage,creatinganativeresponsetothe
refugeesupplyshockattheextensivemarginaswell.
Regardlessofwhichmarginwearereferringto,itiseasytoseehowendogenous
nativelaborsupplycontaminatesestimatesofthewageelasticitybytakingafirst-order
Taylor’sexpansionofthelogchangeinthesizeofthenativeworkforce.Equation(5)can
thenberewrittenas:
(5′) Δ logwrs = θr + θs − η Lrs1 − Lrs0Lrs1
− η mrs +εrs .
Wecanthenpositastandardmodelofthelaborsupplyresponseofnativesbywriting:
(6) Lrs1 − Lrs0Lrs1
= γ Mrs1
Lrs1+urs ,
wheretheparameterγmeasuresthenativelaborsupplyresponse.Iftherefugeesupply
shocklowersthemarketwage,thesupplyparameterγisunambiguouslynegativeaslong
asthesubstitutioneffectdominatestheincomeeffectintheneoclassicallaborsupply
framework.Inotherwords,astheentryofrefugeeslowersthepriceofleisure,notonlydo
fewernativeswork,butthosewhodoremainintheworkforceworkfewerhours.Wecan
substitutethelaborsupplyresponseinequation(6)toobtainthereducedform:
5Therearesomeexceptions.Forexample,Borjas(2003,TableIII)estimatesthewageimpactofimmigrationusingaregressionmodelthatincludesavariablegivingthenumberofnativeworkersintheskillgroup(whichisthendifferencedbyaddingappropriatefixedeffectstothemodel).However,thepropertiesofthewageelasticitiesresultingfromthisparticularspecificationhavenotbeenexaminedinthesubsequentliterature,despitethewidespreadadoptionofthe“skill-cell”approach.Similarly,Monras(2015a)includesthechangesinthelevelofregionalGDPandinnativelaborsuppliesofthevariousskillgroupsinhismainregressionspecification.
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(7) Δ logwrs = θr + θs − η (1+ γ ) mrs +εrs* .
Equation(7)showsthatifwesimplyexcludethechangeinthenative-born
workforcefromtheestimatedregressionmodel(asalmostallofstudiesintheexisting
empiricalliteraturedo),theregressioncoefficientthatrelateswagechangestothesupply
shockmeasuresanamalgamofthewageelasticityηandthelaborsupplyparameterγ.As
longas-1<γ<0,theOLSestimateofthefactorpriceelasticityisbiasedtowards0,
suggestingthattherefugeesupplyshockhadarelativelyweakimpactonwages.The
intuitionisobvious:thewageimpactoftherefugeesupplyshockisattenuatedbythefact
thatnativessuppliedlessworkefforttothelabormarket,andasaresulttherealsupply
shockwasnotaslargeasimpliedbymechanicallycalculatingthenumberofrefugees.
Equation(7)alsoillustratestheinterestingcasewherethedisplacementeffectisone-to-
one(orγ=−1).Thewagechangeincell(r,s)isthenuncorrelatedwiththerefugeesupply
shockbecausethe“complete”nativeresponseensuredthattherewasnosupplyshockto
speakof.
Itisworthnotingthatthemagnitudeofthesupplyparameterγ,whichdetermines
thesizeofthedownwardbiasinestimatesofthewageelasticity,dependsonhowthe
isolatedlabormarkets(r,s)aredefined.Forexample,Borjas,Freeman,andKatz(1997)
documentedthattheestimatedwageelasticityismorenegativethelargerthegeographic
sizeofthelabormarket(e.g.,statesasopposedtocities).Thisresultfollowseasilyfrom
equation(7)becauseitisprobablymorecostlytomoveacrossstatesthanacrosscities(i.e.,
γismorenegativethesmallerthegeographicarea).Similarly,insomecontextsitmaybe
sensibletodefinelabormarketsintermsofoccupations,ratherthanregions.Becauseit
maybemoredifficultfornativestoswitchoccupations(implyingγ isclosertozero),the
resultingbiasshouldberelativelysmall.
3.2Endogenousmigrantlocations
Apositivespuriouscorrelationbetweenεrsandmrsmayarisebecausemigrants
chooseinwhichlocalitiestosettleinthereceivingcountry.Supposethattherearetwo
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regionswheretherefugeescansettle;region1isthriving(i.e.,wagesaregrowingfast),
whileregion2isnot.Income-maximizingrefugeesarethenmorelikelytoendupinregion
1,creatingapositivecorrelationbetweenthechangeinthewageobservedincell(r,s)and
therefugeesupplyshock,andmakingitmoredifficulttodetectanypotentialwage
depressioncausedbythesupplyshockitself.
Thesearchforaninstrumentthatcorrectsforthisspecifictypeofendogeneity
dominatestheexistingdiscussionofthestatisticalproblemsthatarisewhenmeasuringthe
wageimpactofimmigration.BeginningwithAltonjiandCard(1991),thetypicalstudyuses
whathasbecomeknownasthe“migrationnetworks”instrument.Inparticular,Altonjiand
Cardproposedthataninstrumentformrscouldbethegeographicsortingofanearlier
waveofimmigrants,arguingthatthenewimmigrantswouldmostlikelyendupinthose
regionswheretheearlierimmigrantssettledbecausefamilynetworksreducethecostsof
migration.Iflabormarketconditionsinparticularareaswerenotverypersistentovertime,
thismeansthatnewmigrantsenterparticularregionsforreasonsthatareunrelatedto
currentlabormarketconditions.Themigrationnetworksinstrumenthasbeenrefined
(Card,2001)byconstructingamoresophisticatedlagbasedonnationalorigin:thenew
immigrantsfromcountryjaremorelikelytosettleinthosecitieswhereearlierwavesof
type-jimmigrantssettled.
Itiswidelyrecognizedthatusinga“laggedsupplyshock”asaninstrumentisinvalid
ifeconomicconditionsinlocallabormarketsareseriallycorrelated.Theinitialwavesof
type-jimmigrantschosetosettleinregionrforareason(includingfasterwagegrowth),
andifthisreasonpersistsovertime,theserialcorrelationviolatestheconditionthatthe
instrumentshouldbeindependentoftheerrorterminequation(5).
Althoughthemigrationnetworksinstrumentiswidelyusedintheliterature,very
fewstudiesexaminethevalidityofthezeroserialcorrelationassumption.Jaeger,Ruist,
andStuhler(2016)providearareandimportantexception,documentingthatthenon-zero
serialcorrelationactuallyfoundinreal-worldlocallabormarketsbadlycontaminatesIV
estimatesofthewageelasticity.TheJaeger-Ruist-Stuhlersolutiontotheserialcorrelation
problem,however,makesexactingdatademands,requiringthatweobservelocallabor
marketconditionsforaverylongspanoftimepriortothesupplyshock.Suchdataarenot
15
availableinthecontextoftherefugeesupplyshocksexaminedinthispaper.Instead,the
empiricalworkreportedbelowadoptstheapproachintroducedbyMonras(2015).He
arguesthatthecombinationofanetworksinstrumenttogetherwithasupplyshockthat
occurredattimetfortrulyexogenousreasons(combinedwithadequatecontrolsforthe
trendinlocaleconomicconditions)providesa“compromise”solutionthatcanhelpidentify
theeffectofmigrationeveninthepresenceofserialcorrelation.
Itisworthstressingthatthisparticularendogeneityissueremainsaconcernevenif
thecellsweredemarcatedbyoccupationratherthanregion.Theself-selectedrefugeeswill
likelyhaveskillsmarketableinoccupationsthatareinhighdemand,againcreatinga
spuriouspositivecorrelationbetweentheresidualinthewagegrowthregressionandthe
sizeoftherefugeesupplyshockinaparticularmarket,andbiasingtheestimateofη
towardszero.Wewilluseananalogous“employmentnetworks”logictoconstructan
instrumentinthiscontext,arguingthatthecostsofenteringanoccupationforanew
immigrantarelikelytobelowerwhenthatoccupationhasalreadybeenpenetratedby
theircompatriots.Thecompatriotscanprovidevaluable(andcheap)informationaboutjob
opportunitiesinparticularsectorsofthelabormarket.Theempiricalanalysisreported
belowusesthisalternativeapproachwhenanalyzingtheIsraelilabormarket,wherethe
smallgeographicsizeofthecountryseverelyhamperstheuseofgeographicvariation.
3.3Downgradingofimmigrantskills
Aparticularlychallengingmeasurementproblemariseswhenthepre-migration
skillsofimmigrantsarenotagoodpredictorofthegroupofnativeworkerswithwhom
theywillcompeteinthereceivingcountry.Forexample,someofthetrainingthatthe
eventualrefugeesacquiredpriortothemoveisspecifictothecountryoforigin,inevitably
leadingtoareductioninthestockofhumancapitalthatismarketableinthepost-
migrationperiod.Asaresult,theobservationthataparticularrefugeesupplyshock
containedmanyhigh-skillworkers“onpaper”doesnotnecessarilyimplythatitisthehigh-
skillnativeswhowillbeadverselyaffectedbythisshock.AsdemonstratedinDustmann,
Frattini,andPreston(2013),theclassificationissuesraisedbythistypeof“skill-
downgrading”cancontaminateestimatesofthewageimpactofimmigration.
16
Itiseasytodeterminethenatureofthebiasbyconsideringthegenericregression
modelthatallocatesimmigrantsandnativestospecificregion-skillcells.Tosimplifythe
discussion,supposethatthepre-existingsizeoftheworkforceremainsconstantafterthe
refugeesupplyshockandthattherearetwotypesofworkersineachofrregionallabor
markets:high-skill(h)andlow-skill(u).6Thedata,therefore,consistoftwoobservationsin
eachofrlocations.Equation(5)thenimpliesthatthewagechangeforeachofthetwo
typesofworkersisgivenby:7
(8a) Δ logwrh = θ− ηMrh
Lrh1+erh ,
(8b) Δ logwru = θ− ηMru
Lru1+eru .
Ifthepre-migrationskillsofgrouphsurvivedthemovetothereceivingcountry,
equations(8a)and(8b)wouldcorrectlyspecifytheregressionmodelthatestimatesthe
wageelasticityη.Suppose,however,thatafractionπofthehigh-skillrefugees“lose”their
skillsduringthemove.8Thetrueregressionmodelthatwouldcorrectlyestimatethewage
impactofimmigrationisthengivenby:
(9a) Δ logwrh = θ− η (1− π)Mrh
Lrh1+erh ,
6Thederivationofthebiaswouldbeunaffectedifweallowedforchangesinnativelaborsupplyby
usingthereducedformspecificationinequation(7)andreinterpretingtheestimateofthewageelasticityasonethatnetsoutthelaborsupplyresponse.
7Tosimplifythediscussion,supposethatthewagegrowthhasbeendeflatedbytheobservedwagegrowthobservedforeachregionandforeachskillgroup,sothattheregressionneednotincludethevectorsoffixedeffectsθrandθs.
8Moregenerally,wecanthinkofLasgivingthenumberofefficiencyunitsofaparticulargroupofpre-existingworkers,andπwouldbetherateatwhichtheefficiencyunitsdepreciateafterthemove.
17
(9b) Δ logwru = θ− ηMru + πMrh
Lru1+eru .
Notethatequations(9a)and(9b)correctlymeasurethesizeoftherefugeesupplyshock
affectingeachcellafterweaccountfortheskilldowngrading.
Byalgebraicallymanipulatingequations(9a)and(9b),wecanthenrewritethetrue
regressionmodelas:
(10a) Δ logwrh = θ− ηMrh
Lrh1−ηπ −Mrh
Lrh1+erh ,
(10b) Δ logwru = θ− ηMru
Lru1− ηπMrh
Lru1+eru .
Bycomparingequations(8a)and(8b)withequations(10a)and(10b),itiseasyto
seethatthedowngradingofskills,andtheresultingmeasurementerrorinthesizeofthe
supplyshock,effectivelyaddsaregressortothegenericregressionmodel.Thisadditional
regressortakesonavalueof(−Mrh/Lrh1)forthehigh-skilllabormarkets,and(Mrh/Lru1)for
thelow-skilllabormarkets.Thecoefficientofthisadditionalregressorwouldequal−ηπ.
Putdifferently,thebiasintroducedbyunobservedskilldowngradingcanbeeasily
reinterpretedasanomittedvariablebias,soitshouldberelativelysimpletodeterminethe
directionofthebias.Astraightforwardapplicationoftheomitted-variablebiasformula
(seetheAppendix)showsthattheOLScoefficientoftherefugeesupplyshockvariable
resultingfromestimatingthemisspecifiedmodelinequations(8a)and(8b)is:9
(10) plim η̂ = η− ηπ σh2
σh2 +σu
2 1−ρhuσu
σh
⎡
⎣⎢
⎤
⎦⎥,
9Thederivationofequation(10)assumesthatthenativeworkforceisequallysplitbetweenhigh-
andlow-skillworkers.
18
whereσ s2 isthevarianceinthemeasureofthesupplyshockfortypesworkersacross
markets;andρhuisthecorrelationbetweenthehigh-skillandthelow-skillsupplyshocks.
Equation(10)impliesthatiftherefugeesupplyshockhadnoeffectonwages(so
thatη =0),themisclassificationofsomehigh-skillimmigrantsintolow-skillcellsdoesnot
generateanybias.TheOLScoefficientmeasuringthewageelasticitywillstillbezero.
Ifthetruewageelasticityηisnegative,however,skilldowngradingbiasesthe
estimatedwageelasticity,andthenatureofthebiasobviouslydependsonhowthehigh-
andlow-skillsupplyshocksaredistributedacrossmarkets.Oneparticularlyinteresting
specialcaseariseswhenthesupplyshocksforhigh-skillandlow-skillworkersareequally
spreadout(sothatσh2 = σu
2 ).Itistheneasytoshowthatthewageelasticityisbiased
towardszeroregardlessofthevalueofρhu.Anotherinterestingspecialcaseoccurswhen
thecorrelationρhuequalszero,sothat(roughly)thecitieswherehigh-skillrefugeesendup
providenoinformationaboutwherethelow-skillrefugeessettle.Itisobviousfrom
equation(10)thattheestimatedwageelasticitywillagainbebiasedtowardszero.
3.4Complementaritiesacrossskillgroups
Uptothispoint,ourdiscussionhasfocusedonestimatingtheimpactofarefugee
supplyshockinaparticularregion-skillcellonthewageofnativeswhobelongtothatsame
region-skillcell—inotherwords,theidentificationofthe“own”wageeffectofimmigration.
Wehaveshownthat,undercertainconditions,thefunctionalformassumptionofan
aggregateCESproductionfunctioninaregionallabormarketproducesaverysimple
regressionmodelthatidentifiestheownwageeffectbyrelatingthewagechangeobserved
inaparticularcelltotherefugeesupplyshockinthatcell,evenwhileignoringthechanges
thatmighthaveoccurredinthequantitiesofotherfactorinputs.Thisregressionmodelhas
becomethedefactogenericregressionintheliterature(althoughitisnotoftenlinkedtoa
factordemandtheoreticalframework).
Theentryoftherefugeesintoaparticularskillgroupobviouslyhasramificationsfor
thewagesofworkersinotherskillgroups,andafullaccountingoftheimpactofthesupply
shockwouldrequiredocumentingnotjusttheownwageeffectofimmigration,butthe
“crosseffects”aswell.Becausethenumberofpotentialcross-effectsexplodesasthe
19
numberofskillgroupsincreases,theexistingliterature,includingboththeearlyworkof
Grossman(1980)andtheframeworkintroducedinBorjas(2003),reducesdimensionality
byexploitingpropertiesoffunctionalformassumptionsabouttheproductiontechnology.
Forexample,Borjas(2003)classifiesworkersinto32skillgroups(foureducationgroups
andeightexperiencegroups).Ifcapitalisalsoafactorinput,therearethenapotential
1,089wageeffectsthatneedtobeestimated.TheimpositionofanestedCESframeworkon
thedata,wherevariousskillgroupsareaggregatedintoefficiencyunits,leadstoa
remarkablereductioninthenumberofprimitiveparameters(i.e.,theelasticitiesof
substitution).InBorjas(2003),onlythreedistinctelasticitiesofsubstitutionaresufficient
toderiveall1,089potentialown-andcross-wageeffects.
Thisreductionintheparameterspace,however,obviouslycomesatgreatcost.
Specifically,thenestedCESframeworkgreatlylimitsthetypesofcross-group
complementaritiesthatareallowable.Moreover,thefunctionalformassumptions
introducenumericalconstraintsonthevalueofthewageeffects.Forexample,aconstant
returnstoscaleaggregateproductionfunctionthathascapitalandlaborefficiencyunitsas
inputsmustimplythatthelong-runwageeffectofimmigrationaveragedacrossallskill
groupsisidenticallyequaltozero.Thisnumericalconstraintthencascadesovertoallother
wageeffectsestimatedinsuchaframework,raisingquestionsaboutwhethertheresults
accuratelyreflecttheunderlyingdataandgreatlyreducingtheirvalueforpolicyanalysis.
Tominimizetheinfluenceofsuchextraneousassumptionsontheestimatedcross-
effectsofimmigration,weonlyassumetheexistenceofageneralizedproductionfunction.
Tosimplifytheexposition,weconsideraproductionfunctionwithtwoinputs,F(Lrh,Lru),
whereLrhgivesthenumberofhigh-skillworkersinregionr,andLrugivesthe
correspondingnumberoflow-skillworkers.10TheproductionfunctionFhasthetypical
properties(i.e.,concave,twicedifferentiable,etc.).Ifwesetthepricelevelasthenumeraire,
wecanthenwriteageneralcharacterizationofwhathappenstowagesinregionrandskill
groups(s=h,u)as:
10Assumingmoreworkertypesintroducesmoreregressorsintotheregressionmodel,butdoesnot
changethenatureoftheempiricalanalysis.
20
(11) Δ logwrs = α shΔ logLrh +α suΔ logLru .
whereαsjgivesthefactorpriceelasticitydefinedby∂logwrs/∂logLrj.11
Insteadofimposingfunctionalformassumptionsontheproductiontechnology,we
exploitthefactthattherefugeesinmanyofthehistoricalepisodesexaminedinthispaper
wereoftenconcentratedinoneparticularskillgroup.Low-skillrefugesmadeupavery
largefractionoftheMarielitosinMiamiandoftheAlgeriannationalsmovingtoFrance,
whilecollegegraduatesdominatedtheinfluxofSovietémigrésinIsrael.Toeasilyillustrate
ourapproach,supposethatweconsideranepisodewhereallrefugeesbelongtothelow-
skillgroup.Wecanthenrewriteequation(11)as:
(12) Δ logwrs = α shΔ logLrh +α suΔ logLru +α sumru ,
wheretheΔlogLrsvariablesarenowinterpretedasthechangeinthenumberofnative
workersincell(r,s);andmru=Mru/Lru1,themeasureoftherefugeesupplyshock.
Wecanthenestimateequation(12)separatelyforeachskillgroup.This
methodologicalapproachessentiallyexploitsthenaturalexperimentcreatedbythe
refugeesupplyshocktomeasurenotonlytheownwageeffect,butalsothecrosseffects.
Putdifferently,thecross-effectsareidentifiedbyrelyingontheexogenousnatureof
refugeesupplyshocksandonthehistoricalconcentrationoftherefugeesinaverysmall
numberofskillgroups.Thecrosseffectisgivenbythecoefficientthatrelatesthelabor
marketoutcomesofskillgroupsuntouched(atleastdirectly)bytherefugeestothe
measureofthesupplyshockintheskillgroupthatwasmostdirectlyaffectedbythe
politicalupheaval.
11Asimplederivationof(11)startswiththefactthatthemarginalproductivitycondition(say,for
high-skillworkers)iswrh = Fh (Lrh ,Lru ) .Totallydifferentiatingthefirst-orderconditionyields:dwrh = FhhdLrh + FhudLru . Equation(11)thenfollowseasilyfromthisdifferential,wherethefactorprice
elasticityα ij = κ icij ;κiistheshareofincomeaccruingtoskillgroupi;andcijistheelasticityofcomplementarity(cij=FijF/FiFj)betweengroupsiandj.
21
Itisimportanttore-emphasizethatthisapproachdoesnotimposeanyconstraints
onthepotentialvalueofthecross-effects.Infact,wecanevenuseequation(12)tore-
estimatetheown-effectwithoutimposingtheaggregateCESfunctionalformrestriction
usedtoderiveequation(5).Theregressionimpliedbyequation(12),therefore,effectively
letsthedatadecidewhatimpactrefugeeshadontheearningsofallnativegroups.
3.5Otherproblems
Inanideal(fromaresearcher’spointofview)supplyshock,themigrantswouldbe
randomlyselectedfromthepopulationofthesendingcountry.However,itishardlyever
thecasethatmigrantsarearandomsampleofthatpopulation.Forexample,Fernandez-
Huertas(2011)documentsthatMexicanworkersmovingtotheUnitedStatestendtobe
lessskilledthantheMexicanworkerswhochoosetoremainbehind.Althoughthistypeof
selectionmaybeduetoavarietyoffactors,Borjas(1987)showshowdifferencesinthe
returnstoskillsbetweenthesendingandreceivingcountriescansystematicallygenerate
variouspatternsofselection.
Eveninthecontextofexogenousrefugeesupplyshocks,thepoliticalchangeinthe
sendingcountryinevitablyaffectsdifferenttypesofpeopledifferently.Thosewhobenefit
fromthenewregimewillbemorelikelytostaybehind,whilethosewholosewillhave
greaterincentivestobecomerefugees.Forexample,aCommunisttakeover“taxes”the
economicwellbeingofentrepreneurs.Ifthereceivingcountryvaluesthosetypesofskills,
theself-selectionoftherefugeescreatesaspuriouspositivecorrelationbetweenthe
residualεrsinequation(5)andtheshareofrefugeesenteringthosemarkets,mrs.This
positivecorrelationwouldfurtherattenuatetheestimateofthewageelasticityη.Although
itisrecognizedthattheself-selectionofimmigrantscontaminatesthemeasuredwage
impactofimmigration,therehavenotbeenanystudiesthatattempttoquantifythisbias.
Inaddition,thesupplyshockmightgenerate“generalequilibrium”effectsbecause
therefugeesmightinfluencetheaveragelevelofproductivityintheaggregateeconomy.
Onesucheffectthathasreceivedsomeattentionisthepossibilitythatsomeimmigrants,
andparticularlyhigh-skillimmigrants,bringnewideasandknowledgethatexpandthe
productionfrontier.Specifically,thehigh-skillimmigrantsnotonlyintroduceincreased
22
competitionwithhigh-skillnatives,butalsocreateknowledgespilloversthatincreasethe
productivityofallotherworkersintheprocess.
Unfortunately,thetypicalattempttoestimatetheimpactofsupplyshocksonthe
averagewagelevelinareceivingcountryhasagainreliedonextraneousfunctionalform
assumptionsabouttheproductiontechnology.Thisapproachbuildsinanumericalanswer
forthegeneralequilibriumwageeffects.Intheabsenceofproductivityspillovers,for
example,iftheaggregateproductionfunctionwereCobb-Douglas,theelasticityrelatingthe
averagewageleveltothesizeoftheworkforcemustequal(thenegativeof)capital’sshare
ofincomeintheshortrunandzerointhelongrun.
Therelianceonfunctionalformassumptionstoquantifythegeneralequilibrium
effectsisnotsurprising.Theestimationoftheseaggregateeffectsfromactualdataraises
extremelydifficultchallenges.Howexactlywouldoneestimatetheimpactofasupply
shockontheaveragewagelevelfromavailabledata?Supposethatweobservethata
countryreceivingmorerefugeesisdoingbetterpost-shockthanitwaspre-shock.Isthis
duetowhatmigrantsbringtothereceivingcountry,orisitpossiblethatthereareother
unobservedfactors,unrelatedtoimmigration,thataredeterminingeconomicgrowthin
thatcountry?Makingbefore-and-aftercomparisonsintheaveragewageofacountry
providesverylittleinformationabouthowtherefugeesupplyshockaffectedtheoverall
levelofeconomicactivity.
Insum,ourdiscussionshowstheimportanceofthinkingcarefullyaboutboththe
underlyingtheoreticalmodelandthestatisticalproblemscreatedbyreal-worldsupply
shockswhenweattempttomeasurethelabormarketimpactofimmigration.Inonesense,
themeasurementofthewageimpactofrefugeesupplyshocksisatrivialexercise.The
canonicalmodelofsupplyanddemand,whichisfundamentaltoourunderstandingofhow
real-worldlabormarketswork,predictsthattherefugeeswillobviouslylowerthewageof
competingnativeworkersintheshortrun.Toconductyetanotherstudydocumentingthat
labordemandcurvesaredownwardsloping,therefore,wouldseemtobearather
pedestrianexercise.
Itturnsout,however,thatmeasuringtheelasticityofwageswithrespecttomigrant
inflowsintroducesthornymeasurementandstatisticalproblemsthathaveyettobefully
resolved.Infact,laboreconomistshavedevotedadisproportionateamountoftimeand
23
effortinthepastthreedecadestodocumentwhatis,intheend,atrivialempiricalfinding.
Theresultingconfusion(andsometimesobfuscation)intheliteraturehasnotbeena
productivecontributiontotheimmigrationpolicydebate.
Theexaminationofrefugeesupplyshocks—whicharetrulyexogenousonatleast
somedimensions—canperhapshelpclarifyandincreaseourunderstandingofhow
immigrationaffectsreal-worldlabormarkets.Thereal-worldconditionsthatgenerate
refugeesupplyshockswillalmostneverreplicatetheidealizedconditionsthatleadtothe
genericempiricalapproachthatiswidelyusedintheliterature.Aswehaveseen,however,
manyofthestatisticalproblemscreatedbyreal-worldcircumstancestendtobias
estimatesofthewageimpactofimmigrationinthesamedirection:attenuatingthe
negativewageeffectpredictedbyfactordemandtheory.
4.Mariel
OnApril20,1980,FidelCastrodeclaredthatCubannationalswishingtoemigrate
couldleavefreelyfromtheportofMariel.Cuban-AmericanslivingintheUnitedStates
quicklyorganizedaboatlifttobringtheirrelatives.ThefirstmigrantsarrivedonApril23,
andover100,000hadtakenadvantageofCastro’sinvitationbyJune3.Bythetimethe
boatliftendedthroughanagreementbetweentheUSandCubangovernmentsinOctober
1980,about125,000CubanshadmovedandMiami’sworkforcehadgrownbyabout8
percent.TheMarielitosweredisproportionatelylow-skill,withmostlackingahighschool
diploma.TheMarielsupplyshockincreasedthesizeofthislow-skillworkforceinMiamiby
nearly20percent.
WebeginourempiricalanalysisofrefugeesupplyshocksbyreexaminingtheMariel
datafromtheperspectiveofthefactordemandframeworkintroducedearlier.TheMariel
contextplaysaprominentroleintheliteraturethatexaminesthewageimpactof
immigration.Card’s(1990)landmarkstudyofthisparticularsupplyshockwasapioneerin
thenow-commonapproachofexaminingoutcomesfromnaturalexperimentstomeasure
parametersofgreatpolicyinterest.
TheCardstudylookedatlabormarketconditions,includingwagesand
unemployment,inMiamiintheyearsbeforeandafterMariel,andcomparedthechangein
24
thosevariablestowhatwashappeningincomparablecitiesthatwerepresumably
unaffectedbytherefugees.Surprisingly,thiscomparisonindicatedthattherelativewage
fortheaverageworkerinMiamiremainedunchanged,leadingCardtoconcludethateven
sizablesupplyshockshadlittleeffectonthepriceoflaborintheaffectedmarkets.
TherehasbeenaflurryofrenewedinterestintheMarielsupplyshockinthepast
year,sparkedbytheBorjas(2017)reappraisaloftheMarielevidence.12Usingakeylesson
fromthevoluminousresearchinthepasttwodecadesonthelabormarketimpactof
immigration,BorjasarguedthatitiscrucialtostudytheimpactoftheMarielitosby
focusingspecificallyontheearningsoftheworkersmostlikelytobeaffectedbythesupply
shock—namely,thelow-skillworkforce.Itturnsoutthatthecomparisonoflow-skillwages
inMiamiandvariouscontrolcitiesbeforeandafterMarieloverturnstheperceptionthat
Marielhadanegligibleeffect,showinginsteadthattherelativeearningsofmalehigh
schooldropoutsinMiamifellandthatthemagnitudeofthewagedropwassubstantial.
4.1SummaryStatistics
Table2summarizestheavailabledataonthesizeandskillcompositionofthe
Marielsupplyshock.TheCubanrefugeesbegantoarriveonlyafewweeksafterthe1980
decennialcensuswasconducted,sothatthefirstenumerationoftheMarielitosinlarge-
scalesurveyswasnotdoneuntil1990.Specifically,the1990censusreportsthenumberof
12SeePeriandYasenov(2015)andBorjas(2016).Theempiricaldebatehingesonwhetherwomen
andnon-CubanHispanicsshouldbeincludedinthesamplewhencalculatingtheaveragewageinalocallabormarket.Borjas(2016)notesthattheinclusionofwomenisproblematicbecausethefemalelaborforceparticipationratewasrisingrapidlyinthe1980s,anditgrewdifferentiallyindifferentmetropolitanareas.Theinclusionofwomentheninevitablychangesthesamplecompositionovertime,contaminatingwagetrends.Similarly,nearlyhalfoftheadditionalobservationsthatwouldbeaddedbyincludingnon-CubanHispanicsinthesampleareofimmigrantswhoarrivedafterMariel,againchangingthesamplecompositionandcontaminatingwagetrendsinlocallabormarkets.Finally,theoriginaldraftofthePeriandYasenov(2015)studyexaminedasampleofworkersaged16-61withoutanycontrolsforwhetheraparticularpersonwasenrolledinschool.Thisledtotheerroneousclassificationofhighschoolstudentsaged16-18as“highschooldropouts”becausethosestudentshadnotyetreceivedtheirhighschooldiploma.ItisworthnotingthatthepossibilitythatCard’sevidencedoesnotcorrectlyconveywhathappenedtothelow-skilllabormarketinMiamiwasfirstnotedintheonlineappendixofMonras(2014),whichexaminedwagetrendsinthepooledsampleofhighschooldropoutsandhighschoolgraduatesanddocumentedarelativedeclineinthewageofMiami’slow-skillworkforce.
25
Cuban-bornpersonswhomovedtotheUnitedStatesduringtheyears1980or1981.13We
definethisgrouptobethepopulationofrefugeesresultingfromtheMarielsupplyshock.
The1990censusenumerated120,605suchimmigrants.Thatcensusalsoreports
thegeographiclocationoftherefugeesasof1985,with69.4thousandoftheMarielitos(or
almost60percent)livinginMiamifiveyearsaftertheshock.Notethatalthoughallexisting
studiesoftheimpactoftheMarielsupplyshockfocusonlabormarketoutcomesinthe
Miamimetropolitanarearelativetosomesetofplacebocities,40percentoftheMarielitos
werelivingoutsidetheMiamiareawithin5yearsaftertheshock.Themainalternative
locationswereNewYorkCity(whichhoused13percentoftherefugees),LosAngeles(7
percent),andTampa(3percent).14
TheregressionframeworkderivedearlierallowsfortheMarielitostohavean
impactoncitiesotherthanMiami.Thisfactmarksonekeydistinctionbetweenour
regression-basedapproachandthetreated-untreateddifference-in-differences
methodologyemployedinboththeCard(1990)andBorjas(2017)studies.Wediscussthe
implicationsofthismethodologicaldistinctioningreaterdetailbelow.
Table2alsoconfirmstheinsightthatmotivatedtheBorjas(2017)reappraisal.The
Marielsupplyshockwascomposedofdisproportionatelylow-skillworkers.Over60
percentoftherefugeeslackedahighschooldiploma,ascomparedtoonly20percentofthe
native-bornworkforceinMiami.Incontrast,only7percentoftheMarielitoshadacollege
diploma,ascomparedtoover25percentofnativeworkers.Asaresult,eventhoughthe
MarielitosincreasedMiami’spopulationbyonly8percent,theyincreasedthenumberof
maleworkerswithoutahighschooldiplomaby32percent.
13Thedatafromlatersurveys,includingthe2000decennialcensus,indicatethatthenumberof
Cubanimmigrantswhoarrivedin1981isrelativelysmall,sothatthisdefinitionoftheMarielitosshouldnotcreatesubstantialmeasurementerror;seethedetaileddiscussioninBorjas(2017).
14Weidentifythe1985locationsfromthe1990censusdatabothbecauseofthelargersamplesizeofthedecennialcensusandbecausethecensusspecificallyidentifiespersonsborninCuba(asopposedtohavingCubanancestry,whichistheonlyinformationavailableintheCPS).Tofurtherincreasetheprecisionofourmeasureofthesupplyshock,weremoveotherimmigrantsarrivingintheUnitedStatesbetween1980and1985fromthebasepopulationineachcell.Specifically,wemeasuremrs = Crs1 / (Lrs1 − Crs1 − Irs1 ), whereCrsgivesthenumberofMarielitosincell(r,s);Irsgivesthenumberof“other”immigrantswhoarrivedin1980-85;andLrs1givesthesizeofthecellin1985.Theregressionresultsarealmostidenticalifwedonotexcludetheotherimmigrantsfromthebase.
26
ThebottompanelofTable2reportstherateofwagegrowthduringtherelevant
periodforeacheducationgroup,bothinMiamiandoutsideMiami.WeusetheMarchCPS
datatocalculatethepre-andpost-Marielaveragelogwageinasampleofnon-Hispanic
menaged25-59.15Wepoolworkerswhoreportedearningsdataincalendaryears1977-79
tocalculatetheaveragepre-Marielwage,andpooldataforcalendaryears1981-84to
calculatethepost-Marielwage.Wedonotuseearningsdatafromthe1980calendaryear
becausetheMarielitosarrivedtowardsthemiddleofthatyear.
Thesummarystatisticsreportedinthebottompanelofthetableshowsthattherate
ofwagegrowthforhighschooldropoutswasfarlowerinMiamithanoutsideMiami.
Interestingly,thetablealsoshowsthattherateofwagegrowthforhighschoolgraduates,a
groupwhosesizewasonlyincreasedmodestlybytheMarielitos,isnoticeablyhigherin
MiamithanoutsideMiami.Similarly,theunemploymentrateofhigh-skillworkers
decreasedinMiami,whileincreasingintherestofthecountry.Thesepatternshintatthe
possibilitythatrefugeesupplyshocksgeneratenotonlyadverseownwageeffects,butalso
improvelabormarketconditionsforcomplementaryworkers,aresultthatwasoverlooked
inearlierstudies.
4.2Results
Weinitiallyusetheregressionmodelsderivedinequations(5)and(7)toidentify
theowneffectsoftheMarielsupplyshock.Theanalysisusesthesampleof38metropolitan
areas,includingMiami,whichcanbeconsistentlymatchedoverthe1977-1984period.16
Weclassifyworkersintofoureducationgroups:highschooldropouts,highschool
graduates,somecollege,andcollegegraduates.17Weexaminethelabormarketoutcomes
ofnon-Hispanicmenaged25-59,agroupthatapproximatestheprime-agenative-born
15Ourempiricalanalysisofallfourrefugeeepisodesfocusesonexamininglabormarketoutcomesforprime-agemen.Thisisthegroupofworkersmostattachedtothelabormarket,sothatwageandemploymenttrendsarelesslikelytobecontaminatedbychangesinsamplecomposition.
16Weusetheaggregated3-digitversionofthemetareavariableintheIPUMSfiles(ratherthanthe4-digitversionthatwouldgenerateasampleof44metropolitanareas)toavoidincludingintheanalysislocallabormarketsthathaveveryfewobservations.
17Theunitofobservationthatdefinesamarketcouldbefurtherrefinedtoacity-education-agecell.Suchadefinition,however,leadstoaverysmallaveragenumberofobservationspercellintherefugeeshocksexaminedinthispaper.
27
workforceinMiami,thecitymostaffectedbytheMarielitos,around1980.Theunitof
observationintheregressionsisacity-educationcell,sothattheidentifyingvariation
arisesbothfromthefactthattheMarielitossettledinaspecificsetoflocationsandwere
disproportionatelyrepresentedintheleast-skilledgroup.
Table3reportstheregressioncoefficientsthatestimatetheowneffectoftheMariel
supplyshock.Throughouttheanalysis,theregressionsareweightedby (n1n0 ) / (n1 + n0 ) ,
wherentgivesthenumberofobservationsusedtocalculatethedependentvariableina
particularcity-educationcellattimet.18Asimpliedbythetheory-basedregression
specificationinequations(5)and(7),alltheregressionsincludeeducationfixedeffectsand
metropolitanareafixedeffects.19Weusethreealternativedependentvariables:therateof
wagegrowthinacity-educationcell(wherethewagevariablemeasuresweeklyearnings);
thechangeintheaverageunemploymentrate(wheretheunemploymentrateisdefinedas
theratioofthenumberofpersonsunemployedtothenumberofpersonsinthelabor
force);andthechangeintheaverageemploymentrate(definedastheratioofthenumber
ofemployedtothesizeofthecorrespondingpopulation).
ItisusefultobeginbydiscussingtheregressioncoefficientsfromthesimplestOLS
specificationsreportedinthefirsttwocolumnsofPanelBofthetable,wherethe
dependentvariableisthechangeintheaveragelogweeklywage.Thetheory-based
specificationderivedearlierrequirestheinclusionofthevariableΔlogLrs,aregressorthat
givesthelogchangeinthesizeofthenativeworkforceinthecell.Thetablereports
coefficientsfromtwoalternativeregressionmodelsthataddresstheendogeneityofthis
variableindifferentways.First,wesimplyexcludethevariablefromtheregressionsothat
theestimatedwageelasticityisareducedformcoefficientthatincorporatesthenative
laborsupplyresponse(andisbiasedtowardszero)Alternatively,wereplacethevariableΔ
18Thesearetheoptimalweightswhenconstructingaggregatedfirst-differencedcellsfrommicro-
leveldata.Thevarianceofthedifferencedaverageresidual(assumingthevarianceoftheperson-specificerrortermisnotseriallycorrelatedandhasconstantvariance)isgivenby (σε
2 / n0 + σε
2 / n1 ) .Theoptimalweighttakesintoaccountthefactthatmeasurementerrorofthemeanvalueinthecellislessaccurateifthenumberofobservationsinthatcellissmall.
19TheinclusionofthesefixedeffectsdonotsaturatetheregressionbecausethenatureoftheMarielsupplyshockledtoveryunbalancedsupplyshiftsacrossbothcitiesandeducationgroups.
28
logLrswiththecorrespondingchangeinthenative-bornpopulationinthatcell,sothatthe
coefficientofthisvariableitselfbecomesatypeofreduced-formcoefficient.20Notethatthe
coefficientofthevariablemeasuringthesizeoftheMarielsupplyshockisabout-1.3,and
statisticallysignificant,regardlessofhowweaddresstheendogeneityofthenativelabor
supplyresponse.21Figure1helpsvisualizethewageimpactoftheMarielitos.Itisclearthat
thenegativeownwageeffectisdrivenmostlybythechangingmarketconditionsfacing
low-skillworkersintheverysmallnumberofcitieswheremostoftherefugeessettled.
AcrucialfeatureoftheMarielsupplyshockisthattherefugeescouldonlyleave
fromtheportofMariel.ManyoftheCuban-AmericanswhoalreadylivedintheUnited
StatesboughtorrentedboatstheywouldthentaketoMarieltopickuptheirrelatives(as
wellasotherpotentialrefugees)waitingattheport.Itisinevitablethatthegeographic
sortingofthenewarrivalswouldbeverysimilartothatofthepre-existingCuban
populationintheUnitedStates,agroupthatsponsoredandphysicallyenabledtheentryof
theMarielitos.Giventheextremeclusteringofthepre-MarielCubanrefugeesintheMiami
metropolitanarea,withabout50percentofthatpopulationlivinginMiamiin1980,itis
notsurprisingthatabout60percentoftheMarielitosendedupthereaswell.
Weaddressthepotentialendogeneitycreatedbythegeographicdistributionofthe
Marielitosbyusingthegeographicsortingofthepre-MarielCubanimmigrantstopredict
wherethenewrefugeeswouldsettle.22ThefirstpanelofTable3showstherelevant
coefficientfromthefirststageregression,summarizingtherelationbetweenthesizeofthe
Marielsupplyshockincell(r,s)andtheshareofCubansinthatcellpriorto1980.Not
surprisingly,thecoefficientisstronglypositive.23
20Thisreduced-formspecificationimpliesthattheregressioncoefficientoftherefugeesupplyshock
willgenerallydifferfromthatofthechangeinthepopulationofthespecificcell.21Thewageelasticityestimatedintheregressionframeworkisverysimilartothe-1.5elasticity
producedbyapplyingadifference-in-differencesapproachtotheMarchCPSdata;seeBorjas(2017).
22Weusedatafromthe1980censustocalculatethedistributionofpre-MarielCubansacrosstheregion-skillcells.
23Inotherwords,weusethelaggedshareofCubansintheworkforceastheinstrument.Thefirst-stageregressioncoefficientthenessentiallyestimatesbyhowmuchthepre-existingimmigrantworkforceinagivencellincreasedthesupplyofmigrantstothatcellasaresultoftherefugeeshock.Somestudiesintheliterature(e.g.,OttavianoandPeri,2007)usethepredictedlocationoftheactualflowsobservedinthedata.IftheinstrumentissufficientlystronginthesealternativeIVspecifications,thefirst-stagecoefficient,byconstruction,willhoveraround1.0.
29
TheIVestimatesofthewageelasticityreportedinthesecondpanelareagainabout
-1.3,sothatthereislittleindicationthatcontrollingfortheendogeneityofthegeographic
sortingoftherefugeesplaysanyroleindeterminingtheirlabormarketimpact.24The
similaritybetweentheOLSandIVestimatesintheMarielcontextisnotsurprising.The
physicalcharacteristicsoftheboatliftensurethatthegeographicsortingoftheMarielitos
afterarrivalhadlittletodowitheconomicconditionscirca1980.
Thebottomtwopanelsofthetablereportanalogousregressionsusingthechangein
theunemploymentandemploymentratesasdependentvariables.Noneofthecoefficients
aresignificantlydifferentfromzero.TheowneffectsoftheMarielsupplyshock,therefore,
seemtoberestrictedtochangesinwages.Thisfindingmayperhapsbeinformativeabout
howlabormarketsadjusttosupplyshocksduringaperiodofveryhighinflation.TheUS
inflationratewas13.5percentin1980and10.3percentin1981.
Table4reportsselectedcoefficientsfromthemorecomprehensiveregression
modelthatidentifiesbothown-andcross-effects.Wecancarryoutthisanalysisbecause
mostoftheMarielitoswerehigh-schooldropouts,allowingustoexaminetheirimpacton
theotherskillgroups.Todoso,weestimateequation(12)separatelyineachofthefour
educationgroupsusedintheanalysis(i.e.,highschooldropouts,highschoolgraduates,
somecollege,andcollegegraduates).Theregressionmodelalsoincludesvariables
measuringthechangeinthenativepopulationineachofthegroups.Thisregression
specificationenablesustodetectpotentialcomplementaritiesacrossfactortypeswithout
imposinganyfunctionalformrestrictionsontheproductiontechnology.
Asbefore,theestimatedownwageeffectisnegativeandsignificant,withawage
elasticityofabout-0.9.Similarly,theestimateoftheownemploymenteffectisnot
distinguishablefromzero.25Theanalysis,however,showsthatthecrosseffectsare
numericallyimportant.Althoughthesupplyshockofthepredominantlylow-skill
24WealsoestimatedtheMarielregressionsusingdatafromtheOutgoingRotationGroup(ORG)CPS
filesratherthantheMarchCPS,andobtainedsimilarresults,although,asinBorjas(2017),thepointestimateoftheownwageelasticityissmaller.TheownwageelasticityestimatedintheORGwhentheregressionmodelincludesthechangeinthesizeofthenativepopulationis-0.51(0.11)intheOLSregression,and-0.43(0.16)intheIVregression.Theseelasticityestimatesareagainvirtuallyidenticaltothe-0.5elasticityimpliedbyapplyingadifference-in-differencesmethodologytotheORGdata.
25Theinstrumentinthisregressionusesonlyvariationinthelocationoftheleast-skilledCubans.
30
Marielitosloweredthewageofhighschooldropouts,itraisedthewageofworkerswitha
highschooleducation,andthiseffectisbothnumericallyandstatisticallysignificant.The
cross-wageelasticityisabout+0.7.Inaddition,theunemploymentrateofworkerswith
morethanahighschooldiplomaalsofellsignificantly.
Insum,ouranalysisoftheMarielsupplyshockyieldsaremarkableresult.As
impliedbythesimplestmodeloffactordemandinacompetitivemarket,supplyshockscan
havebothnegativeandpositiveeffectsonthepre-existingworkforce.Thoseworkerswho
mostresembletherefugeessufferthewageloss,whilethewagegainsaccruetothose
workerswhocomplementtheskillsbroughtinbytherefugees.
Thedataalsoindicatethatthenegativeandpositiveeffectsofsupplyshocksneed
notoccuralongthesamedimensions.IntheMarielcontext,theowneffectstendtoshow
upaswagecuts,whilecrosseffectsareobservedinbothwagesandemployment.Thereis
obviouslymuchtolearnabouthowlabormarketsadjusttosupplyshocks.Regardlessof
howthemarketreachesanewequilibrium,however,itisevidentthatrefugeesupply
shockscanhaveimportantdistributionalconsequences.
4.3AlternativeApproachestoNaturalExperiments
ItisofinteresttocontrasttheresultssummarizedinTables3and4withthe
evidencereportedinexistingstudiesoftheMarielsupplyshock.Aswenotedearlier,there
isakeymethodologicaldifferencebetweenourtheory-basedregressionsandthe
atheoreticalapproachexemplifiedinearlierstudies.BothCard(1990)andBorjas(2017)
pursuedadifference-in-differencesapproach,comparingthechangedconditionsinthe
Miamilabormarkettothechangedconditionsinasetofcontrolcities.
Itisobviouslyverydifficulttoconstructperfectcontrolgroupsor“placebos”
outsidealaboratorysetting.Agoodplaceboneedstosatisfytwodistinctconditions.First,
thetreatedandcontrolgroupsmustbecomparableinimportantways.Card(1990)
comparedMiamitoacontrolgroupoffourcities:Atlanta,Houston,LosAngeles,andTampa.
Thisparticularplacebowaspartlyselectedbylookingatemploymentdynamicsinvarious
citiesbothbeforeandaftertheMarielsupplyshock.TheBorjas(2017)reappraisalshowed
thattheconstructionofthecontrolgroupplaysakeyroleinanyevaluationoftheimpactof
theMarielitos.Usinganalternativecontrolgroupbasedonemploymenttrendspriortothe
31
supplyshock,aswellasemployingtheAbadie,Diamond,andHainmueller(2010)synthetic
controlmethod,consistentlyresultedinlarger(i.e.,morenegative)estimatesoftheown
wageeffectofthesupplyshock.
Asecondconditionthatagoodplacebomustsatisfyisthatthereshouldnotbeany
spilloversbetweenthetreatmentandcontrolgroups.Thiscondition,althoughconceptually
important,hasbeenignoredinallexistingMarielstudies.Itistrivialtoseehowsuch
spilloversariseinthiscontext.Nearly40percentoftheMarielitoschosetosettleincities
outsideMiami.Infact,twoofthecitiesinthecontrolgroupusedinCard’s(1990)study
werecitiesthatactuallyreceivedmanyrefugees:7.4thousandsettledinLosAngelesand
another3.1thousandsettledinTampa.Thegenericdifference-in-differencesapproach,
therefore,suffersfromthefactthatsomeofthecitiesinthecontrolgroupweretreatedby
theexogenoussupplyshockaswell.
Unlikethetraditionaldifference-in-differencescalculationsthatcompareMiamiand
aplacebo,ourregression-basedanalysisallowsfortherefugeesupplyshocktoaffectmany
differentmarkets,alongboththeregionandskilldimensions.Weidentifytheimpactby
exploitingthedifferentnumbersofMarielitossettlingindifferentcitiesandthedifferent
numbersofMarielitosindifferenteducationgroups.Inotherwords,theregression
approachfullyincorporatesthefactthattherefugeesupplyshock“treated”manymarkets,
andinfacttreatedthosemarketsdifferentially,andthenusesthatdispersiontoidentify
howsupplyshocksalterlabormarketoutcomes.
5.ÉmigréstoIsraelfromtheformerSovietUnion
Priortothelate1980s,itwasextremelydifficultforSovietJewstomigrateto
Israel.26ThepressuresforsuchmigrationbegansoonaftertheSix-DayWarin1967,when
IsraelbegantomoreforcefullystateitsdemandthatSovietJewsbeallowedtorejointheir
familiesorbuildanewlifeinIsrael.TheSovietreluctancetoallowsuchmigrationbecame
animportantobstacleinattemptstoimproverelationsbetweentheSovietUnionandthe
26SeeBuwalda(1997)foradetailedhistory.
32
West,anditwasnotuntilMichaelGorbachev’sGlasnostinitiativein1986thattheSoviet
UnionbegantoconsiderandallowtheemigrationofitsJewishpopulation.
In1986and1987,asmallnumberofvisasweregrantedtoSovietJewswhowished
toemigrate.Mostoftheseémigrés,however,chosetosettleintheUnitedStatesorCanada,
andonlyasmallfractionmovedtoIsrael.TheUnitedStateswasaparticularlyappealing
destinationbecausethecountryallowedSovietemigrantstoqualifyforrefugeestatus,
makingitrelativelyeasytoobtainentryvisas.
By1989,theUnitedStateshadchangedtherulethatautomaticallyclassifiedSoviet
émigrésasrefugees,makingitalmostimpossibleforSovietJewstomovetothatcountry
unlessanAmericanrelativecouldsponsortheirentry.Incontrast,Israel’sLawofReturn
continuedtheopen-doorpolicyofwelcomingallJews.AsFriedberg(2001)notes:
“Between1989and1995,610,100immigrantsarrivedfromthe[formerSovietUnion],
increasingthesizeoftheIsraelipopulationby13.6%.”
5.1SummaryStatistics
Weusedatadrawnfromthe1983and1995Israelicensusmicrodatamaintainedby
IPUMS.Eachofthesedatafilesrepresentsa10percentrandomsampleoftheIsraeli
population.Thecensusesreportinformationoncountryofbirthandtheyearofmigration
(ifbornabroad).Usingthe1995census,weclassifyaSovietémigréassomeoneborninthe
formerSovietUnionwhomigratedtoIsraelbetween1990and1995.Forexpositional
convenience,wewillrefertothepre-existingpopulationofIsraelicitizensas“natives”even
thoughaverylargefraction(42percent)wasbornoutsideIsrael.AsTable5shows,the
Sovietémigrésmadeupalmost10percentofthepopulationin1995.27
ThetablealsosummarizeskeycharacteristicsoftheSovietémigrés.Incontrastto
theMarielitos,theémigréswereveryhighlyskilled.Fewofthem(onlyabout11percent)
lackedasecondaryeducation,ascomparedtoathirdoftheIsraelpopulation.Incontrast,
27TheinflowofSovietémigréswassolargethatwemeasurethesizeoftheshockas
mk = Sovietk / (Lk1 + Sovietk ) ,whereSovietkgivesthenumberofémigrésincellk.Thepointestimatesofthewageimpactdonotchangesignificantlyifweexcludethenumberofémigrésfromthedenominator,buttheIVcoefficientislesspreciselyestimated.Thisisprobablybecausethederivationofourestimatingequationusestheapproximationthattherefugeesupplyshockis“small,”anassumptionthatisfalseformanycellsintheIsraelicontext.
33
43percentoftheémigréshadcompletedauniversityeducation,ascomparedtoonly18
percentoftheIsraelinatives.
Thetabledocumentsinterestingdifferencesbetweentheoccupationaldistributions
oftheémigréandnativepopulations.Notethat14percentoftheémigrés,despitetheir
veryhigheducationalattainment,endedupas“unskilledworkers,”eventhoughonly7
percentofthenativeIsraelipopulationworkedinsuchjobs.Similarly,over50percentof
theémigrésworkedas“skilledworkersinindustryandconstruction,”againafarhigher
representationthanthe35percentofnativesinthatoccupation.28
Thebottompanelofthetablepresentssummarystatisticsgivingthewagegrowth
ofnativeIsraelisobservedinselectededucation/occupationcategories.Weexaminethe
changeinannualearnings(theonlywagemeasurethatisavailableinbothIsraeli
censuses).Itissuggestivethattheeducation-occupationcellthatwasmostaffectedbythe
Sovietémigrés,universitygraduateswhoendupas“skilledworkersinindustryand
construction,”experiencedaremarkablylargedropinearningsduringtheperiod.
Wewillshowbelowthatthismismatchbetweenthepre-existingskillsofthe
émigrés(asmeasuredbytheireducationalattainment)andthetypeofjobtheyactually
endedupdoinginIsraelmayhaveplayedanimportantroleingeneratingFriedberg’s
(2001)conclusionthattheémigrésdidnotaffecttheIsraeliwagestructure.A
reexaminationofthedatathatallowsfortheveryhigh-skillémigréstoinfluencethe
earningsofworkersemployedinoccupationsthattypicallyemploylow-skillworkers(and
henceworkerswithlowereducationlevels)overturnsthisresultanddemonstratesthat
theémigrésindeedadverselyaffectedthewageof“trulycompeting”workers,andlikely
increasedthewageofcomplementaryworkers.
5.2Results
Israelisasmallcountry;itslandsizeisroughlythesizeofElSalvadororNewJersey.
Asaresult,itmakeslittlesensetodefinealabormarketintermsofaregion-skill
classification.Theshortcommutingdistancefromonecitytoanotherwouldgenerate
28Thefullnameoftheoccupationis“skilledworkersinindustry,andconstruction,andotherskilled
workers.”
34
sufficientspilloversacrossmarketstomakeitdifficulttomeasuretheimpactofasupply
shockbyexploitingdispersionattheregionallevel.Notsurprisingly,Friedberg's(2001)
examinationoftheSovietsupplyshockfocusedontheimpactoftheémigrésonwages
acrossoccupations,sothatthese"markets"arelesslikelytobeaffectedbythespillovers
resultingfromnativeinternalmigration.
AlthoughweadaptFriedberg'schoiceofanoccupation(ratherthanalocallabor
market)todefinetherelevantunitofanalysis,ouranalysisdiffersinacrucialway.Asthe
summarystatisticsreportedabovesuggest,theeducationalattainmentoftheémigré
providesanadditionalmeasureofskillsthatislikelytoaffectproductivityandwages—
eveniftheémigrésmustinitiallyworkinjobsthatdonotreflecttheircredentials.
Therefore,wedefinealabormarketasaparticularoccupation-educationpairing.
Weclassifyworkersintofoureducationcategories:lessthanprimaryschooling,
completedprimaryschooling,completedsecondaryschooling,andcompletedauniversity
education.29WealsousetheoccupationclassificationavailableintheIPUMSfilesofthe
Israelicensus,whicharetheeightbroadoccupationgroupslistedinTable5.Asinour
studyoftheMarielsupplyshock,werestricttheempiricalanalysistomaleIsraelinatives
aged25-59.Finally,thenatureoftheIsraelicensusdataimpliesthatwecanonlyusethe
changeinlogannualearningsasthedependentvariable.Theoccupationofemploymentis
onlyavailableforpersonswhoworksothatwecannotanalyzetheimpactofthesupply
shockoneithertheemploymentortheunemploymentrate.
Table6summarizesthemainregressionresultsusingthesimplerspecificationthat
focusesonidentifyingtheownwageeffects.ConsiderinitiallytheOLSresultsinthefirst
twocolumnsofthebottompanel.Theestimatedcoefficientisabout-0.73(withastandard
errorof0.27).Notethattheestimateofthewageelasticityofabout-0.7isunchangedwhen
weaddaregressorgivingthechangeinthesizeofthenativepopulationintheparticular
cell.
ThetablealsoreportsthewageeffectresultingfromtheIVspecification.The
instrumentistheshareofearlierSovietmigrants(whowereobservedinthe1983census)
employedinaparticularoccupation-educationpairing.Thekeycoefficientinthefirststage
29Friedberg(2001)examinestheeducation-adjustedwagesofworkersinaparticularoccupation.
35
oftheIVishighlysignificant,sothatthenewémigrésfoundemploymentinroughlythe
sameoccupationsthatemployedthecompatriotsthatarrivedpriortothecollapseofthe
SovietUnion.TheIVestimateofthewageelasticityis-0.62(0.32),verysimilartothe
coefficientobtainedintheOLSregression.Inshort,aregressionanalysisbasedonthe
notionthatalabormarketconsistsofanoccupation-educationcellunambiguously
indicatesthattheSovietémigrésadverselyaffectedtheearningsofcomparableworkers.
Figure2visualizesthisinsight.Thefigureshowsalarge"cloud"ofoccupation-
educationcellsthatwereunaffectedbytheSovietinflux.Italsoshowsthattherelatively
fewcellsthat“welcomed”theémigrésarethesourceofthenegativewageeffect.The
affectedcellsarecomposedoftheselectoccupationsthatattractedhigh-skillémigrés.Not
surprisingly,thoseoccupationsweretheonesthatexperiencedthelowestwagegrowth
between1983and1995.30
AsshowninTable5,thesizeoftheSovietsupplyshockwaslargestforworkerswho
hadauniversitydegree.Forthisparticularskillgroup,theinflowoftherefugees
representeda26percentincreaseinsupply.AswithouranalysisoftheMarielsupply
shock,weexploitthisfacttoderiveasimplemethodforestimatingthepotentialcross-
effects.Specifically,weestimatethecross-effectsmodelgivenbyequation(12)separately
foreachoftheeducationgroups,wherethekeyregressorgivesthesupplyshock
experiencedbyuniversitygraduatesinaparticularoccupationgroup.31
Table7reportsIVregressioncoefficientsfromthecross-effectsspecification.The
resultsagainindicatethattheown-effectsofthehigh-skillSovietémigrésarenegative,
implyingawageelasticityofabout-0.7.Thetablealsoreveals,however,thattherewere
somepositivecomplementaritiesbetweenthehigh-skillémigrésandtheleastskilled
Israelinativeswhohadnotcompletedtheirprimaryeducation.Theearningsofthelowest
30TherewasacurrencychangeinIsraelin1986,oneyearafterthe1985censusthatweusetoestablishthebaselineinthepre-shockperiod.Thewagedatain1985isdenominatedinShekelswhilethepost-shockperioddataisdenominatedinNewShekels.Therefore,theverticalaxisinFigure2reflectsboththechangeinthecurrencyaswellasrealwagegrowth.Ouranalysisexaminesrelativedifferencesacrosseducation-occupationcells.Thecurrencychangeisabsorbedbytheconstantintheregressions.
31Theregressionalsoincludesavariablethatcontrolsforthechangeinthesizeofthenativepopulationinthe“own”occupation-schoolinggroup.Becauseofthesmallnumberofobservationswithineacheducationgroup,weexcludethe“cross”changesinnativelaborsupply.Theresultsreportedbelowwouldbeverysimilarif,instead,weaggregatedthedatatotwoeducationgroupsandincludedboththeown-andcross-nativesupplyresponses.
36
educationgroupincreasedaftertherefugeesupplyshock,withacross-elasticityof+0.35
(0.18).
Notealsothattherefugeesupplyshockhad,ifanything,aslightnegativeimpacton
theearningsofintermediateskillgroups..Thecoefficientsthatmeasuresthecrosswage
elasticitybetweenthehigh-skillémigrésandthemiddle-skillIsraelisareabout-0.1
(thoughnotsignificant).Thisresultislikelytobeaconsequenceoftheskilldowngrading
thatmanySovietémigrésencounteredaftertheyenteredtheIsraelilabormarket,anissue
wediscussinmuchgreaterdetailshortly.Theskilldowngradingobviouslyimpliesthat
somehigh-skillémigréswerecompetinginthesamelabormarketaslower-skillednatives,
sothatthecross-effectsmeasuredbytheregressionsreportedinTable7actually
incorporatean“owneffect”ontheintermediateskillgroupsaswell.Butitisunlikelythat
theskilldowngradingcuttheefficiencyunitsofacollege-educatedSovietémigrétothatof
anIsraelinativewhohadnotcompletedaprimaryeducation,explainingwhyitistheleast
skilledIsraelinativeswhogainedfromtheSovietsupplyshock.
TheseresultsarecomparabletotheonesobtainedintheMarielcontext.Theentry
ofthelow-skillMarielitosincreasedthewageofnativeswhoweremorehighlyskilled,
whiletheentryofthehigh-skillSovietémigrésincreasedthewageofnativeswhowere
leastskilled.Thesecross-effectsdocumentthepotentiallylargedistributional
consequencesthatrefugeesupplyshockscanhaveonthereceivingcountry’slabormarket.
5.3SkillDowngrading
Inimportantways,theevidencesummarizedinTable6isbothsimilartoandvery
differentfromtheevidencereportedinFriedberg(2001),thestudythathasmostcarefully
examinedtheconsequencesofthisspecificsupplyshock.Aswenotedearlier,theFriedberg
analysisusesanoccupationastheunitofanalysisandexaminesthetrendineducation-
adjustedwageswithinanoccupation.FriedbergalsoreportsbothOLSandIVestimatesof
theownwageeffectattributabletotheSovietinflux.
Infact,theownwageeffectsthatFriedbergestimatedinherOLSregressionsare
verysimilartothosereportedinTables6and7,showingasignificantreductioninthe
wageofthoseoccupationsmostaffectedbytheSovietémigrés.Forexample,Friedberg
(1990,TableII)reportsanownwageelasticityof-0.616(0.206).Friedbergthenargued
37
thattheoccupationalsortingofthenewémigrésinIsraelwasendogenous,asincome-
maximizingémigréswouldobviouslygravitatetowardsthehighest-payingoccupations.
Tocontrolforthisendogeneity,Friedbergusedthemigrant'soccupationinthe
SovietUnion,priortomigration,asaninstrumentforthemigrant'seventualoccupationin
Israel,arguingthatthepre-migrationoccupationalchoicewasobviouslyunaffectedbythe
Israeliwagestructure.Theuseofthisparticularinstrument,whichisavailableinasmall
surveyofSovietémigrésusedbyFriedbergbutisnotavailableintheIPUMSfiles,leadsto
anIVestimateofthewageelasticitythatispositiveandinsignificant,leadingherto
concludethat"theinfluxofRussianstoagivenoccupationinIsraeldoesnotappeartohave
adverselyaffectedthewagegrowthofnativesworkinginthatoccupation”(Friedberg,
2001,p.1395).
ItisimportanttoemphasizethatthedifferencebetweentheOLSandIVresultsin
theFriedbergstudyispuzzling,andremainsunexplained.32Aslongasémigrésareincome-
maximizers,enteringthemostprofitableoccupations,theendogeneitycreatedbytheself-
sortingoftheémigrésintohigh-payingjobsshouldbiastheOLScoefficienttowardszero.In
short,Friedberg’scorrectionforthistypeofendogeneityshouldhavepresumablyledtoa
morenegativewageelasticity,andnottoamorepositiveone.
Table6showsthatourIVestimateofthewageelasticityremainsnegativeand
significant,andis,infact,aboutthesamemagnitudeastheOLScoefficient.Thereisa
crucialdifference,however,betweenthetwoinstruments:Friedberg'sinstrumentisbased
ontheoccupationthattheSovietémigrésheldintheSovietUnionpriortomigration;our
instrumentisbasedontheactualoccupationsthatearlierwavesofémigréswithsimilar
educationpursuedinIsrael.
Thedifferenceintheestimatesofthewageelasticityimpliedbythetwodifferent
instrumentsis,ofcourse,relatedtothepossibilitythattheskillstheémigrésacquiredin
theSovietUnionmaynotbecompletelytransferabletotheIsraelilabormarket.Infact,itis
easytodocumentthatthepre-existingskillsoftheémigrésarenotaverygoodpredictorof
thetypeofjobtheyactuallyendupdoing.
32Cohen-GoldnerandPaserman(2011)makearelatedpoint,arguingthatFriedbergusedaweak
instrumentthatledtoanunderstatementofthewageimpactoftheémigrésupplyshock.
38
Table5alsoreportstheoccupationdistributionsoftheémigrésandnativeswho
haveauniversitydegree.Recallthathalfoftheémigrésareinthisparticulareducation
category.Thetableclearlyshowsasubstantialdowngradinginthetypeofjobthatahigh-
skillémigréheldinIsrael.Onlyonepercentofnativeuniversitygraduates,forexample,end
upas"unskilledworkers."Amongémigrés,however,theprobabilityofworkinginsuch
jobsincreasesten-fold.Onlyfourpercentofnativeuniversitygraduatesendupbeing
"skilledworkersinindustryandconstruction."Amongtheémigrés,however,the
probabilityincreases9-fold,to36percent.Inshort,thedataclearlyindicatethatpre-
existingeducationalskills,althoughobviouslycorrelatedwiththetypeofjobthatthe
émigréswilldoinIsrael,cangenerateverylargeerrorsinpredictingthepost-migration
allocationofémigrésacrossoccupations.Theobviousskilldowngradingcanhelpexplain
notonlythedifferentwageelasticitiesproducedbythetwoinstruments,butalsothe
puzzlingresultintheFriedbergstudywheretheuseofinstrumentalvariablesleadstoa
morepositivewageelasticity.
ConsiderthespecificexamplewherefluencyinHebrewrepresentsabarrierinto
certainoccupations.Forinstance,supposetherearetwooccupationsinIsrael,onewhere
workersneedtobefluentinHebrew(e.g.,aTVpersonality)andonewhereworkersdonot
(e.g.,workingatamanufacturingassemblyline).Asaresultofthedifferenceinlanguage
requirements,thetypicalSovietémigré,eventhoughhemightholdauniversitydegree,
willinevitablyendupinoccupationswhereHebrewfluencyisunimportant.
Infact,itiseasytodocumentthattypeofsortingintheIsraelilabormarket.The
1983IsraelicensusreportswhetherHebrewwasafirstlanguageforeachenumerated
person.WecanconstructameasureoftheshareofworkerswhohaveHebrewasafirst
language(excludingmigrantsfromtheSovietUnion)ineachoccupation-educationcell.
Figure3revealsastrongnegativerelationshipbetweenthesizeoftheSovietsupplyshock
ineachcellandthefractionofpeoplewhospeakperfectHebrew.TheSovietsupplyshock
wasfarsmallerinthoseoccupationsthatrequireHebrewfluency.
Supposefurtherthatthewageelasticityηisindeednegative,sothatwhenanew
waveofSovietémigrésarrivesinIsrael,theaveragewageintheoccupationswhere
Hebrewfluencyisunimportantfalls.TheOLSwageelasticityreportedinTable6is
39
essentiallymeasuringthewagechangeintheoccupationswhereHebrewfluencyis
irrelevant(i.e.,theoccupationsactuallyaffectedbythesupplyshock)relativetothewage
changeinoccupationswhereHebrewfluencyisrequired(i.e.,theoccupationslessaffected
bythesupplyshock).OurIVestimateispickingupexactlythesameeffect.Thefirst-stage,
whichusesaninstrumentontheoccupationswherepriorSovietwaveswereactually
employedinIsrael,willpredictthatfewoftheémigrésenteroccupationswithstrict
Hebrewfluencyrequirements.Asaresult,theOLSandIVspecificationswouldleadto
almostidenticalestimatesofthewageelasticity.
Friedberg’s(2001)instrument,theoccupationwheretheémigréwasemployedin
theSovietUnion,ignoresthatskillsarenotperfectlytransferableacrosscountriesandthat
theémigrésmayonlybeabletoentercertainoccupationsinIsrael.Thisimpliesthatthe
first-stageregressionwillallocateaworkerwhousedtobeaTVpersonalityintoasimilar
occupationinIsrael,anoccupationthatmayrequirenear-perfectHebrewfluencyandthat,
infact,employsveryfewsuchémigrés.Asaresult,theFriedbergIVwageelasticitymaybe
comparingwagesbeforeandaftertheshockinoccupationsthathavestrictHebrewfluency
requirements(i.e.,anoccupationwheretherewaslittlesupplyincrease)withwage
changesinjobswhereHebrewfluencyisunimportant(i.e.,occupationswherethesupply
increasewasmuchlarger).Thiswouldresultinapositiveestimateofthewageelasticity.In
short,Friedberg'sIViseffectivelygivingmoreweighttooccupationsthat,infact,didnot
receiveashock.
Todocumenttheimportanceofskilldowngradingwhenmeasuringwageimpactsin
theIsraelicontext,wecarriedouttwodistinctexercises.First,foreacheducationlevelwe
candistributetheémigrésaccordingtothenativedistributionacrossoccupationsin1983.
Thispreventstheacross-occupationskilldowngradingandplaysarolesimilartothe
instrumentusedinFriedberg'sstudy.Alternatively,wecankeepthedistributionof
émigrésacrossoccupationsasobservedinthedata,allowingémigréstoenteroccupations
normallyperformedbylowereducatedworkers,butwithineachofthoseoccupationswe
canthenassumethattheémigréinflowwasdistributedintothedifferenteducationgroups
accordingtothenativedistributionofeducation,wherenativestendedtobelesseducated.
Thisallowsforskilldowngradingalongboththeoccupationandeducationdimensions.
40
Table8reportstheregressionresultsfrombothexercises.Whenusingthe
distributionofnativesacrossoccupationstoassigntheSovietémigrés,weobtainan
estimateofthewageelasticityequalto0.257(0.683),whichresemblestheFriedberg
(2001,TableII)IVestimateof0.549(1.28).If,instead,wekeeptheoccupationdistribution
ofmigrantsasobserved,butassignthemtodifferenteducationlevelsfollowingthenative
distributionwithineachoccupation,weobtainanestimateof-0.72.Notethatthisown
wageelasticityisvirtuallyidenticaltotheOLSandIVestimatesreportedinTables6and7.
Insum,theevidencestronglyindicatesthatSovietémigréslandedinoccupations
thatwerequitedifferentfromtheoccupationstheyheldintheformerSovietUnion,leading
themtocompetewithnativesintheoccupationstheyactuallyenteredratherthaninthe
occupationstheyheldbeforemigration.Moreover,itisalsopossiblethattherewassome
skilldowngradingevenwithinoccupations,withsomehighlyeducatedmigrants
performingtasksnormallydonebymiddle-skillIsraelis.
Putdifferently,skilldowngradingoccurredalongthetwodimensionsthatweuseto
definethevariouscells,andignoringthefactthatmeasuredskillsmaynotbehighly
correlatedwithmarketableskillscanleadtoasubstantialattenuationofthewageimpact
ofimmigration.
6.TheAlgerianWarofIndependence
TheAlgerianWarendedwiththesigningoftheEvianAccordsonMarch19,1962.
AlthoughFrance“insistedthatthesettlercitizensstayandbecomeapartoftheAlgerian
nation”(Choi,2016,pp.2,4),theso-calledsettlercitizensandotherAlgerianshadother
ideas,andAlgerianindependencequicklysparkedaflowofrefugeestoFrance.Inthe
summerof1962alone,“750,000Frenchcitizensincluding100,000naturalizedJewsand
severalthousandpro-FrenchMuslimAlgeriansfledthenationalisttakeover.”Overtime,
thenumberofrefugeesincreased,asthepre-independencepopulationofAlgeriaincluded
“900,000whitecolonialsofmixedEuropeandescentknownotherwiseaspiedsnoirs.”
AsthisverybriefsummaryoftheeventsthatfollowedtheEvianAccordssuggests,
theindependenceofAlgeriasparkedtwodistincttypesofrefugeeflowsintoFrance.The
firstconsistedoftheFrenchrepatriates,theFrenchnationals(or“settlercitizens”)who
41
livedinAlgeriaandreturnedtoFranceafter1962.ThesecondconsistedofAlgerian
nationals.Infact,thenumberofAlgeriannationalsmovingtoFranceincreasedsharplyin
1964“withthearrivalofover75,000harkis,theMuslimAlgeriansoldierswhohadfought
ontheFrenchsideduringtheWarofIndependence”(Choi,2016,p.6).
Hunt(1992)examinedthelabormarketimpactofthefirstoftheserefugeeflows,
consistingofrepatriates,ontheFrenchlabormarket.Heranalysissuggeststhatthe
repatriateshadonlyasmall(butadverse)impactontheunemploymentrateorwageof
Frenchnativeworkers.
Aswascommonintheearlystudiesthatexaminedrefugeesupplyshocks,however,
Hunt’sregressionanalysisignoredthatthesupplyshockofrepatriatesmayhavebeen
particularlylargeinsomeskillgroups,andmuchlessimportantinothergroups.In
particular,herregressionanalysisconsistedofessentiallycorrelatingthechangeina
measureof(age-andeducation-adjusted)labormarketoutcomesinaparticularcityona
measureofthetotalsupplyshockofrepatriatesaffectingthatcity.Aswehaverepeatedly
emphasized,itiscrucialtocarefullymatchtheskilllevelofFrenchnativeswiththeskill
leveloftherefugeestocorrectlymeasurethelabormarketimpactofthesupplyshock.
Inaddition,theHuntstudyoverlookedthefactthattheendoftheAlgerianwar
ignitedasizableandconcurrentflowofAlgeriannationals.Itisunlikelythatthetwo
refugeeflowsareuncorrelated.Ifnothingelse,thetimingofbothflowswasmotivatedby
thesamepoliticalupheaval.
OurexaminationoftherefugeesupplyshockssparkedbytheendoftheAlgerian
conflictshowsthattheskillcompositionofthetwogroupsofrefugeesandtheirgeographic
clusteringinFrancediffernotonlyfromeachother,butalsofromthatoftheFrenchnative
workforce.AmorecarefulidentificationoftheFrenchworkerswhomighthavebeenmost
affectedbyeithersupplyshocksuggeststhattheendoftheAlgerianWardidindeedhave
adverseandsizablerepercussionsoncompetingworkersintheFrenchlabormarket.
6.1Summarystatistics
42
Weusethe1962and1968FrenchcensusmicrodatamaintainedatIPUMSto
determinethesizeandskillcompositionofthetworefugeeshocksoriginatinginAlgeria.33
Eachcensusenablesustocountanddocumentthecharacteristicsofpersonswhowerenot
livinginFranceatthetimeoftheearliercensus,whichoccurssixyearspriortothe
enumeration.
Table9reportsthecountsofpersonsinthreekeydemographicgroups:thenumber
ofFrenchrepatriates(orFrenchnationalswhowerenotlivinginFranceatthetimeofthe
lastcensus);thenumberofAlgerianrefugees(orAlgeriannationalswhowerenotlivingin
Franceatthetimeofthelastcensus);andthenumberofFrenchnatives(orFrench
nationalswhowerelivinginFranceatthetimeofthelastcensus).
The1968Frenchcensusenumerated1.4millionpersonsofFrenchnationalitywho
werenotlivinginFrancein1962.AlthoughthecensusdatamaintainedatIPUMSdonot
indicatewherethesepersonsresidedin1962,thehistoricalcontextsuggeststhatasizable
fractionofthisgrouporiginatedinAlgeria.34Thesupplyshockofrepatriatesincreasedthe
sizeofthenativeFrenchpopulationbyabout3percent.
Inaddition,162,000AlgeriannationalsmigratedtoFrancebetween1962and1968,
sothatthissupplyshockincreasedthesizeofthepopulationbyabout0.4percent.Note,
however,thatnearly23percentofFrenchrepatriatesandalmosthalfoftheAlgerian
nationalsweremenintheirprimeworkyears,comparedtoonly20percentofFrench
natives35
Ourempiricalanalysisoftheimpactofthetwosupplyshocksfocusesonthegroup
ofnativeFrenchmenaged25-59,agroupthathad9.1millionoersonsin1968.The
33Itisimportanttonotethatthe1962censusenumerationwascarriedoutbeforethebulkofrefugeesarrivedinFranceaftertheEvianaccordsweresignedinlateMarch1962.Inotherwords,itisunlikelythatthelaborsupplydecisionsofFrenchnativesenumeratedinthe1962censuswereaffectedbytheinfluxofrefugeeswhowouldsoonenterthecountry.
34Weexperimentedwithalternativedefinitionsoftherepatriatepopulation,suchasincludingFrenchnationalswhohadmovedtoFrancepriorto1962.Theanalysisreportedbelowoptsforthemostconservativedefinitioninthesensethatitleadstorelativelyweaklabormarketimpactsoftherepatriates.Itisimportanttonotethat,concurrentwiththerepatriateandAlgeriansupplyshocks,therewasalsoalotofchurninthenumberofforeign-bornpersonsinFranceduetotheentryandexitofoveramillionguestworkers,mainlyfromSpain,Portugal,andItaly.
35Table9alsosuggeststhatthebulkoftheAlgerianrefugeeinfluxwasdisproportionatelymale:88percentoftherefugeesaged25-59weremen.TherespectivestatisticfortheentirepopulationofAlgerianrefugeeswas78percent.
43
repatriatesincreasedthesizeofthispopulationby3.3percent,whiletheAlgerianrefugees
increaseditssizebyalmost1percent.
Table9alsodocumentstheremarkabledifferenceintheskillcompositionofthe
variousgroups.Practicallyall(96percent)oftheAlgerianrefugeeshadlessthanaprimary
education,ascomparedtoonly37percentoftheFrenchnativesand26percentofthe
repatriates.TheextremeconcentrationoftheAlgerianrefugeesintheleastskilledcategory
impliesthatthisspecificsupplyshockincreasedthenumberoflow-skillworkersinthe
aggregateFrenchlabormarketby2.2percent.
Incontrast,theskillcompositionoftheFrenchrepatriateswasmuchmorebalanced,
andcomparabletothatofFrenchnatives,withaslightskewtowardsamoreskilled
composition.Amongmenaged25-59,forexample,26percentofFrenchnativesand37
percentofFrenchrepatriateshadatleastasecondaryeducation.
Thetworefugeeflowsalsodifferedintheirgeographicsettlementaftertheyarrived
inFrance.ThegeographicsortingoftheFrenchrepatriatesverymuchresembledthatof
Frenchnatives,exceptthattheregionProvence-Alpes-Coted'Azurreceivedasomewhat
largershare.However,amuchlargernumberoftheAlgerianrefugeessettledintheParis
andsouthernregions.Forexample,16percentofAlgerianssettledinRhone-Alpes,aregion
thathostedonly9percentofFrenchnatives,andanadditional35percentsettledinIlede
France,butonly19percentofFrenchnativeslivedintheParismetropolitanarea.
Weagainexploitvariationacrossregion-educationcellstoestimatethelabor
marketimpactofthetwodistinctrefugeesupplyshocks.TheavailableFrenchcensusdata
enablesustodefine88suchcells(22regionsand4educationgroups).Theextreme
bunchingoftheAlgerianrefugees,bothintermsoftheireducationalattainmentandtheir
geographicdistribution,intoarelativelysmallnumberofcellscreatesagreatdealof
dispersioninthesizeofthesupplyshockacrosslabormarkets.Thisvariationhelpsto
morepreciselyidentifythelabormarketimpactoftheAlgeriannationals.Incontrast,the
similarityintheskillsand(tosomeextent)geographicsortingoftheFrenchnationalsand
44
theFrenchrepatriatessuggeststhattheremaynotbesufficientvariationtoprecisely
identifytheimpactofthisparticularsupplyshock.36
ThebottompanelofTable9hintsatthenatureoftheevidence.TheProvence-
Alpes-Coted'Azurregion,wherealargenumberoftheverylow-skilledAlgeriannationals
eventuallysettled,witnessedanincreaseintheunemploymentrateofFrenchnativeswith
lessthanaprimaryeducationof2percentagepoints(doublethenationalaverage),anda
decreaseintheemploymentrateof3percentagepoints(incontrasttoanincreaseinthe
employmentrateforthisskillgroupof1percentagepointinthenationallabormarket).
6.2Results
Table10reportstheregressioncoefficientsobtainedfromalternativespecifications
ofthegenericregressionmodelthatidentifiestheowneffectofsupplyshocksinequations
(5)and(7).Becausetherearetwodistinct,thoughconcurrent,supplyshocks,the
regressionspecificationisexpandedtoincludethemeasureofthesupplyshockforeachof
thetwotypesofrefugees.
TheFrenchcensusdatadonotreportanyinformationonaworker'searnings,so
thatweusetwoalternativevariablestomeasurethelabormarketimpactoftherefugees:
theunemploymentrate(definedasthefractionofthelaborforceparticipantsina
particularcellwhoareunemployed);andtheemploymentrate(definedasthefractionof
thepopulationinthecellthatisemployed).Thedependentvariablesusedinthe
regressionsgivethechangeineachoftheseemploymentindicatorsforeachregion-
educationcellbetween1962and1968.
TheOLScoefficientsarereportedinthefirsttwocolumnsofthebottomtwopanels
ofthetable.ItisevidentthattheflowofAlgerianrefugeeshadasizableandstatistically
significantpositiveeffectontheunemploymentrateofFrenchnatives,aswellasanegative,
significant,andquantitativelylargereffectontheiremploymentrate,inlinewithwhatthe
summaryevidencereportedinthebottompanelofTable9suggested.Inotherwords,the
supplyshockofAlgerianrefugeesdrovecompetingFrenchnativesoutofthelabormarket,
36ThisfactexplainswhywedonotincludelocationfixedeffectsintheregressionsreportedinTable
10.IncludingthesefixedeffectsdoesnotchangetheresultsfortheAlgerianinflows,butmakesthecoefficientsfortheFrenchrepatriatessupplyshockveryunstable.
45
andmadethejob-findingprocessmoredifficultforthosenativeswhostayedinthemarket.
BecausetheAlgerianrefugeeflowwasdisproportionatelycomposedofworkerswithvery
lowskillsandclusteredinasmallnumberoflocations,theregressionsareessentially
indicatingthatverylow-educatednativeworkersinasmallnumberofFrenchcitieswere
indeedadverselyaffectedbytheAlgeriansupplyshock.
ItiseasytoseethepositiveimpactoftheAlgeriansupplyshockonthe
unemploymentrateofcomparableFrenchnativesintherawdata.Thebottompanelof
Figure4showsthescatterdiagramillustratingtherelationbetweenthechangeinthe
unemploymentrateinaparticularregion-educationcellandthesizeofthecorresponding
Algeriansupplyshock.ItisobviousthattheunemploymentrateincreasedmostforFrench
workersinthoseregion-educationcellsmostaffectedbytheentryoftheAlgerianrefugees.
Moreover,theeffectofthissupplyshockontheunemploymentrateisnumerically
large.A5percentincreaseinthesizeofthecellduetoaninfluxofAlgerianrefugees,which
isroughlythesizeoftheshockinthemostaffectedregion-educationcell(nativeswhodid
notcompletetheirprimaryeducationlivinginProvence-Alpes-Coted’Azur)increasedthe
unemploymentrateofthisgroupby1.3percentagepoints.TheFrenchunemploymentrate
forprime-age,low-skillmeninthemid-1960swasonly2percent,sothatthesupplyshock
hadasubstantialimpactonFrenchunemployment.
Incontrast,wefindthatalthoughtheimpactoftherepatriatesontheemployment
andunemploymentratesofFrenchnativesgenerallyhasthe“right”signintheOLS
regressions,thecoefficientisalwaysinsignificant.Theweakeffectbecomesstatistically
significantonlyintheunemploymentrateregressionsafterweaccountfortheendogeneity
ofthegeographicdistributionoftherepatriates.Thefirst-stagecoefficientsreportedinthe
toppanelofTable10showthatboththegeographicsortingoftheAlgerianrefugeesand
theFrenchrepatriateswasstronglycorrelatedtowherepreviousAlgerianrefugeesand
repatriatessettled.37Assumingthatthelaggedgeographicsortingisavalidinstrument,the
37Itisimportanttonotethattheflowofrepatriates,unliketheflowofAlgeriannationals,began
priortotheendofthewarin1962.ManyFrenchnationalsarerecordedtohavereturnedtoFranceasearlyas1954.TheFrenchcensusdataavailableatIPUMSdoesnotenableustodeterminetheoriginoftheserepatriates.However,theirskillandlocationdistributionissimilartothelargerflowofrepatriatesthatfollowedtheconclusionoftheAlgerianindependencewar.
46
IVregressionsinthebottomtwopanelsshowthatboththerepatriatesandtheAlgerian
refugeeshadasignificantimpactontheunemploymentratesofFrenchnatives.
Finally,thefactthatthesupplyshockofFrenchrepatriateswas“balanced”across
theeducationcellsmakesitdifficulttoestimatetheresultingcross-effectsusingthe
regressionframeworkderivedearlier.Wesimplifiedtheestimationofcross-effectsby
explicitlyrelyingonthefactthatrefugeesupplyshocksareoftenveryunbalancedintheir
skillcomposition,sothatweneedonlylookathowthelabormarketoutcomesofdifferent
skillgroupsrelatetothesupplyshockexperiencedbytheoneskillgroupthatwasmost
affected.Wecanobviouslycarryoutthisexercisetoestimatethecrosseffectsresulting
fromthesupplyshockofAlgeriannationals,butitisnotpossibletousethemethodologyto
estimatethecorrespondingcrosseffectsfromthesupplyshockofFrenchrepatriates.
AsTable9shows,thesupplyshockofAlgeriannationalswasextremelyunbalanced.
AlmostalltheAlgerianswhoarrivedtoFrancebetween1962and1968hadnotcompleted
theirprimaryeducation,suggestingthatwecanuseequation(12)todeterminehowthe
low-skillAlgeriansaffectedtheemploymentopportunitiesofmoreskilledFrenchnatives.
Table11reportsselectedcoefficientsfromthecross-effectsregressions.Not
surprisingly,theregressionsstillreportanadverseowneffect—employmentratesare
lowerandunemploymentratesarehigherforFrenchnativeswhodonothaveaprimary
education.However,wecannotdetectanyevidenceofbeneficialcross-effectsinthis
episode.Theunemploymentrateofmoreskillednativesdidnotfallwhenverylow-skill
Algeriannationalsenteredtheirspecificlabormarket.Moreover,theevidenceindicates
thattheemploymentrateofskilledFrenchnativesalsofell,althoughitfellbysignificantly
lessthanthedropexperiencedbylow-skillworkers.Wehavebeenunabletodeterminethe
reasonfortheabsenceofbeneficialcomplementaritiesintheAlgeriancontext.Oneobvious
conjectureisthatthesupplyshockofAlgeriannationalswasquiteuniqueintermsofjust
howlow-skilltherefugeeswererelativetothebaselinepopulation.
7.TheBalkanrefugees
FormanyofthepeoplelivinginEuropeduringthe1990s,thenamesofSrebrenica,
Sarajevo,Pristina,andPodgoricaareindeliblyassociatedwithincidentsfromthelastsetof
47
warsfoughtonEuropeansoil.Afterthecollapseofcommunism,theformerrepublicof
Yugoslaviasplitintofivenewcountriesbetween1991and1992:Slovenia,Croatia,Bosnia-
Herzegovina,Serbia,andMacedonia.Thisbreakup,however,wasnotwithoutconflict.
Variousepisodesofcivilandmilitaryunresthittheformercommunistcountrybetween
1990and2000.Thereweremanycasualties,andmanymorepeoplelosttheirhomesand
soughtrefugebymovingelsewhere,eitherinternallywithintheterritoryoftheformer
YugoslaviaortoothercountriesinEurope.
ItisdifficulttoestimatepreciselyhowmanyoftheBalkanrefugeescreatedbythe
continuousconflictmovedtoEuropeancountries.Thedifferenttimingandlocationofthe
variouswars,aswellthepersistenceofthefighting,generateddistinctwavesofrefugees.
Forexample,thefirstwarsstartedinnorthernYugoslavia,whenSloveniaandCroatiain
1991,andthenBosniain1992,declaredindependence.ThewarinCroatiaandBosnia
lasteduntil1995whentheFederalRepublicofYugoslaviarecognizedCroatiaandBosnia-
Herzegovinaasindependentcountries.In1996,ethnicAlbaniansinKosovoformedthe
KosovoLiberationArmytofightforthecreationofanethnicallyseparateGreaterAlbania.
TheWarinKosovoin1998and1999involvedthesouthernregionofformerYugoslavia,
andaffectedlargenumbersoffamilies.Thecalculationofthenumberofrefugeescreated
bythisseeminglyendlessseriesofdistinctconflictsisfurthercomplicatedbythefactthat
manyoftherefugeeseventuallyreturnedtopartsoftheformerYugoslaviaoncethewars
ended.
TherefugeesfromtheformerYugoslaviatendedtomovetoparticularcountriesin
Europe.Therefugeesthensettledinparticularregionswithinthosecountries.Werelyon
thevariationacrossregionswithindifferentEuropeancountriestoidentifythelabor
marketimpactofthisspecificrefugeesupplyshock.
7.1SummaryStatistics
WeusecensusdataforsevenEuropeandestinationcountries:Austria,Greece,
Ireland,Portugal,Romania,Spain,andSwitzerland.Thesecountrieswerechosenbasedon
thefollowingcriteria.First,weonlyuseEuropeancountrieswithpubliclyavailablecensus
dataintheIPUMSarchive.Second,weonlyusecountrieswherewecanconstructa
"before"and"after"snapshotoftherelevantnationallabormarkets.Thetimingofthe
48
YugoslavWarssuggeststhatthecountriesmusthaveconductedacensusaround1990and
anothercensusaround2000.38Third,weneedtoenumerateanddeterminetheskill
distributionoftheBalkanrefugees,aswellasmeasuretheirimpactonthelabormarket
opportunitiesofcomparablenatives.Inotherwords,boththe“pre”and“post”censusesfor
eachcountrymustreportinformationoncountryoforiginandlabormarketoutcomes,and
mustreporteducationalattainmentinamannerthatiscomparableacrosscountries.
AlthoughothercountrieswererecipientsoflargenumbersofBalkanrefugeesatthe
time,thecensusdatapubliclyavailableforthoseothercountriesdonotsatisfyourcriteria.
TheFrenchcensus,forexample,doesnotreportthecountryoforiginofforeign-born
persons.Similarly,thecodingofeducationalattainmentfortheUKcensusesdiffers
significantlyfromthatusedbyothercountries.Finally,therelevantdataarenotavailable
foreitherGermanyorSweden.
Table12showsthatalmost260,000personsbornintheformerYugoslaviamoved
tothesevenEuropeancountriesinouranalysisduringthe1990s.39Thisrepresentsavery
modestincreaseofonly0.3percentintheaggregatepopulationofthosecountries.
However,aswithmanyrefugeesupplyshocks,therefugeesclusteredinarelativelysmall
numberofplaces.AlmostalloftheBalkanrefugeessettledintwoofthecountriesincluded
inouranalysis,AustriaandSwitzerland,withAustriareceiving76percentoftherefugees
andSwitzerlandreceiving17percent.And,withinthosetwocountries,therefugeeswere
furtherclusteredinspecificregions,providingsufficientvariationfortheidentificationof
theirlabormarketimpact.Forexample,Viennareceived34percentoftherefugeesin
Austria,butonly19percentofthenativepopulationresidedinthatcity.
Weagainexaminethelabormarketoutcomesofthenative-bornpopulationofmen
aged25-59inthevariousreceivingcountries.Table12reportsthattheBalkanrefugees
weredisproportionatelyofintermediateskills.While44percentofprime-agemeninthe
38Specifically,weusethe1991and2001censusesinouranalysisofAustria,Greece,Portugal,and
Spain;the1991and2002censusesforIreland;the1992and2002censusesforRomania;andthe1990and2000censusesforSwitzerland.
39WeobtainthisnumberbycomparingthestockofmigrantsfromYugoslaviacirca1990tothestockofmigrantsfromtheformerYugoslaviacirca2000.
49
receivingcountrieshadcompletedasecondaryeducation,67percentoftheBalkan
refugeeshaddoneso.
OuranalysisoftheBalkanrefugeesepisodeagaindefinesalabormarketasa
particularregion-educationcell,wheretheregionindexnowidentifiesaparticularregion
withinaparticularcountryofdestination.Thepubliclyavailablecensusdataallowsusto
identify65suchgeographicareas(across7differentcountries)inthreedifferenteducation
groups,sothatouranalysisexploitsvariationacross195cells.
AlthoughouranalysiscomplementsAngristandKugler’s(2003)initialexamination
ofthisspecificrefugeesupplyshock,thereareseveralkeydifferencesbetweentheirstudy
andours.Forexample,AngristandKuglerusedannualdatareportinglabormarket
outcomesandmigrantflowsinallEuropeancountries.40Theseannualdata,however,do
notprovideanyinformationontheeducationalattainmentoftheBalkanrefugeesoronthe
specificlocallabormarkets(inareceivingcountry)thatwereaffectedbythesupplyshocks.
Exploitingannualvariationonlabormarketoutcomesandonthesizeofsupplyshocks
enablesAngristandKuglertomorepreciselymeasurethechangesinemployment
observedaroundtheyearsoftheBosnianandKosovoWars.Butthelackofinformationon
educationalattainmentandthespecificwithin-countryregionsmostaffectedbythe
refugeesimpliesthattheymustrelyonaggregatedifferencesacrosscountriestoidentify
thelabormarketimpact.Inasense,ourapproachgeneratesagreaterdegreeofdispersion
acrossmarketsthatcanhelpidentification.Atthesametime,however,ourapproachlimits
thenumberofcountriesthatcanbeusedinsuchananalysis.
Figure5illustratesthatwithinoursetof7countries,itismainlysomeregionsin
AustriaandSwitzerlandthatwitnessedsignificantsupplyshocksofrefugeesfromthe
formerYugoslavia.Infact,therearesomeregionsinAustriawheretheinfluxofBalkan
refugeesincreasedthesizeoftheworkforcebyabout5percentinsomeeducationgroups,
whilein(someverysmallcellsin)Switzerlandthesizeofthesupplyshocksometimes
neared20percent.
40TheAngrist-KuglerannualdataaredrawnfromtheLaborForceSurveymaintainedbythe
Eurostat.
50
7.2Results
Table13reportscoefficientsobtainedfromthegeneric“owneffects”regression
modelsderivedinequations(5)and(7).ThepooledcensusesfromthesevenEuropean
countriesdonotcontainanyinformationonaworker'searnings,sothatourdependent
variablesare:thechangeintheunemploymentrate(definedasthefractionofthelabor
forceparticipantsinaregion-educationcellwhoareunemployed);andthechangeinthe
nativeemploymentrate(definedasthefractionofthepopulationinthecellthatis
employed).Notethatallregressionspecificationsreportedinthetableincludecountry-of-
destinationfixedeffects,sothattheimpactofthesupplyshockisbeingidentifiedfromthe
variationacrossregion-educationcellswithinaparticularcountry.41
TheOLScoefficientsofthe“own”labormarketimpactarereportedinthefirsttwo
columnsofthebottomtwopanelsofthetable.42ItisevidentthattheBalkanrefugeeshada
positiveandsignificanteffectonthenativeunemploymentrateandanegative(but
insignificant)effectonthenativeemploymentrate.Thepointestimatesuggeststhata5
percentrefugeesupplyshockincreasestheunemploymentrateofcompetingnativesby
about1percentagepoint.BecausethisparticularsupplyshockwaslargestinAustriaand
Switzerland,wheretheunemploymentratesin2000were5.5and2.0percent,respectively,
theBalkanrefugeeshadasizableeffectonnativelabormarketopportunitiesinthosetwo
countries.
Figure5illustratestherawdatathatgeneratesthispositivecorrelationbetweenthe
supplyshockandthechangeintheunemploymentrate.Itisevidentthatthepositive
unemploymenteffectisgeneratedbythewithin-countryvariationinthesizeofthesupply
shock.
Ofcourse,theBalkanrefugeesmaybeendogenouslychoosingwhichparticular
labormarkettomoveto(intermsofchoosingbothaparticularcountryofdestinationand
aparticularregionwithinthatcountry),obviouslypreferringtosettleinlocationsthat
offerthebestemploymentopportunities.Toaddresstheendogeneityconcern,weagain
41Itisimportanttocontrolforcountryfixedeffectsbecausedifferentcountriesweretryingto
convergeinmacroeconomicconditionspriortoenteringthecommoncurrencyunion.42Theregressionresultsaresimilarifweestimatetheregressionsusingonlyregional-education
variationinthetwocountries(AustriaandSwitzerland)thatreceivedmostoftheBalkanrefugees.
51
usethemigrationnetworkinstrument.Thequestion,ofcourse,iswhetherthepastshareof
workersfromtheformerYugoslavia(priortoitsbreakup)isagoodpredictorofwherethe
new(post-breakup)migrantsmoved.
Ourinstrumentalvariablesregressionagainexploitsthevariationacrossregions
withineachcountry.Interestingly,someregionsin(mainly)AustriaandSwitzerlandhad
largersharesofmigrantsfromtheformerYugoslaviapriorto1990andalsoreceivedmany
moremigrantsduringthe1990s.ThefirsttwocolumnsofthetoppanelofTable13reports
thefirststagecoefficient,whichispositiveandsignificant,andsuggeststhata10percent
highershareofmigrantsinaparticularregionpriorto1990resultedina1.4percent
increaseintheinflowrateduringthe1990s—relativetootherregionsinthesamecountry.
TheuseofIVtocontrolforthegeographicsortingoftheBalkanrefugeesdoesnot
fundamentallyalterourresults,buttheIVcoefficientsofthelabormarketimpactaremore
impreciselyestimated.Itisworthnotingthatourestimatesofthe“own”employment
effectsseemweakerthanthoseestimatedbyAngristandKugler(2003)usingcross-
countryvariation.Forinstance,AngristandKugler(2003,pp.F318,F322)reportthat100
moremigrantsleadto35or83fewernativejobs(dependingonwhethertheimpactis
estimatedusingOLSorIV,respectively).43
Aswenotedearlier,theBalkanrefugeesweredisproportionatelylocatedinthe
middleoftheeducationdistribution;67percentoftherefugeeshadacompletedsecondary
education,ascomparedto44percentofnatives.Weusethecross-effectsregressionmodel
derivedinequation(12)toseparatelyexaminehowthisparticularsupplyshockaffected
theemploymentoutcomesofnativepersonsatthetwoextremesoftheskilldistribution.
Table14summarizestheevidenceoncrosseffects.Notethattheexpanded
regressionmodelinequation(12)stillyieldsthefindingofadverseowneffects.Inother
words,therewasanincreaseintheunemploymentrateofnativeworkerswithasecondary
educationandadecreaseintheiremploymentrate.Equallyimportant,theinfluxofa
disproportionatelylargenumberofintermediate-skillrefugeesloweredtheunemployment
43TheAngrist-Kuglerpointestimatesassumeabaselineimmigrationlevelof5percent.Incontrast,
usingasettingsimilartoours,Glitz(2012)examinesvariationacrossGermanregionsthatweredifferentiallyaffectedbytheinflowofSovietmigrantsafterthecollapseoftheSovietUnion,andobtainsemploymenteffectsthatarequantitativelysimilartothosereportedinTable13.
52
rateandincreasedtheemploymentrateoflow-skillnativeswhohadatmostaprimary
education.Althoughthebeneficialcross-effectsonlow-skillnativesareoftennot
statisticallysignificant,thepointestimatesconsistentlysuggestthattheiremployment
outcomesimprovedbecauseoftheentryofsomanyrefugeesinthenexthigherrungofthe
skilldistribution.However,theevidenceonthepresenceofbeneficialcross-effectsforthe
mostskilledEuropeannatives,thosewhohadcompletedauniversityeducation,isfar
weaker.
8.Summary
Therecent(andcontinuing)entryofhundredsofthousandsofrefugeesintomany
Europeancountrieshasalreadygeneratedagreatdealofpoliticalcontroversyandraised
manyquestionsthatrequireafullerunderstandingofthedeterminantsandconsequences
ofrefugeesupplyshocks.Thispaperrevisitedsomeofthehistoricalrefugeeflowsto
documentthelabormarketconsequencesofrefugee-inducedincreasesinlaborsupply.
Specifically,ouranalysisreexaminestheevidencesurroundingfourepisodes:(1)
TheinfluxoftheMarielitosintoMiamiin1980;(2)theinfluxofFrenchrepatriatesand
AlgeriannationalsintoFranceattheendoftheAlgerianWarofIndependencein1962;(3)
theinfluxofJewishémigrésintoIsraelafterthecollapseoftheSovietUnionintheearly
1990s;and(4)theinfluxofrefugeesfromtheformerYugoslaviaintosomeEuropean
countriesduringthelongseriesofBalkanwarsbetween1991and2001.
Althoughthelabormarketconsequencesofeachoftheseshockshavebeen
separatelyexaminedinpriorstudies,ourexaminationoftheevidencediffersfromthe
priorliteratureinthreekeyways.First,weuseacommonempiricalapproach,basedonthe
implicationsoffactordemandtheory,todocumentthelabormarketconsequencesofeach
oftherefugeesupplyshocks.Despitetheobviousdifferencesinthehistorical,economic,
andpoliticalforcesthatmotivatedthevariousrefugeeflows,theuseofthesameempirical
frameworktostudyeachoftheepisodesrevealsacommonthreadintheevidence:
Exogenoussupplyshocksadverselyaffectthelabormarketopportunitiesofcompeting
nativesinthedestinationcountries.
53
Insomecontexts,ofcourse,thisresultimpliesthatarefugeesupplyshockwill
mainlyharmlow-skillworkersinsomeregionsofthereceivingcountry(aswasthecase
withtheinfluxofMarielitosintoMiamiortheinfluxofAlgeriannationalsintoFrance).In
othercases,however,itisthehigh-skillworkforceinthereceivingcountrythatbearsthe
bruntoftheimpact(aswasthecasewithhigh-skillIsraeliscompetingwithlargenumbers
ofhigh-skillSovietémigrés).
Second,theverydifferentskilldistributionsofnativesandrefugeesinsomeofthese
episodessuggeststhatthesenaturalexperimentscanbefurtherexploitedtoidentifythe
impactofthesupplyshocksonpotentiallycomplementarynativegroups.Forexample,the
low-skillMarielitosmayhaveincreasedthewageoremploymentopportunitiesofhigh-skill
Miamians,whilethehigh-skillSovietémigrésmayhavebenefitedlow-skillIsraelis.These
complementaritiesshouldobviouslybeanimportantpartofanyassessmentofhow
refugeesupplyshocksaltertheemploymentopportunitiesofnativeworkers.Ourempirical
analysisdocumentsthat,inmanycases,thesebeneficialeffectsdoindeedexistandare
numericallyimportant.
Finally,ratherthanrelyonproprietaryorconfidentialdata,weonlyusethepublicly
availablecensusmicrodatamaintainedatIPUMS.Ouruseofeasilyaccessibledatato
examinetheimpactofrefugeesupplyshocksimpliesthatourresultsarefullyreproducible.
Thereproducibilityoftheevidenceinthiscontextisessentialbecausetherecentrefugee
supplyshocksinEuropehavealreadysparkedextremelycontentiouspolicydebatesin
manyreceivingcountries.
Ourempiricalanalysisofthefourhistoricalepisodesofrefugeesupplyshocks
teachesanimportantlesson.Althoughtheseepisodesdifferincountlessways,auniversal
themeseemstoconnecttheevidence.Putbluntly,thehumanitarianprinciplesthat
encouragereceivingcountriestoacceptasmanymigrantsaspossiblehaveimportant
distributionalconsequences,aspredictedbythecanonicalmodelofsupplyanddemandin
thelabormarket.
54
Appendix:SkillDowngradingasanOmittedVariable Asimplewaytothinkaboutskilldowngradingistoassumethatanexogenous(andconstant)fractionπofthehigh-skillrefugeesactuallyenterthelow-skillmarket.Equations(10a)and(10b)showthatthechangeinlabormarketoutcomesforthetwoskillgroupshanduaredeterminedby:
Δ logwrh = θ− ηMrh
Lrh1−ηπ −Mrh
Lrh1+erh ,
Δ logwru = θ− ηMru
Lru1− ηπMrh
Lru1+eru .
Thisimpliesthattheestimatingequationcanbewrittenas:(A1) Yr = α + βXr + γ Zr + εr , wherethevectorYr=(Δlogwrh, Δ logwru)and,
Xr = (xrh , xru ) =Mrh
Lh1,Mru
Lru1
⎛⎝⎜
⎞⎠⎟,
Zr = (zrh , zru ) =−Mrh
Lrh1,Mrh
Lru1
⎛⎝⎜
⎞⎠⎟.
Withoutlossofgenerality,wecanmeasurevariablesasdeviationsfromtheirmeans.
Ifweestimateequation(A1)usingOLS,butexcludingZ,wehaveastandardproblemofomittedvariablebias.ThebiasdependsonthecovariancebetweenXandZ:
plim β̂ = β + γ plimxrjzrjr , j∑xrj2
r , j∑ .
Wecanfurthersimplify:
Bias = γ plimxrjzrjr , j∑xrj2
r , j∑ = γ plimxrhzrh + xruzrur∑r∑xrh2 + xru
2r∑r∑ .
Defineσh
2 =Var(Mrh / Lrh1) ;σu2 =Var(Mru / Lru1) ;andσhu = Cov(Mrh / Lrh1,Mru / Lru1) .
Thevariances(σh2 ,σu
2) measurethedispersioninhigh-skillandlow-skillrefugeesupply
55
shocksacrossmarketsr,andthecovarianceσhumeasurestherelationbetweenhigh-skillsupplyshocksandlow-skillsupplyshocks.Itthenfollowsthat:
plim xrhzrhr∑⎛⎝⎜
⎞⎠⎟= plim Mrh (−Mrh )
Lrh1Lrh1r∑⎛⎝⎜
⎞⎠⎟= −σh
2,
plim xruzrur∑⎛⎝⎜
⎞⎠⎟= plim MruMrh
Lru1Lru1r∑⎛⎝⎜
⎞⎠⎟= plim Mru
Lru1
Mrh
Lrh1
Lrh1Lru1r
∑⎛⎝⎜⎞⎠⎟= σhuR,
where R = plim(Lrh1 / Lru1). Forsimplicity,weconsiderthecasewhere“skills”aredefinedsothattheskilldistributionofthenativeworkforceis“balanced,”andR=1.Italsofollowsthat:
plim xrh2 + xru
2
r∑
r∑⎛⎝⎜
⎞⎠⎟= plim Mrh
Lrh1
⎛⎝⎜
⎞⎠⎟
2
r∑ + Mru
Lru1
⎛⎝⎜
⎞⎠⎟
2
r∑
⎛
⎝⎜
⎞
⎠⎟ = σh
2 +σu2.
Thecorrelationbetweenhigh-andlow-skillsupplyshocksacrossmarketsisgivenby
ρhu =σhu /σhσu. Combiningexpressionsyieldsequation(10)inthetext:
plim η̂ = η− ηπ σh2
σh2 +σu
2 1−ρhuσu
σh
⎡
⎣⎢
⎤
⎦⎥.
56
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Figure1.TheimpactoftheMarielsupplyshockonnativewages
Notes:Thisfigureplotsthechangeinthewageofnativemenaged25-59againstthesizeofthemigrantinflowineachcity-educationcellusingtheMarchCPSsurveyyearsof1978-1980asthepre-migrationperiodandtheMarchCPSsurveyyearsof1982-1985asthepost-migrationperiod.Eachdotrepresentsacity-educationcell.Thesizeofthedotsrepresentsthesizeofthecells.Blue,red,green,andyellowdotsindicate“lessthanprimary”,“Primarycompleted”,“Secondarycompleted”,and“Universitycompleted”respectively.Thefigureexploitsvariationacross38metropolitanareasand4educationgroups.
59
Figure2.TheimpactoftheSovietémigrésonnativewages
Notes:Thisfigureplotsthe1983-1995changeintheannualearningsofnativeIsraelimenaged25-59againstthesizeofthemigrantinflowineachcell.Eachdotrepresentsaneducation-occupationcell.Blue,red,green,andyellowdotsindicate“lessthanprimary”,“Primarycompleted”,“Secondarycompleted”,and“Universitycompleted”respectively.Thesizeofthedotsrepresentsthesizeofthecells,measuredbytheoptimalweightsusedintheregressiontables.Thefigureexploitsvariationacross4educationsgroupsand8occupationcategories.
60
Figure3.Sovietinflowsandlanguageusepriortothesupplyshock
Notes:ThefigureplotstheinflowofSovietémigrésagainsttheshareofworkerswhospeakHebrewastheirfirstlanguagein1983andwhowerenotfromtheSovietUnion.Weremoveeducationfixedeffectsfrombothvariables.Eachdotrepresentsaneducation-occupationcell.Blue,red,green,andyellowdotsindicate“lessthanprimary”,“Primarycompleted”,“Secondarycompleted”,and“Universitycompleted”respectively.Thefigureexploitsvariationacross4educationsgroupsand8occupationcategories.
61
Figure4.TheimpactofthesupplyshocksaftertheAlgerianWaronthenativeunemploymentrate
A.TheFrenchrepatriates
B.TheAlgeriannationals
Notes:Thefigureplotsthe1962-1968changeintheunemploymentrateofFrenchnativemenaged25-59againstthesizeofthemigrantinflowineachcell.Eachdotrepresentsaregion-educationcell.ThetopfigureshowstheimpactoftheFrenchrepatriatesandthebottomfigureshowstheimpactoftheAlgeriannationals.Blue,red,green,andyellowdotsindicate“lessthanprimary”,“Primarycompleted”,“Secondarycompleted”,and“Universitycompleted”respectively.Thesizeofthedotsrepresentsthesizeofthecells.Thefigureexploitsvariationacross4educationgroupsand22locations.
62
Figure5.TheimpactoftheBalkanrefugeesonthenativeunemploymentrate
Notes:Thefigureplotsthechangeintheunemploymentrateofnativemenin7EuropeancountriesagainstthesizeofthemigrantinflowineachcellbetweentheCensusyearclosestto1990andtheCensusyearclosestto2000foreachofthecountriesused.Eachdotrepresentsacountryofdestination-regionwithinthecountry-educationcell.Countryfixedeffectsareremovedinthegraph.Differentcolorsrepresentthedifferentcountriesused:Austria,Greece,Ireland,Portugal,Romania,Spain,andSwitzerland.Thesizeofthedotsrepresentsthesizeofthecells.Thefigureexploitsvariationacross3educationgroupsand65locations.
Table1.Overviewofthefourrefugeesupplyshocks
Numberofrefugees
(in1000s)
Refugeesupplyshock: AllMenaged25-59
Localities/occupationsmostaffected
Predominantskillsoftherefugees
Increaseinsupplyofmostaffectedgroup
1.Mariel,1980 120.6 47.9 Miami Highschooldropouts31.9%(malehighschooldropoutsinMiami)
2.SovietémigréstoIsrael,1990 476.5 101.6
Skilledworkersinindustryandconstruction Collegegraduates
267.9%(malecollegegraduatesin“skilled
workersinindustryandconstruction”)
3.TheAlgerianIndependenceWar,1962
A.FrenchRepatriates 1358.9 302.0Provence-Alpes-Cote
d'AzurBalancedacross
groups10.2%(meninProvence-
Alpes-Coted'Azur)
B.AlgerianNationals 162.1 77.1Provence-Alpes-Cote
d'AzurLessthanprimary
schooling
5.8%(menwithlessthanprimaryschoolinginIle
deFrance)
4.TheYugoslavWars,1991-2001 258.6 65.1SomecitiesinAustriaandSwitzerland
Secondaryschoolingcompleted 4.6%(meninVienna)
Table2.SizeandskillcompositionoftheMarielsupplyshock Censusdata,1990 Marielitos Natives %increaseinsupplyAllpersons(in1000s) 120.6 247339.0 0.05Aged25-59 73.2 105674.6 0.1Men,25-59 47.9 51696.4 0.1
%ofmenaged25-59witheducation: Highschooldropouts 62.2 20.1 0.3Highschoolgraduates 17.3 27.7 0.1Somecollege 13.8 26.3 0.0Collegegraduates 6.6 25.9 0.0
Samplesize,men25-59 2211 2577549 Censusdata1990,Miamicounts Marielitos Natives %increaseinsupplyAllpersons(in1000s) 69.4 852.7 0.08Aged25-59 54.7 576.0 0.09Male,aged25-59 34.5 290.5 0.12
%ofmenaged25-59witheducation: Highschooldropouts 62.4 23.2 31.9Highschoolgraduates 15.9 21.7 8.7Somecollege 14.5 27.5 6.3Collegegraduates 7.2 27.6 3.1
Samplesize,men25-59 833 6692 MarchCPSdata,pooled1978-1984surveys Samplesize Δlogwage ΔunemploymentrateOutsideMiami Highschooldropouts 8718 -0.17 0.06Highschoolgraduates 20299 -0.15 0.04Somecollege 12431 -0.12 0.03Collegegraduates 19898 -0.06 0.01
Miami Highschooldropouts 146 -0.41 0.04Highschoolgraduates 218 0.02 0.03Somecollege 107 -0.09 -0.06Collegegraduates 192 -0.02 -0.03
Notes:Thetoptwopanelsreportdatafromthe1990Censusbasedon1985locations,withagelevelsreferringto1985.TheMarielitosareCubanimmigrantswhoarrivedintheUnitedStatesin1980or1981;thenativesarepersonswhoareneithernon-citizensnornaturalizedcitizens.Thebottompanelreportsstatisticscalculatedinthesampleofnon-Hispanicmenaged25-59,wholiveinoneofthe38metropolitanareas.The(Δlogwage)and(Δunemploymentrate)variablesgivetheaveragechangebetweenthepooled1978-1980CPSsurveysandthepooled1982-1985surveys.The1981survey,whichreportsearningsforthe1980calendaryear,isnotusedinthecalculations.
65
Table3.TheimpactoftheMarielsupplyshockoncompetingworkers OLS IV (1) (2) (3) (4)A.Firststage Laggedsupplyshock 1.260 1.262 --- --- (0.053) (0.053) Changeinnativepopulation --- -0.002 --- --- (0.001)
B.Changeinlogweeklywage Marielsupplyshock -1.313 -1.350 -1.264 -1.310 (0.338) (0.346) (0.320) (0.322)Changeinnativepopulation --- 0.039 --- 0.039 (0.045) (0.038)
C.Changeinunemploymentrate Marielsupplyshock 0.060 0.066 0.007 0.015 (0.072) (0.075) (0.079) (0.083)Changeinnativepopulation --- -0.007 --- -0.006 (0.019) (0.016)
D.Changeinemploymentrate Marielsupplyshock -0.001 -0.001 0.052 0.053 (0.092) (0.097) (0.102) (0.107)Changeinnativepopulation --- -0.000 --- -0.001 (0.025) (0.021)
Notes:Robuststandarderrorsarereportedinparentheses.Theunitofobservationisacity-educationcell,andthedataconsistof38metropolitanareasand4educationgroups.The“Marielsupplyshock”variablegivestheratioofthenumberofMarielitosinthecelltothenumberofnativesinthecellasof1985.The“changeinnativepopulation”variablegivesthelogdifferenceinthenumberofnativepersonsinthecellbetween1980and1985.ThefirststageregressioninPanelArelatestherelativeinflowofMarielitosinthecellasof1985totheshareofCubansinthecellasof1980.Allregressionshave152observationsandincludebotheducationfixedeffectsandmetropolitanareafixedeffects.
66
Table4.OwnandcrosseffectsoftheMarielsupplyshock
Highschool
dropouts
Highschool
graduate
Some
college
College
graduates
A.Changeinlogweeklywage -0.857 0.653 0.217 0.097
(0.383) (0.331) (0.458) (0.442)
B.Changeinunemploymentrate -0.156 -0.136 -0.386 -0.170
(0.223) (0.192) (0.197) (0.080)
C.Changeinemploymentrate 0.147 0.164 0.419 0.046
(0.295) (0.235) (0.303) (0.136)
Notes:Standarderrorsarereportedinparentheses.Theunitofobservationisacity,andthereare38
metropolitanareasintheanalysis.Thetablereportsthecoefficientofthe“Marielsupplyshockforlow-skill
workers,”whichgivestheratioofthenumberofMarielitoswhoarehighschooldropoutstothenumberofnativeswhoarehighschooldropoutsin1985intheparticularcity.Theregressionsalsocontainregressors
givingthechangeinthesizeofthenativepopulationofeachofthefoureducationgroups.Theregressionsare
estimatedseparatelyforeacheducationgroupusingIVandhave38observations.
67
Table5.SizeandskillcompositionofSovietémigrésinIsrael,1995
Émigrés
Natives%increaseinsupply
Allpersons(in1000s) 476.4 4924.4 9.7Aged25-59 223.6 1898.7 11.8Menaged25-59 101.6 934.4 10.9
%ofmenaged25-59witheducation: Lessthanprimary 4.5 11.7 4.2
Primarycompleted 6.2 20.7 3.3Secondarycompleted 46.0 49.6 10.1Universitycompleted 43.2 18.0 26.2
%ofmenaged25-59workingas: Academicprofessionals 14.7 11.6 15.3
Associateprofessionalsandtechnicians 8.2 9.5 10.4Managers 1.0 9.4 1.3Clericalworkers 3.6 10.1 4.3Agents,salesworkersandserviceworkers 5.7 13.9 5.0Skilledagriculturalworkers 1.3 3.3 4.9Skilledworkersinindustryandconstruction 51.1 35.0 17.6Unskilledworkers 14.3 7.2 24.1
%ofmenaged25-59withuniversityeducationworkingas: Academicprofessionals 29.9 50.5 17.1
Associateprofessionalsandtechnicians 11.6 10.4 32.2Managers 1.6 18.0 2.6Clericalworkers 4.8 8.4 16.4Agents,salesworkersandserviceworkers 5.3 6.6 23.3Skilledagriculturalworkers 1.0 1.2 24.0Skilledworkersinindustryandconstruction 35.6 3.8 267.9Unskilledworkers 10.2 1.2 249.3
SampleSize:Menaged25-59 10160 93443 Δlogearnings SamplesizeAverageinIsrael,excludingskilledworkersinindustryandconstruction
Lessthanprimary 0.12 12470Primarycompleted 0.13 25717Secondarycompleted 0.07 58279Universitycompleted 0.17 24770
Skilledworkersinindustryandconstruction Lessthanprimary 0.00 2271Primarycompleted 0.01 3123Secondarycompleted -0.12 2748Universitycompleted -0.39 542
Notes:ThesampleofSovietémigrésconsistsofpersonsbornintheformerSovietUnionwhodidnotresideinIsraelin1990.ThesampleofIsraelinativesisIsraelinativesconsistsofpersonswhowerenotbornintheformerSovietUnion.ThebottompanelreportsstatisticscalculatedinthesampleofIsraelinativemenaged25-59.The(Δlogearnings)variablegivestheaveragechangeinannualearningsbetweenthe1983and1995censusesfortheparticulargroup.
68
Table6.TheimpactofSovietémigrésoncompetingworkersinIsrael
OLS IV
(1) (2) (3) (4)
A.Firststage
Laggedsupplyshock 2.686 2.659 --- ---
(0.514) (0.552)
Changeinnativepopulation --- 0.007 --- ---
(0.037)
B.Changeinlogannualearnings
Émigrésupplyshock -0.730 -0.740 -0.616 -0.611
(0.266) (0.298) (0.316) (0.334)
Changeinnativepopulation --- 0.009 --- -0.004
(0.083) (0.071)
Notes:Robuststandarderrorsarereportedinparentheses.Theunitofobservationisanoccupation-
educationcell,andthedataconsistof8occupationsand4educationgroups.The“émigrésupplyshock”
variablegivestheratioofthenumberofSovietémigrésinthecelltothetotalsizeofthecellasof1995.The
“changeinnativepopulation”variablegivesthelogdifferenceinthenumberofnativepersonsinthecell
between1983and1995.ThefirststageregressioninPanelArelatestheshareofSovietémigrésinthecellas
of1995totheshareofSovietimmigrantsinthecellasof1983.Allregressionshave32observationsand
includeeducationfixedeffects.
69
Table7.OwnandcrosseffectsoftheSovietémigrésinIsrael Lessthan
primaryPrimarycompleted
Secondarycompleted
Universitycompleted
Changeinlogannualearnings 0.350 -0.070 -0.083 -0.739 (0.184) (0.117) (0.121) (0.208)
Notes:Standarderrorsarereportedinparentheses.Theunitofobservationisanoccupation,andthereare8occupationsintheanalysis.Thetablereportsthecoefficientofthe“émigrésupplyshockforhigh-skillworkers,”whichgivestheratioofthenumberofSovietémigréswhocompletedauniversityeducationrelativetothenumberofnativeswhoalsocompletedauniversityeducationin1995intheparticularoccupation.Theregressionsalsocontainregressorsgivingthechangeinthesizeofthenativepopulationfortheowneducationgroup.TheregressionsareestimatedseparatelyforeachoccupationgroupusingIVandhave8observations.
70
Table8.Sensitivityteststoskilldowngrading
Regressor: (1) (2) (3) (4)
Measureofsupplyshock:
Predictedinflowusingnativeoccupational
distributionwithinaneducationgroup 0.257 -0.228 --- ---
(0.683) (0.937)
Predictedinflowusingnativeeducational
distributionwithinanoccupationgroup --- --- -0.718 -0.729
(0.251) (0.320)
Changeinnativepopulation --- -0.087 --- 0.006
(0.104) (0.100)
Notes:Robuststandarderrorsarereportedinparentheses.Theunitofobservationisanoccupation-
educationcell,andthedataconsistof8occupationsand4educationgroups.Thedependentvariableisthe
changeinlogannualearningsbetween1983and1995fornativeIsraelisineachcell.Theregressorgivingthe
“predictedinflowusingnativeoccupationaldistributionwithinaneducationgroup”givestheémigrésupply
shockcalculatedafterassigningSovietémigrésineacheducationgrouptooccupationsaccordingtothe
occupationaldistributionofnativeswithineacheducationgroup.Theregressorgivingthe“predictedinflow
usingnativeeducationaldistributionwithinanoccupationgroup”givestheémigrésupplyshockcalculated
afterassigningSovietémigrésineachoccupationtoaneducationalcategorybasedontheeducation
distributionofnativesineachoccupationcategory.Allregressionshave32observationsandinclude
educationfixedeffects.
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Table9.SizeandskillcompositionoftheAlgeriansupplyshock,1968 %increaseinsupply
French
repatriatesAlgeriannationals
Frenchnatives
FrenchRepatriates
Algeriannationals
Allpersons(in1000s) 1358.9 162.1 45732.6 3.0 0.4Aged25-59 595.0 87.8 18610.0 3.2 0.5Male,Aged25-59 302.8 77.1 9079.9 3.3 0.8
%ofmenaged25-59witheducation: Lessthanprimary 26.1 96.3 37.2 2.3 2.2
Primarycompleted 36.8 2.5 36.4 3.4 0.1Secondarycompleted 25.8 1.0 20.2 4.3 0.0Universitycompleted 11.2 0.2 6.1 6.1 0.0
%ofmenaged25-59livingin: IledeFrance 21.3 35.2 18.9 3.8 1.6
Lorraine 3.1 7.3 4.4 2.3 1.4RhoneAlpes 9.7 16.4 8.8 3.7 1.6Provence-Alpes-Coted'Azur 19.2 15.6 6.3 10.2 2.1
%oflow-skillmenaged25-59livingin: IledeFrance 17.3 34.6 13.1 3.1 5.8
Lorraine 2.8 7.5 4.3 1.5 3.9RhoneAlpes 10.6 16.8 8.2 3.0 4.5Provence-Alpes-Coted'Azur 22.9 15.8 6.2 8.6 5.6
Samplesizeofmen,aged25-59 15139 3857 453993
Δunemploymentrate Δemploymentrate SamplesizeAverageinFrance:
Lessthanprimary 0.01 0.01 462579Primarycompleted 0.01 0.01 330784Secondarycompleted 0.00 0.00 159991Universitycompleted 0.00 0.00 49703
AverageinProvence-Alpes-Coted'Azur: Lessthanprimary 0.02 -0.03 32188Primarycompleted 0.01 0.00 20872Secondarycompleted 0.01 0.01 9886Universitycompleted 0.01 0.01 3466
Notes:ThesampleofFrenchrepatriatesconsistsofFrenchcitizenswhowerenotlivinginFrancein1962;thesampleofAlgeriannationalsconsistsofAlgerianswhowerenotlivinginFrancein1962;andthesampleofFrenchnativesconsistsofFrenchcitizenswhowerelivinginFrancein1962.ThebottompanelreportsstatisticscalculatedinthesampleofFrenchnativemenaged25-59.The(Δunemploymentrate)and(Δemploymentrate)variablesgivetheaveragechangebetweenthe1962and1968censusesfortheparticulargroup.
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Table10.TheimpactofFrenchrepatriatesandAlgeriannationalsonFrenchnatives
OLS IV (1) (2) (3) (4)A.Firststage:shareofrefugees Laggedrepatriatesupplyshock 1.283 0.067 --- --- (0.115) (0.053) LaggedAlgeriansupplyshock -0.063 0.558 --- --- (0.076) (0.027)
B.Changeinunemploymentrate Repatriatesupplyshock 0.063 0.067 0.089 0.096 (0.040) (0.041) (0.038) (0.039)Algeriansupplyshock 0.270 0.265 0.247 0.240 (0.067) (0.069) (0.067) (0.069)Changeinnativepopulation --- -0.006 --- -0.009 (0.011) (0.011)
C.Changeinemploymentrate Repatriatesupplyshock -0.075 -0.057 -0.100 -0.083 (0.066) (0.069) (0.077) (0.081)Algeriansupplyshock -0.647 -0.666 -0.636 -0.651 (0.206) (0.211) (0.222) (0.226)Changeinnativepopulation --- -0.022 --- -0.019 (0.029) (0.027)
Notes:Robuststandarderrorsarereportedinparentheses.Theunitofobservationisaregion-educationcell,andthedataconsistof22regionsand4educationgroups.The“repatriatesupplyshock”and“Algeriansupplyshock”variablesgivetheratioofthenumberofFrenchrepatriatesorthenumberofAlgeriannationalsinthecelltothenumberofFrenchnativesinthecellasof1968.The“changeinnativepopulation”variablegivesthelogdifferenceinthenumberofnativepersonsinthecellbetween1962and1968.ThefirststageregressioninPanelArelatesthesesharestotherespectivesharesasof1962.Allregressionshave88observationsandincludeeducationfixedeffects.
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Table11.OwnandcrosseffectsofthesupplyshockofAlgeriannationals Lessthan
primary
Primary
Secondary
UniversityA.Changeinunemploymentrate 0.319 0.059 0.014 -0.039 (0.097) (0.067) (0.085) (0.093)
B.Changeinemploymentrate -0.662 -0.295 -0.349 -0.229 (0.239) (0.131) (0.139) (0.169)
Notes:Standarderrorsarereportedinparentheses.TheunitofobservationisaFrenchregion,andthereare22regionsintheanalysis.Thetablereportsthecoefficientofthe“Algeriansupplyshockforlow-skillworkers”variable,whichgivesthecoefficientoftheratioofthenumberofAlgeriannationalswhohavelessthanprimaryeducationtothenumberofnativeswithoutaprimaryeducationin1968intheparticularcity.Theregressionsalsocontainregressorsgivingthechangeinthesizeofthenativepopulationforeachofthefoureducationgroups.TheregressionsareestimatedseparatelyforeacheducationgroupusingIVandhave22observations.
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Table12.SizeandskillcompositionofrefugeesfromtheformerYugoslavia,2000 Refugees Europeannatives %increaseinsupply
Allpersons(in1000s) 258.6 94052.4 0.3
Aged25-59 170.2 49435.0 0.3
Male,Aged25-59 65.1 24611.1 0.3
Educationdistribution,menaged25-59
Primarycompletedorless 25.1 44.4 0.1
Secondarycompleted 67.0 44.1 0.4
Universitycompleted 7.9 11.5 0.2
%ofmenaged25-59livingin: Austria 75.8 7.7 2.6
Greece 2.9 10.0 0.1
Ireland 0.9 3.6 0.1
Portugal 0.2 9.9 0.0
Romania 0.9 20.5 0.0
Spain 2.0 41.5 0.0
Switzerland 17.4 6.8 0.7
%ofmenaged25-59inAustrialivingin: Burgenland,AUT 2.3 3.6 1.7
Niederosterreich,AUT 12.4 19.7 1.6
Wien,AUT 33.5 18.9 4.6
Karnten,AUT 6.8 6.9 2.6
Steiermark,AUT 11.8 14.9 2.1
Oberosterreich,AUT 16.1 16.9 2.5
Salzburg,AUT 7.4 6.3 3.1
Tirol 6.3 8.5 1.9
Vorarlberg,AUT 3.3 4.4 2.0
Samplesize:menaged25-59 5871 1744826
AverageinAustria Δunemploymentrate Δemploymentrate Samplesize
Primarycompletedorless 0.03 -0.01 76838
Secondarycompleted 0.01 -0.01 268539
Universitycompleted 0.01 -0.00 30759
AverageinVienna:
Primarycompletedorless 0.02 -0.01 17787
Secondarycompleted 0.03 -0.01 48006
Universitycompleted 0.00 -0.00 10100
Notes:ThesampleofrefugeesfromtheBalkanWarsconsistsofpersonsbornintheformerYugoslavia,butwhomigratedtooneofthesevenEuropeancountriesbetween1990and2000.ThesampleofEuropean
nativesconsistsofpersonsnotbornintheformerYugoslavia.Thebottompanelreportsstatisticscalculated
inthesampleofEuropeannativemenaged25-59.The(Δunemploymentrate)and(Δemploymentrate)variablesgivetheaveragechangebetweenthe1990and2000censusesfortheparticulargroup.
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Table13.TheimpactoftheBalkansupplyshockoncompetingworkers OLS IV (1) (2) (3) (4)A.Firststage:shareofrefugees LaggedBalkansupplyshock 0.152 0.144 --- --- (0.036) (0.036) Changeinnativepopulation --- 0.004 --- --- (0.005)
B.Changeinunemploymentrate Balkansupplyshock 0.209 0.209 0.456 0.487 (0.078) (0.103) (0.311) (0.376)Changeinnativepopulation --- -0.000 --- -0.003 (0.016) (0.017)
C.Changeinemploymentrate Balkansupplyshock -0.001 -0.000 -0.084 -0.091 (0.020) (0.022) (0.109) (0.116)Changeinnativepopulation --- -0.000 --- 0.001 (0.002 (0.002
Notes:Robuststandarderrorsarereportedinparentheses.Thetableexploitsvariationacross3educationgroupsand65regionslocatedin7differentcountries.Theunitofobservationisacountry-region-citycell.The“Balkansupplyshock”variablegivestheratioofthenumberofBalkanrefugeesinthecelltothenumberofnativesinthecellasof2000.The“changeinnativepopulation”variablegivesthelogdifferenceinthenumberofnativepersonsinthecellbetween1990and2000.ThefirststageregressioninPanelArelatestheshareofBalkanrefugeesinthecellasof2000totheshareofYugoslavianmigrantsinthecellasof1990.Allregressionshave195observationsandincludebotheducationfixedeffectsandcountryofdestinationfixedeffects.
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Table14.CrosseffectsoftheBalkansupplyshock Primary
educationorless
Secondary
UniversityA.Changeinunemploymentrate -1.412 1.056 -0.008 (0.951) (0.754) (0.411)
B.Changeinemploymentrate 0.330 -0.103 -0.038 (0.169) (0.058) (0.051)Notes:Standarderrorsarereportedinparentheses.Theunitofobservationisacountry-regioncell,andthereare65regionslocatedin7differentcountries..Thetablereportsthecoefficientofthe“Balkansupplyshockformiddle-skillworkers,”whichgivestheratioofthenumberofBalkanrefugeeswhohadcompletedtheirsecondaryeducationtothenumberofnativeswhoalsocompletedasecondaryeducationin2000intheparticularcountry-regioncell.Theregressionsalsocontainregressorsgivingthechangeinthesizeofthenativepopulationforeachofthethreeeducationgroups.TheregressionsareestimatedseparatelyforeacheducationgroupusingIVandhave65observations.