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Macroeconomic and Labor Market Impact of Russian Immigration in Israel

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  • Sarit Cohen

    ()
    (Department of Economics, Bar Ilan University)

  • Chang-Tai Hsieh

    (Princeton University)

Abstract

From the end of 1989 to 1997, over 710 thousand Russian Jews emigrated to Israel, increasing Israel-s working-age population by 15 percent. This paper argues that a canonical one-sector neoclassical growth model explains both the short run and the medium run response of Israel,s economy to this shock. Specifically, we show that average effective wages of native Israelis fell and the return to capital increased during the height of the influx in 1990 and 1991. By 1997 however, both average wages and the return to capital had returned to pre-immigration levels due to an investment boom induced by the initial increase in the return to capital. As predicted by an intertemporal model of the current account, the investment boom was largely financed by external borrowing. Furthermore, despite the high educational levels of the Russian immigrants, the Russian influx did not lower the skill-premia of native Israelis. We show that this result is not explained by Rybczynski-type output composition changes but because the Russian immigrants suffered from substantial occupational downgrading in Israel and thus did not change the relative supply of skilled workers in Israel.

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File URL: http://www.biu.ac.il/soc/ec/wp/11-01/11-01.pdf
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Bibliographic Info

Paper provided by Department of Economics, Bar-Ilan University in its series Working Papers with number 2001-11.

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Date of creation: May 2001
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Handle: RePEc:biu:wpaper:2001-11

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Postal: Faculty of Social Sciences, Bar Ilan University 52900 Ramat-Gan
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Web page: http://econ.biu.ac.il
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  1. Yoram Weiss & Robert M. Sauer & Menachem Gotlibovski, 2003. "Immigration, Search, and Loss of Skill," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 557-592, July.
  2. Elise Brezis & Paul Krugman, 1996. "Immigration, investment, and real wages," Journal of Population Economics, Springer, vol. 9(1), pages 83-93, February.
  3. Rachel M. Friedberg & J. Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Working Papers 95-5, Brown University, Department of Economics.
  4. Eckstein, Z. & Weiss, Y., 1999. "The Integration of Immigrants from the Former Soviet Union in the Israeli Labor Market," Papers 33-99, Tel Aviv.
  5. Friedberg, Rachel M, 2000. "You Can't Take It with You? Immigrant Assimilation and the Portability of Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 221-51, April.
  6. Hercowitz, Zvi & Yashiv, Eran, 2001. "A Macroeconomic Experiment in Mass Immigration," CEPR Discussion Papers 2983, C.E.P.R. Discussion Papers.
  7. Rachel M. Friedberg, 2001. "The Impact Of Mass Migration On The Israeli Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1373-1408, November.
  8. Gordon H. Hanson & Matthew J. Slaughter, 1999. "The Rybczynski Theorem, Factor-Price Equalization, and Immigration: Evidence from U.S. States," NBER Working Papers 7074, National Bureau of Economic Research, Inc.
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Cited by:
  1. Cohen-Goldner, Sarit & Eckstein, Zvi, 2010. "Estimating the return to training and occupational experience: The case of female immigrants," Journal of Econometrics, Elsevier, vol. 156(1), pages 86-105, May.
  2. Timothy J. Hatton & Jeffrey G. Williamson, 2006. "What Determines Immigration's Impact? Comparing Two Global Centuries," NBER Working Papers 12414, National Bureau of Economic Research, Inc.
  3. Jeffrey G. Williamson, 2007. "Global Capital Markets in the Long Run: A Review of Maurice Obstfeld and Alan Taylor's Global Capital Markets," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 400-409, June.
  4. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  5. Cohen-Goldner, Sarit & Paserman, Daniele, 2004. "Mass Migration to Israel and Natives' Transitions from Employment," IZA Discussion Papers 1319, Institute for the Study of Labor (IZA).
  6. O'Connor, Peter & Stephenson, John & Yeabsley, John, 2012. "Grow for it - How population policies can can promote economic growth," NZIER Working Paper 2012/1, New Zealand Institute of Economic Research.

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