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Skilled Immigration and Wages in Australia

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Author Info
Asadul Islam
Dietrich K. Fausten

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Abstract

This paper addresses the implications of the increasing skill intensity of cross-border migration flows for labour market outcomes in host countries. Specifically, we investigate the impact of the relative growth of skilled migrants on domestic wages in Australia over the last quarter century (1980-2006). We use instrumental variable (IV) estimation techniques to deal with the potential endogeneity of immigration. Unlike most of the previous literature, we use macro data to allow for the adjustment of wages and aggregate demand to immigration flows. However, the limited time span of such data raises problems of small sample bias. We address the small sample bias problem by using Jackknife IV estimation. Our basic finding challenges popular presumptions about the adverse wage implications of immigration. However, our examination of the skill composition of migration flows supports the many prevailing empirical findings that immigration need not cause labour market outcomes to deteriorate. Specifically, we do not find any robust evidence that a relative increase in arrivals of skilled immigrants exerts discernible adverse consequences on wages in Australia.

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Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 36/07.

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Length: 46 pages
Date of creation: 03 Nov 2007
Date of revision:
Handle: RePEc:mos:moswps:2007-36

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Related research
Keywords: Immigration; wage; endogeneity; instrumental variable.;

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Find related papers by JEL classification:
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other

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  11. Adriana D. Kugler & Robert M. Sauer, 2005. "Doctors without Borders? Relicensing Requirements and Negative Selection in the Market for Physicians," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 437-466, July. [Downloadable!]
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    Other versions:
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