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Immigrant versus natives ? displacement and job creation

Author

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  • Ozden,Caglar
  • Wagner,Mathis Christoph
  • Ozden,Caglar
  • Wagner,Mathis Christoph

Abstract

The impact of immigration on native workers is driven by two countervailing forces: the degree of substitutability between natives and immigrants, and the increased demand for native workers as immigrants reduce the cost of production and output expands. The literature so far has focused on the former substitution effect, while ignoring the latter scale effect. This paper estimates both of these effects using labor force survey data from Malaysia (1990-2010), a country uniquely suited for understanding the impact of low-skilled immigration. The instrumental variable estimates imply that the elasticity of labor demand (3.4) is greater than the elasticity of substitution between natives and immigrants (2.5). On average the scale effect outweighs the substitution effect. For every ten additional immigrants, employment of native workers increases by 4.1 in a local labor market. These large reallocation effects are accompanied by negligible relative wage changes. At the national level, a 10 percent increase in immigrants, equivalent to 1 percent increase in labor force, has a small positive effect on native wages (0.14 percent). The impact of immigration is highly heterogeneous for natives with different levels of education, resulting in substantial changes in skill premiums and hence inequality. Immigrants on net displace natives with at most primary education; while primarily benefiting those with a little more education, lower secondary or completed secondary education.

Suggested Citation

  • Ozden,Caglar & Wagner,Mathis Christoph & Ozden,Caglar & Wagner,Mathis Christoph, 2014. "Immigrant versus natives ? displacement and job creation," Policy Research Working Paper Series 6900, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6900
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    Citations

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    Cited by:

    1. Sari Pekkala Kerr & William R. Kerr & William F. Lincoln, 2015. "Skilled Immigration and the Employment Structures of US Firms," Journal of Labor Economics, University of Chicago Press, vol. 33(S1), pages 147-186.
    2. Genicot, Garance & Mayda, Anna Maria & Mendola, Mariapia, 2016. "The Impact of Migration on Child Labor: Theory and Evidence from Brazil," IZA Discussion Papers 10444, Institute of Labor Economics (IZA).
    3. Calogero Carletto & Jennica Larrison & Çaglar Özden, 2014. "Informing migration policies: a data primer," Chapters, in: Robert E.B. Lucas (ed.), International Handbook on Migration and Economic Development, chapter 2, pages 9-41, Edward Elgar Publishing.
    4. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    5. Marouani, Mohamed A. & Nilsson, Björn, 2016. "The labor market effects of skill-biased technological change in Malaysia," Economic Modelling, Elsevier, vol. 57(C), pages 55-75.
    6. International Monetary Fund, 2015. "Kuwait: Selected Issues," IMF Staff Country Reports 2015/328, International Monetary Fund.
    7. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 625-685, Elsevier.
    8. World Bank Group, 2015. "Malaysia Economic Monitor, December 2015," World Bank Publications - Reports 23565, The World Bank Group.
    9. Lim, Sokchea & Mahbub Morshed, A.K.M., 2017. "Fiscal policy in a small open economy with cross-border labor mobility," Journal of Macroeconomics, Elsevier, vol. 52(C), pages 147-174.
    10. Jaeger, David A & Ruist, Joakim & Stuhler, Jan, 2018. "Shift-Share Instruments and the Impact of Immigration," CEPR Discussion Papers 12701, C.E.P.R. Discussion Papers.
    11. : Andrew Minster & Danielle Kavanagh-Smith & Lara-Zuzan Golesorkhi, 2018. "Institutionalist Review and Analysis of Immigration Effects on U.S. Jobs Markets," SCEPA working paper series. 2018-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    12. Javier Ortega & Gregory Verdugo, 2021. "Who stays and who leaves? Immigration and the selection of natives across locations," Working Papers hal-03370661, HAL.
    13. Joel OUDINET, 2021. "Introduction - L’impact de la migration sur le développement inclusif," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 53, pages 5-21.
    14. Björn Nilsson & Mohamed Ali Marouani, 2015. "The Labor Market Effects of Skillbiased Technilogical Change in Malasya," Working Papers 20150006, UMR Développement et Sociétés, Université Paris 1 Panthéon-Sorbonne, Institut de Recherche pour le Développement.
    15. Balcilar, Mehmet & Nugent, Jeffrey B., 2019. "The migration of fear: An analysis of migration choices of Syrian refugees," The Quarterly Review of Economics and Finance, Elsevier, vol. 73(C), pages 95-110.
    16. Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2018. "Dealing with Illegal Immigration: the Role of Informality, Taxation and Trade," LIDAM Discussion Papers IRES 2018007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    17. Christian Dustmann & Uta Schönberg & Jan Stuhler, 2016. "The Impact of Immigration: Why Do Studies Reach Such Different Results?," Journal of Economic Perspectives, American Economic Association, vol. 30(4), pages 31-56, Fall.
    18. Del Carpio,Ximena Vanessa & Wagner,Mathis Christoph, 2015. "The impact of Syrian refugees on the Turkish labor market," Policy Research Working Paper Series 7402, The World Bank.

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