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Immigration and Poverty in the United States Author(S): Steven Raphael and Eugene Smolensky Source: the American Economic Review, Vol

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Immigration and Poverty in the United States Author(S): Steven Raphael and Eugene Smolensky Source: the American Economic Review, Vol American Economic Association Immigration and Poverty in the United States Author(s): Steven Raphael and Eugene Smolensky Source: The American Economic Review, Vol. 99, No. 2, Papers and Proceedings of the One Hundred Twenty-First Meeting of the American Economic Association (May, 2009), pp. 41-44 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/25592372 . Accessed: 25/06/2014 18:29 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected]. American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to The American Economic Review. http://www.jstor.org This content downloaded from 169.229.139.238 on Wed, 25 Jun 2014 18:29:41 PM All use subject to JSTOR Terms and Conditions American Economic Review: Papers & Proceedings 2009, 99:2, 41-44 http://www.aeaweb. org/articles.php?doi=10.1257/aer. 99.2.41 ImmigrationAnd Poverty InThe UnitedStates By Steven Raphael and Eugene Smolensky* Between 1970 and 2003, theproportion ofUS that overall production in the economy is residents born in another country increased from described by themultilayer constant elasticity 4.8 to 12.4 percent, with net migration account of substitution (CES) production function ing for one-quarter of net population growth. Recent migrants are concentrated among groups (1) Qt=[a0tK? + auLnl/u, with either extremely low or relatively high lev els of formal educational attainment, with the at the low end where group being particularly large. l/=l-~?^[> The potential contribution of international migration to the official US poverty rate likely two avenues. with (2) , where operates through First, Lt=[Y.e,kLl) V=l-^, higher poverty rates among the foreign born, an increase in the proportion foreign born increases / 8 \1'l/? the national rate. s poverty Second, international Xtkj (3) Ltkj/ immigration alters the relative supplies of work Z^E^iyKj=\ ers with different skill levels, which influ = ? may where S 1 -~?, ence thewages and employment of bothmigrants ue\p and natives. The impact of this change on poverty on the of native / 2 \l/e depends sensitivity employment = and earnings to labor supply shifts. (4) Ltkj , We assess the impact of immigration on ^mtkjiL^jiJ native rates = ? poverty operating through the latter where e 1 -pr.? channel. We calibrate a model of theUS wage structure using census data for the period 1970 to 2005, and use this model to simulate what where t indexes times, k indexes four labor native would have been in 2005 if wages immi groups defined by educational attainment (less were grant penetration in the labor market at than high school, high school, some college, col we 1970 levels. Next, use this hypothetical set lege graduates),,/ indexes eight potential years of of in wage effects conjunction with household experience groups (0 to 4, 5 to 9, 10 to 14, 15 to data for 2005 to con survey estimate what the 19, 20 to 24, 25 to 29, 30 to 34, 35 to 40), and i for native rates would = = sequences poverty have indexes nativity (1 native, 2 immigrant). been. Equation (1) combines capital and total labor in t to year produce national output Qt, where aot I. The Wage Determination and Simulating the and alt are productivity coefficients for capital Effects of on Wage Immigration Natives and labor, respectively, and aKL is the elasticity of substitutionbetween capital and labor. In turn, Following David Card and Thomas Lemieux the total labor supply aggregate, Lt, is a CES (2001), George Borjas (2003), and Gianmarco aggregation of subcategories of labor defined by Ottaviano and we assume Giovanni Peri (2007), the four educational groups, Ltk, given by equa tion (2), where the etkprovide the corresponding coefficients and is the elastic * productivity <reduc Goldman School of Public Raphael: Policy, University ity of substitution between education groups. of California, Berkeley, 2607 Hearst Avenue, Berkeley, The labor supply of each educational group, Lth CA 94720-7320 (e-mail: [email protected]); is further assumed in to be a CES Smolensky: Goldman School of Public Policy, University equation (3) of of California, Berkeley, 2607 Hearst Avenue, Berkeley, CA aggregation labor supply for each of the eight 94720-7320 (e-mail: [email protected]). experience groups, Ltkj, with corresponding 41 This content downloaded from 169.229.139.238 on Wed, 25 Jun 2014 18:29:41 PM All use subject to JSTOR Terms and Conditions 42 AEA PAPERS AND PROCEEDINGS MAY 2009 productivity coefficients xtkjand an elasticity of where st is labor's share of income in year t, stk is substitution between experience groups within the share of income accruing to labor in educa an education branch given by aexp. Finally, labor tion group k in year t, stkjis the share of income supplied within a given education-experience accruing to labor in group tkj, and stkj2 is the cell is assumed to be a CES aggregation of native share of income accruing to immigrant labor in with a labor, Ltkjl, and immigrant labor, Likj29 group tkj. the as the corresponding elasticity of substitutionbetween Define variable Mkj percentage immigrants and natives given by <rimmig,and pro increase in immigrant supply between 1970 and m as ductivity coefficients given by mtkji. 2005, and the column vector the complete The wages of workers in group tkji are deter set of shocks for the 32 education-experience mined by theirmarginal product, which in turn groups. Using the ?lasticit?s in equations (5) will depend on the supply of capital, the overall through (7), we can construct a square elasticity supply of labor, the supply of labor in educa matrix II where the rows are defined by the edu tion group tk, the supply of labor in education cation experience group of natives forwhom we experience group tkj, and their own supply of wish to analyze wage effects, and the columns over a time are defined the labor Ltkji. Immigration given period by education-experience group affects the wages of natives through an impact experiencing an immigrant labor supply shock. = on the firstfour of these factor supplies. Since we Elements of the matrix where /row /coiumnand = are estimating the effects of immigration over a ?ow ./columnare given bv the own-elasticity in 35-year period, we assume that the economy is equation (5), and elements of thematrix where = are on its long-run balanced growth path (follow ?row ?column and jrow 7a Column given by the ing Ottaviano and Peri 2007 and Borjas 2005), cross experience group elasticity in equation implying that capital accumulates at the rate (6), while elements of thematrix where /row^ a return to are the cross needed to ensure constant capital. Column andyrow ? 7column given by To derive the full effects of a specific immi education group elasticity in equation (7). The gration-induced supply shock on thewages of a vector of simulated wage effects of immigration given native skill group, we must derive the elas on natives between 1970 and 2005 is given by ticity of native wages to changes in immigrant the equation supply (1)within the same education-experience = cell, (2) within one's education group but outside (8) Wage Effect Urn. one's education-experience cell, and (3) with In our we assume that labor's respect to immigrant supply outside one's edu simulations, cation group. Raphael and Smolensky (2008) share of national income is 0.7, and estimate show that these threewage elasticities are given the additional shares using data from the 2005 by the expressions American Community Survey. We define as the immigrant shocks Mkj the difference , , d In _ wtkjX _ i stkj2 between the immigrant supply level in 2005, a&d?C d InLtkj2 less the immigrant supply level in 1970, all divided by the immigrant supply level in 2005. Stkj2 stkj2 Our estimates of the three elasticities + preferred ^educ stk Stkj of substitution implied a high degree of sub stitutability between immigrants and natives = a lower level of substitutability _ (^immig 33), d\nwtkjX i stkf2 workers in different education -cross-exp between groups (6) ^educ St ? d\nLtkf2 (^educ 8), and a somewhat greater degree of substitutability between workers of similar levels + where j^f, education but different experience (aexp -g-, = 9.14).' These parameter choices, coupled with endogenous capital accumulation, result , , d In -_ wtkjl _~ i stkf2 {I) ?cross-educ g m (Jeduc St ?^ 1 See Raphael and Smolensky (2008) for estimation where k^k', details. This content downloaded from 169.229.139.238 on Wed, 25 Jun 2014 18:29:41 PM All use subject to JSTOR Terms and Conditions VOL. 99NO. 2 IMMIGRATIONAND POVERTY IN THE UNITED STATES 43 Table 1 -Simulated Proportional Effects of Immigration Between 1970 and 2005 on the Weekly Wages of Native High School Dropouts by Potential Years of Work Experience *^ ?? ^imm 33 ^immig ^immig - = = ^exp 9.14 C7exp 9.14 <rexp 9.14 ? = = Years of experience ^educ 8 creduc 2.5 creduc 2.5 0-4 -0.00 -0.05 -0.07 5-9 -0.02 -0.07 -0.09 10-14 -0.02 -0.07 -0.09 15-19 -0.02 -0.07 -0.09 20-24 -0.02 -0.07 -0.09 25-29 -0.01 -0.06 -0.08 30-34 -0.01 -0.06 -0.08 35-40 -0.00 -0.06 -0.07 Note: See text for description of the wage simulations.
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