Part I. Trends in immigration 

Chapter 1: Why study the economics of immigration?

Chapter 2: Why people become immigrants

Chapter 3: Where immigrants go and for how long

Part II. Immigrant selection and assimilation

Chapter 4: Selection in immigration

Chapter 5: Assimilation

Chapter 6: The second generation

Part III. Labor market effects of immigration

Chapter 7: Labor market effects: theory

Chapter 8: Labor market effects: evidence

Part IV. Other effects of immigration

Chapter 9: Effects on other markets in the destination

Chapter 10: Fiscal effects

Chapter 11: Effects on source countries

Part V. Frontiers in immigration research

Chapter 12: Frontiers in the economics of immigration

Part VI. Immigration policy

Chapter 13: U.S. immigration policy

Chapter 14: Immigration policy around the world

Part I. Trends in immigration

Chapter 1: Why study the economics of immigration?

Summary: The economics of immigration examines the determinants and consequences of international migration. The economic gains from immigration are substantial, raising the question of why more people do not become immigrants. Immigration clearly benefits immigrants. It also benefits receiving countries as a whole, although there are winners and losers within receiving countries. Immigration creates winners and losers within sending countries as well. This chapter explains the terminology used to describe different types of immigrants and provides general background on immigration globally, with a particular focus on the United States.

Chapter 2: Why people become immigrants

Summary: People migrate because of push factors that cause them to leave their current country and pull factors that attract them to a different country. Income in the destination relative to the origin and migration costs play central roles in determining whether people move. Having a network of friends and family who have already migrated is also important. Being unable to bear migration costs limits migration from poor countries. Immigration restrictions limit migration as well. This chapter presents a utility- or income-maximization model used to determine whether a person becomes an immigrant. It also presents a gravity model used to determine the size of migration flows between pairs of countries.

Chapter 3: Where immigrants go and for how long

Summary: Immigrants are highly geographically concentrated both within and across countries. Although there are immigrants all over the globe, most of them head to just a few destination countries. Economic conditions, migrant networks, migration costs and immigration policy play key roles in explaining why, as discussed in this chapter. Immigrants tend to cluster together within destination countries as well. Not all immigrants remain in the destination country forever. Some return to their origin country, while others move on to another destination. This chapter discusses how economic and social factors affect the decision whether to stay in the destination or leave.

Part II. Immigrant selection and assimilation

Chapter 4: Selection in immigration

Summary: The characteristics of immigrants are as important as the number of immigrants to origin and destination countries. Differences between the origin and the destination in how characteristics are rewarded in the labor market—differences in labor market returns—influence who chooses to become an immigrant. This chapter focuses on how differences in the return to skills affect the average skill level among immigrants. Immigrants are from the top of the skill distribution, or positively selected, when the return to skill is higher in the destination than in the origin; they are from the bottom of the skill distribution, or negatively selected, when the return to skill is higher in the origin than in the destination. The relative return to skill also influences who chooses to become a return migrant.

Chapter 5: Assimilation

Summary: Immigrants’ earnings, employment, participation in public assistance programs, location within the destination country and other economic outcomes typically change as their duration of residence in the destination country increases. Immigrants also change along cultural dimensions over time. If immigrants’ outcomes become more similar to natives’ over time, immigrants are said to have assimilated. This chapter discusses the determinants of whether immigrants assimilate. It focuses on earnings but also discusses a number of other outcomes, including marriage and fertility behavior. The chapter also discusses how immigrants’ labor market assimilation has changed over time and potential causes of those changes.

Chapter 6: The second generation

Summary: In many countries, the children of immigrants account for a growing share of the population. How well does this “second generation” of immigrants do in the labor market? How much education do they acquire? Do they become proficient in the language spoken in the destination even if their parents do not? The economics of immigration extends to questions like these. This chapter examines intergenerational progress and assimilation among immigrants. It discusses a number of measures of intergenerational assimilation, including earnings, education, language, marriage and fertility behavior. It also discusses whether the first and second generations of immigrants continue to identify with the origin country.

Part III. Labor market effects of immigration

Chapter 7: Labor market effects: theory

Summary: This chapter explores economic theories of how immigration affects the labor market in the destination country. It focuses on how immigration affects natives’ wages and employment. The chapter starts with the basic neoclassical model, which suggests that immigrants compete with natives for jobs and hence have an adverse effect on natives’ wages. Adding migration costs reduces these adverse wage effects but creates social welfare losses. The chapter considers labor market effects when foreign- and native-born workers are perfect substitutes in the production process and when they are complements. If immigrants and natives are less substitutable in the production process, the adverse effects on natives are smaller and perhaps even reversed, so that immigration may actually increase natives’ wages. The chapter discusses the importance of differentiating natives and immigrants according to their skill level when characterizing the labor market effects of immigration.

Chapter 8: Labor market effects: evidence

Summary: This chapter explains how economists estimate the labor market effects of immigration. It introduces four empirical approaches: spatial correlation, natural experiments, skill cells and structural estimation. Differing methodologies may—and often do—result in conflicting evidence. The chapter examines these methodologies and evidence reached using them in order to understand why research on the labor market effects of immigration sometimes reaches differing conclusions. In addition to examining the evidence on wage and employment effects found by studies using those four approaches, the chapter discusses evidence on skill and occupational upgrading; changes in production technology and output mix; and productivity gains from immigration.

Part IV. Other effects of immigration

Chapter 9: Effects on other markets in the destination

Summary: This chapter examines how immigration affects markets in the destination country other than the labor market. Immigration affects the housing market in areas where immigrants live, adds to the variety of products offered and may lower the prices of certain goods and services. In addition, immigration may lead to more international trade and greater flows of financial capital across countries. At the macroeconomic level, immigration may lead to more investment in physical capital and to more innovation, both of which lead to a higher level of output in an economy. Immigration may also affect income inequality. These mechanisms are important when accounting for the overall effect of immigration at both the local and national levels.

Chapter 10: Fiscal effects

Summary: This chapter discusses immigration from a fiscal perspective in destination countries. It examines how much immigrants pay in taxes and receive in government benefits compared with natives of the destination country. Estimating the fiscal effect of immigration can be complicated, so the first part of the chapter addresses methodological and measurement issues. The chapter then presents estimates of the fiscal effect of immigration for the United States and other OECD countries. The last section provides an in-depth discussion of immigrants’ participation in four government-funded programs in the United States: welfare, education, health care and Social Security.

Chapter 11: Effects on source countries

Summary: Emigration is when people leave their home country with the intent to settle in another country. This chapter discusses the effects of emigration on the home, or source, country. Since many migrants are workers, emigration may affect the labor market in the source country. Migration by high-skilled workers may be of particular concern to source countries. Although economists and policymakers have traditionally focused on the negative consequences of high-skilled emigration, or so-called brain drain, research also identifies a number of positive consequences, or “brain gain.” This chapter also discusses the theory and evidence on the effects of remittances, or money and in-kind transfers sent by migrants to family members in the source country. The chapter concludes with a discussion of the possible impact of emigration on political, economic and social institutions in the source country.

Part V. Frontiers in immigration research

Chapter 12: Frontiers in the economics of immigration

Summary: This chapter considers other effects of immigration beyond its fiscal and labor market impacts. Most of these effects do not involve a specific market but nonetheless have significant economic and policy implications. Specifically, this chapter examines how immigration affects happiness, education, health, fertility and crime, including human trafficking. Many of these effects encompass immigrants and natives alike, and all are important for students of the economics of immigration as well as policymakers to understand.

Part VI. Immigration policy

Chapter 13: U.S. immigration policy

Summary: The United States is the world’s top destination for immigrants. This chapter summarizes the history of U.S. immigration policy from an economic perspective. It explains the multitude of ways that the United States admits legal immigrants on a temporary or permanent basis. It also discusses how U.S. immigration policy addresses unauthorized immigration. The chapter covers issues relevant to a number of current policy debates, including whether the country should offer legal status to unauthorized immigrants, what the optimal level of enforcement is and whether undocumented youth should be eligible for in-state tuition at public colleges and universities.

Chapter 14: Immigration policy around the world

Summary: This chapter describes immigration policies in other countries. It focuses on industrialized countries that have comprehensive immigration policies. It compares immigration policies that are based mainly on family-sponsored preferences to point-based immigration systems, which were pioneered by Canada, New Zealand and Australia but are increasingly common around the world. The chapter highlights the current state of immigration in the European Union and how member countries are adapting EU-wide policies. It also describes guest worker programs, refugee policies and legalization programs that have been implemented in parts of the world. Approaches toward immigrants after their arrival are also noted.