The domestic economic impacts of immigration

TL;DR

This paper reviews evidence on how immigration impacts employment and wages of native workers in wealthy countries, highlighting that long-term effects are generally neutral and distributional impacts vary based on skill and similarity to migrants.

Contribution

It provides a comprehensive review of empirical research on immigration's economic impacts, clarifying long-term effects and distributional consequences in industrial economies.

Findings

Long-term impacts of immigration on native wages and employment are likely neutral.

Skilled immigration can enhance productivity and wages for natives.

Distributional effects depend on workers' skills and similarity to migrants.

Abstract

This paper critically reviews the research on the impact of immigration on employment and wages of natives in wealthy countries--where "natives" includes previous immigrants and their descendants. While written for a non-technical audience, the paper engages with technical issues and probes one particularly intense scholarly debate in an appendix. While the available evidence is not definitive, it paints a consistent picture. Industrial economies can generally absorb migrants quickly, in part because capital is mobile and flexible, in part because immigrants are consumers as well as producers. Thus, long-term average impacts are probably zero at worst. And the long-term may come quickly, especially if migration inflows are predictable to investors. Possibly, skilled immigration boosts productivity and wages for many others. Around the averages, there are distributional effects. Among low-income "native" workers, the ones who stand to lose the most are those who most closely resemble new arrivals, in being immigrants themselves, being low-skill, being less assimilated, and, potentially, undocumented. But native workers and earlier immigrants tend to benefit from the arrival of workers different from them, who complement more than compete with them in production. Thus skilled immigration can offset the effects of low-skill immigration on natives and earlier immigrants.