Canada's demand for Third World highly trained immigrants: 1976–86

World Development. Vol. 21, No. I. pp. 177-187. 1993. 0305-750x/93 $6.(M) + 0.00 Printed in Great Britain. @ 1993 Pergamon Press Ltd

Canada’s Demand for Third World Highly Trained

Immigrants: 1976436

SAJJAD AKBAR University of Victoria, British Columbia

and

DON J. DEVORETZ* Simon Fraser University, Burnaby, British Columbia

Summary. - Immigration to Canada, after a major policy change in 1978 which favored the family reunification class, has been dominated by Third World immigrants. These immigrants continue to be a significant source of highly trained individuals for Canada. Using an excess demand model to estimate the determinants of demand, this paper finds that the supply of domestic graduates, occupational income and the previous periods immigration level are major variables that influence Canada’s demand for skilled immigrants. Thus, it is argued that the movement in these variables primarily guides Canadian immigration policy toward skilled immigrants.

1. INTRODUCTION

The economic consequences of the immigration of highly skilled immigrants to Canada has been a subject of many studies. To date these studies have focused on the value of this transfer (DeVoretz and Maki, 1975, 1980; Coulson and DeVoretz. 1989). the impact of this movement on the Canadian labor market (Akbari and De- Voretz, 1988; Clark and Thompson, 1986; DeVoretz, 1989; Parai, 1965, 1975; Roy, 1987) or the impact on public finance (Akbari, 1989; Rao and Kasalis, 1982).

DeVoretz and Maki (1983) focused on the demand characteristics of Canada’s highly trained immigrant flow circa 1967-73. Given the substantive changes in Canada’s immigration policy after 1977 and the increased concentration of this highly trained immigrant flow from Third World countries, the central question posed by this paper is: Does a variant of the DeVoretz- Maki reduced form model hold for 197686? This question is nontrivial since Borjas (1988) has recently proposed an alternative model of immigration selection (for the United States) which emphasizes the “sorting” or supply-side decisions made by immigrants when they choose their destination. The model used in this paper argues that Canada’s policy makers dictated the flow of

highly trained immigrants by measuring the degree of excess demand regardless of any sorting procedure being carried out by the prospective immigrants.’ Recent work by MacPhee and Hassan (1990) in the United States also confirms the robustness of the DeVoretz-Maki excess demand model and thus is in direct contrast to the Borjas’s view. By reestimating the excess demand model in a more recent Canadian context we hope to add another test result to these contrasting views. The paper is divided into three sections. Section 1 examines the flow of skilled labor from Third World countries to Canada and recent changes in Canadian immigration policy. Section 2 develops an excess demand model for skilled workers in Canada. Section 3 provides a discussion of the empirical results. Section 4 presents conclusions.

*An earlier version of this paper was presented at the Western Economics Association Meetings, Lake Tahoe, CA., June 19, 1989. The comments by A. Akbari, R. Simson and two anonymous referees are noted with appreciation. Final revision accepted: June I, 1992.

177

178 WORLD DEVELOPMENT

2. FLOW OF HIGHLY TRAINED THIRD ment from less-developed countries (LDC’s) to WORLD IMMIGRANTS: CANADA 1976-86 Canada is concentrated by area of origin (i.e.,

Hong Kong-China, India, West Indies, and the Table 1 describes the dominant role that Third Philippines) and second, a few occupational

World immigrants played in the flow of highly groups (teachers, nurses, managers and en- trained manpower in Canada’s recent past. For gineers) dominate the composition of the highly the initial period (1967-75) following Canada’s trained immigrant flow. more liberal 1967 Immigration Act, 33.3% of The recent concentrated flow is an outgrowth highly trained immigrants came from Third of several past policy initiatives. Prior to 1963, World countries. The most recent immigration under the 1951 Immigrant Act Canadian immi- regulations (under the 1978 Immigration Act) gration regulations favored European immi- have altered the levels and permitted an even grants. With the adoption of the 1967 policy, a greater concentration from Third World coun- point system was introduced to eliminate discri- tries. For 197846 the percentage of profes- mination on the basis of nationality and country sionally trained immigrants from Third World of origin. The point system was formally intro- countries has risen to an average of 43.5%. A duced in 1967 as a means of ensuring that the more detailed view of this immigrant flow leads immigrant selection process would be nondiscri- to two further points: first, the immigrant move- minatory with respect to sex, color, race, natio-

Table 1. Trends in Canadian immigration: lY67-86 (absolute numbers in UOOs)*

Immigrants in Labor Force

Year

Professionals 3rd World as Professionals as % of All % of Total

(8) (2) (4) (6) Third

(1) Total Third Third Third (7) World (9) (l(l) Total World (3) World (5) World Total origin Total Professional

immigration immigration Total origin Total origin (S/3) (6/4) (413) (615)

1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

222 183 161 147 121 122 184 218 187 149 114 86

112 143 128 121

:: 84 99

51 119 19 27 7.4 23.4 49 95 19 26 6.9 27.5 54 84 25 24 7.3 29.5 51 77 24 20 5.8 26.9 47 61 22 15 5.0 26.6 43 59 22 15 5.8 26.6 86 92 43 19 8.0 20.9 76 106 31 18 7.0 17.9 98 81 40 23 9.2 29.5 83 61 30 18 7.1 19.8 60 47 22 13 4.8 28.1 46 35 16 9 3.2 26.6 70 47 27 10 3.8 21.8 91 63 38 13 6.9 21.0 71 56 31 I5 5.5 28.0 66 55 27 17 8.7 30.9 58 37 23 8 3.9 22.8 66 38 26 7 3.6 19.5 60 30 26 8 3.9 21.4 70 48 32 10 4.4 21.5

37.6 16.6 26.6 35.0 20.7 26.3 29.3 29.9 29.6 24.1 31.2 28.0 25.8 37.9 36.7 25.8 37.9 36.7 18.4 47.3 41.1 24.2 29.6 41.1 22.9 49.5 38.3 22.9 50.3 38.8 21.2 47.5 35.6 19.6 46.4 34.3 13.8 56.6 36.4 17.9 60.4 51.3 17.2 55.9 34.4 31.8 49.4 50.8 16.8 62.4 46.0 13.6 69.1 48.0 15.0 68.1 47.8 13.5 67.9 42.6

Sources: Canada, Department of Manpower and Immigration (later Employment and Immigration); Canada, Immigration Statistics, various issues. *The income criterion for Third World was less than or equal to US$l ,tHlO real (1974) per capita income. The 16 countries are: People’s Republic of China (including Taiwan), Hong Kong, India, Philippines, Jamaica, Trinidad and Tobago, and two area groups. The two area groups represent the less-developed countries of Europe; Greece, Hungary, Portugal, Yugoslavia, Rumania and a second group included Egypt, Lebanon, Pakistan, El Salvador and Iran. Professionals are defined by degree qualifications defined by Canada, Employment and Immigration and reported by immigrants.

CANADA’S DEMAND FOR IMMIGRANTS 179

nality, and religion and yet still link the admission decision to domestic labor market requirements.’

The nature of the post-1977 Canadian immigration regulations lend themselves to a close examination when modeling Canada’s demand for highly trained Third World immigrants. The 1978 immigration policy was termed a “Canada First” policy because of the dramatic change from the earlier universalistic policy (see Marr and Percy, 1985). The expansionist policy of 1967-74 was replaced by a tightly controlled policy.

The immigration policy during 1967-77 had no stated yearly quota or targets. Levels were simply limited by the number of qualified applicants (and available processing officials) and reflected the view that Canada achieved scale economies and enjoyed human capital inflows at these levels (Marr and Percy, 1985). When the presumed general economic benefits of immigration were challenged the primary economic goal of the post-1977 immigration policy became the relief of identified labor shortages.-

This more restrictive post-1977 “Canada First” policy had an explicit yearly target which by law had to be tabled in the House of Commons in the previous calendar year. In fact, for the post-1977 period the number of economically active immigrants - the subject of this study - was a well- defined residual of this yearly stated target. The process of determining the number of economic migrants was as follows. First, the yearly target was set and the number of immigrants anticipated under the family reunification class for the next year were deduced from this target. Next, a predetermined number of refugees was deducted from this net target figure and the residual was assigned to the independent/economic class of immigrants.J In the period when yearly target was set at less than 100,000, the number of immigrants in the residual economic class was small .’

Two additional screening devices were put into place to further ensure that the economic or residual class met Canada’s manpower needs. Of the 70 points required for admission in the independent class some occupational points were a necessary, but not sufficient conditions, for entry in the independent class. If a potential immigrant’s designated occupation was assigned zero points for labor demand by policy makers, then regardless of the total number of points earned by the immigrant for age, education, marital status and language, etc., the person would not be admitted.h For 1982-85 these occupational restrictions became even more stringent as previously certified and arranged

employment was required before entry was permitted in the independent class.’ In sum, we argue that the 1977 immigration policy implied a new criterion, “job vacancy,” and replaced the human capital model of the previous era with a manpower planning approach.

We examined the determinants of the immigration of Third World professionals to Canada for 1976-86 to capture the effects of this new policy regime. Earlier studies by DeVoretz and Maki (1983) and Green (1976) provide tests for immigrant demand models under earlier and different policy eras in Canada. Following the DeVoretz and Maki (1983) study of 1966-73, we utilize a reduced-form-excess demand model of the Arrow-Capron genre (1959) to isolate the independent arguments in this demand function.’

(a) Excess demand for skilled workers in Canada

As noted earlier we focus on Third World highly trained immigrants since they are the largest and most contentious group in the Cana- dian context (see Table 1). Furthermore, our proposed model is recursive and presumes an infinitely elastic supply of immigrants to Canada. We argue that there exists an infinite supply (or at least a very large one relative to Canada’s demand) of technically trained Third World immi

8 rants for Canada at the prevailing wage

rate. Hence, changes in Canada’s excess demand in the labor market determine the place- ment of the immigrant demand curve and the equilibrium number of immigrants.“’

Green (1976) and DeVoretz and Maki (1983) argue, and we concur, that changing yearly targets and the distribution of Canadian immigration offices among countries coupled with changing weights on various economic characteristics have meant that substantial control could be exercised by Immigration Canada over immigrant flows. Figure 1 illustrates the comparative statics of the dynamic shortages model in an immigrant demand context.

In any one period (r-l) given a real income level of Y, there exists a domestic supply of skilled labor equal to (Oa) which results in a positive excess demand for skilled labor equal to (ab). This excess demand could be partially filled by more domestic graduates in period (t) equal to (ae) as the Gth) occupational income rises to Yz and an immigrant flow of (&I given this income. With no increase in either income or the domestic supply, the gap could be filled totally by immigrants (i.e. ab). Policy makers attempt to forecast the yearly excess demand (ab) at income Y, or (ef) at income YZ.


I I I I I 0 de f b L

#jth Workers

Figure 1. Excess demund model for skilled labor: Cairrlada.

(b) Model and hypotheses

The above arguments lead us directly to the following Canadian immigrant demand specification:

I !,,’ = f{G,.t-I, ~uJ,,,,-I~ L,,,FI. y,,,-,I In short, the absolute number of immigrants to Canada from an (ith) country with the (jth) type skills in period (t). I,,, depends upon four exog- enous variables:

the lagged Canadian graduates with (jth) skills. Cl,,_,; the previous period’s flow of all professionally trained immigrants to the United States from the (ith) Third World countries

or I,,,,+I; the lagged endogenous variable, I,,,,_,; and the absolute income in period (f-l) in Canada for the 0th) occupation, I’,,,+,.

The lagging process in this model is crucial since policy makers must by law forecast their immigration flows 12-18 months in advance. Hence, the domestic supply variable, graduates, is lagged two periods. i.e., G,,,_r, G,,_?. since this reflects the latest graduate information available when the target is set. The income and the US immigrant variables need more detailed explana- tions. The income term is a much debated variable in immigration studies.” One view suggests that the absolute income difference between origin and destination country’s income is a proxy for growth in excess demand in the destination country’s labor market and hence relevant. We include the relevant Canadian occupation income under this later rationale. Again we note that due to legislative time lags policy makers only have at their disposal lagged

income to measure labor excess demand. Hence, as lagged occupation income rises, policy makers infer that ceteris paribus excess demand in that occupation has grown and immigration levels should rise.

The United States immigration variable (Ius~j,,_r) is cited in the literature as a long- standing determinant of Canada’s immigration levels. Historically it has been argued that immigration to the United States has been a two-stage process; immigrants move first to Canada and then later after acculturation go to the United States (Dales, 1964, 1966; Green, 1976). Hence, a rise in the US-Third World admissions in the previous period should encourage larger numbers to come to Canada under the expectation of later moving to the United States.

3. EMPIRICAL RESULTS AND ANALYSIS

(a) Definitions and data

The dependent variable, I;,, is the absolute number of immigrants in the occupational groups actually entering Canada annually over the relevant time period with an immigrant visa from a selected Third World country. The 16 countries are: People’s Republic of China (including Taiwan). Hong Kong, India, Philippines, Jamaica, Trinidad and Tobago, and two area groups. The two area groups represent the less- developed countries of Europe, Greece, Hun- gary, Portugal, Yugoslavia, and Rumania, and a second group includes Egypt, Lebanon, Pakis- tan, El Salvador and Iran. These two groups were pooled since in any one year they indi- vidually sent very few immigrants in the selected occupations.” When these countries are pooled, however, their immigrant levels approximately equal that of either China, Hong Kong, India or the Philippines.

Neither the definition of highly trained immigrant nor an LDC is free from ambiguity. The countries chosen were based upon two criteria. First, countries were classified by GNP per capita (see World Bank, World Tables. 1976 and 1986) to identify countries with less than US$l,OOO per capita income in 1974 dollars. Next, from the group of poor countries, those with known immigration flows to Canada were selected. Two points must be stressed. First, the “all other” category nets out all remaining developed countries to leave an estimate. albeit crude, of all other low-income immigrant source countries not separately included. Second. our definition of professional and technical manpower was made on the basis of the required training associated


with the occupation in Canada. Thus, occupations with significant formal post-secondary training were included.

The occupations selected, nurses, teachers, professors and physicians including medical technicians, are representative of highly trained Third World immigrants. Coulson and DeVoretz (1989) document the importance of each occupation both in terms of numbers and human capital inflow.” Clearly other occupations are candi- dates for inclusion; however, data availability precluded using other highly trained groups. Each remaining variable used is defined and its source noted in the appendix (Table Al).

(b) The results

The linear and log-linear formulations of the immigrant demand function specified above are estimated using the Generalized Least Square (GLS) procedure. The results reported in Table 2 reflect the effects of the “restrictive” immigration policy regime (i.e., 1978-86) in Canada and generally support a transformed version of the dynamic shortages model.

Following DeVoretz and Maki and others (see

Greenwood, 1983) our initial specification of the immigrant demand model included a lagged endogenous variable. Our estimating procedure was straightforward. The log-linear formulation of the immigrant demand function was estimated using Ordinary Least Squares (OLS) and GLS procedures. The GLS technique is used to correct for the autocorrelation detected under the OLS estimation. The Durbin-H statistic calculated for the OLS estimation indicated that the residuals were serially correlated.14 Hence, the GLS (first order autocorrelation) technique is used to correct for this problem. The Durbin-H statistic indicated no significant serial correlation under the GLS estimates. In addition, since immigration theory does not a priori allow us to choose a functional form, i.e., linear or log- linear, we conducted a PE test on the lagged endogenous specification.15 Both the parameter estimates for the linear model and the PE test statistics are reported in the appendix (Table A3). The PE test indicates that the log-linear functional form is preferred.

This preferred log-linear model conforms to a priori expectations (see Table 2). Under this lagged endogenous model all the key variables (except Ius,, ,-,) are significant and obtain the

Table 2. Purutneter estimates for Canadian lagged endogenous immigrant demand function: 197546

Independent Regression variable coefficient T-value

Panel A:

Model I: Log-linear OLS” Constant -2.52 -1.66

y,.,- I Income 0.20 l.YY G 1

$-‘_ ,,.I 1

Grad Lag -0.91 -1.91

‘I., Grad US Lag 0.01 1.03 Mig 2.16 0.23 I,,.,~ I Mig Lag 0.65 14.4

S.E.E. = 0.685 R’ = 0.52 Number of observations = 269

Panel B:

Model II: Log-linear GLS* Constant -0.251 -1.66

Y ,,I I Income 0.21 1.75 G,.,. I Grad Lag -1.11 -2.03

%i,,;, , Grad h/I@ US Lag 0.01 1.22 2.253 0.21 I 11.1 I Mig Lag 0.65 9.4

S.E.E. = 0.666 R’ = 0.53 Number of observations = 269

*The estimating equation was log-linear form of equation (I) in text.


correct sign. Moreover, the overall explanatory power of the model is good for a time series of cross-sections (R2 = 0.53).

Keeping in mind the parameter estimates under a log-linear model are elasticities eases the interpretation of the results. The effects of past Canadian graduation levels has a two-part expla- nation. First, in the immediate period immigrant demand has a near unitary (-0.91) negative elasticity with respect to last period’s graduate output in the four key professions. After two years (or more) however, a rising domestic graduation level in these occupations is positively correlated with increased immigrant demand. Thus, in the immediate period immigrants are seen as substitutes for last year’s graduate cohort by Canadian officials.‘h After two periods, graduates and their immigrant cohort are com- plementary workers. Next, past income growth is associated with a rise in the immigrant flow. A 10% rise in the relevant Canadian occupational income led to almost a 2% rise in immigration.” In addition, Third World movement of the highly skilled to Canada is not a complement to movement to the United States given the small and insignificant parameter estimate (0.01) for this variable.

Finally, the level of last period’s immigration has a positive impact on the contemporary period’s immigration flow. A 1% rise (or fall) in last period’s immigration levels led to a 0.65% rise (or fall) in the contemporary period’s immigration levels. This less-than-unitary value for the parameter estimate on the lagged endogenous variable insures that the estimated excess demand model is stable.

As noted, several immigrant demand studies have employed the dynamic shortages model. Green (1976) applied this model to Canada circa 1950-70 to explain the movement of highly skilled (mainly European) immigrants. Although Green never formally tests his model there exists substantial agreement between his descriptive analysis and the results of this model.

During a different policy regime in Canada (circa 1967-73) DeVoretz and Maki (1983) estimate a comparable version of the dynamic shortages model used in this paper. Under their lagged endogenous version of the dynamic shortages model three variables obtained significance. These variables include: graduates, immigration and the total supply of Third World immigrants. lx Their model’s crucial income variable, however. is insignificant. In addition, the lagged endogenous variable dominated their

estimated equation and when it was omitted the model was greatly weakened.‘” MacPhee and Hassan (1990) estimated a simultaneous equations variant of the dynamic shortages model for the United States. They disaggregated their mode1 by professions and concluded in general that: “Our results are generally consistent with those of DeVoretz and Maki . except that we find significant differences among professions” (P. 14).

In sum, without reproducing their extensive results, it is clear that MacPhee and Hassan find that the supply of US graduates and previous immigrant flows explain the contemporary movement of skilled LDC workers to the United States. Unlike this paper’s results, however, MacPhee and Hassan’s income variable consist- ently obtained the wrong sign (i.e., -10 or -0.04).

4. CONCLUSIONS

The results reported in Table 2 indicate that a dynamic adjustment model patterned after the Arrow-Capron (1959) model best rationalizes the post-1977 highly skilled Third World immigrant flow to Canada. During Canada’s post-1977 policy regime, the short-run excess demand for highly trained manpower responded to exogen- ous shifts in real income and domestic graduates. Resulting excess demand was compensated for by a carefully controlled flow (i.e., quota or target) of immigrants as depicted in Figure 1.

The positive elasticity value for occupational income indicates the policy makers’ sensitivity to a previous period’s rise in occupational real income. In terms of Figure 1, movement up along a portion of the domestic supply function was recognized in the next period’s immigrant target levels. This finding is in sharp contrast to the reported insignificance of the Canadian income variable for the pre-1978 expansionist period.2” Thus, the restrictive post-1978 period had new institutional forces put into place to recognize the role of income as an indicator of excess demand.

The above view is further confirmed by two facts. First, it must be recognized that Canadian immigration policy is set by the Department of Employment and Immigration, hence the preoc- cupation with labor shortages criteria. Next, and more important, after 1978 entry points were differentially awarded for narrowly defined occupations.” In the extreme. if an occupation was assigned zero points an independent immigrant would not be admitted (circa 1981) regardless of the number of points received for any other combination of attributes.”


The initial near unitary negative elasticity of demand with respect to the graduate variable indicates a quick response by Canadian policy makers in the immediate period to this excess demand criterion. This responsiveness is also a by-product of a second policy under which a foreigner could not be hired by a Canadian employer and enter Canada without the prior permission of Immigration Canada. The permission was only granted if no suitable Canadian could be found. Additional periodic joint meetings with unions, employer groups and Immigra- tion Canada identified areas of actual or anticipated labor shortages allowing a quick short-term response in terms of altering contemporary immigrant target levels for specific occupations. In the longer run, i.e., 24 months or beyond, a rising supply of Canadian highly skilled graduates was interpreted by policy makers as indicating rising secular demand for these occupations. Thus, immigration levels in these skill groups were expanded. In fact, earlier professionally trained Canadian graduates may be creating demand for other similar professionally trained immigrants.23

Our model supports the thesis that the restrictive post-1978 Canadian immigration policy was a product of a carefully controlled, but fairly rapid response to the number of yearly Canadian graduates entering the labor market, past immigration flows and rising real wages.24 In short, we demonstrate that the expressed policy of 1978- 86, “Canada First,” or insuring domestic graduate employment, was carefully adhered to by Canadian officials unless real wages rose. The fact that contemporary immigrant demand was positively influenced by last period’s flow is consistent with Canada’s queuing problem. The time interval for processing, approval and actual admission of immigrants is becoming longer.

Moreover, the traditional view that Canada’s highly skilled immigrant flows are influenced by US conditions is not supported in this period.

There exists no substitution (or complementarity) between the Canadian and US highly skilled immigrant demands. This result is unexpected given that MacPhee and Hassan (1990) successfully used a similar model to rationalize US immigrant flo~s.‘~ In addition, Canada’s stated universalistic policy which disregards country of origin is adhered to when admitting professional or highly trained immigrants since. third World sources continue to be Canada’s dominant source group.

Nevertheless, this universalistic and carefully controlled policy based upon dynamic shortages led to unexpected externalities. Each contemporary immigrant under the independent or economic classification created a later claim on future immigration levels. In short, an economic immigrant could sponsor future immigrants under the family reunification entry class which ultimately distorted this carefully controlled immigrant admissions policy. By the mid-1980’s over 50% of the immigrant admissions were in the economically unscreened family reunification class (see Coulson and DeVoretz, 1989). Thus, the carefully controlled policy of immigrant admissions based upon a dynamic shortages model is mis- leading and only correct in the short run, i.e., yearly. In the longer run, due to this ability to sponsor relatives, the immigrant policy has become inverted. In reality, yearly immigrant targets are set and then, the anticipated number of immigrants under the family reunification class (and refugees) is deducted from this target level. Thus, the outlined dynamic shortages model only applies to the residual or remaining immigrant vacancies for a limited number of occupations. In certain years of our study period (1981-86) this residual claim under the economic criteria category was 17% or less. Thus, the results and conclusions implied by this dynamic shortages model for highly skilled immigrants are very limited in scope and would not hold for other skill levels.26

NOTES

I. We will argue below that the elasticity of supply of North American immigrants is infinite.

2. For further discussion see Marr and Percy (1985, p. 62).

3. The 1978 Act also had clearly stated family reunification and humanitarian goals.

4. By the 1980s the previous near constant number of refugees, approximately 20,000, fluctuated widely.

5. For example, in 1983-85 the yearly target was less than 100,000 immigrants and the independent/ economic class of immigrants constituted less than 14% of the target.

6. The occupational groups were defined to a three- digit occupational code.

7. This restriction was dropped in 1986. See Coulson and DeVoretz (1989) for details. See note 16 for our test of this restriction.


8. This model with its implied shortages is a variant of the Arrow-Capron (1959) model of domestic US dynamic labor shortages.

9. DeVoretz and Maki (1975) cite a time lag between successful application to admission of 1.6 years. Current evidence circa (1989) suggests that this time lag is even longer (Canada, Immigration to Canada, 1989. p. 38).

10. MacPhee and Hassan (1990) in a different context. i.e. US. argue for a simultaneous equations system with a supply function partially dependent on US income levels.

11. See Greenwood (1983) for a review of this variable’s SUCCESS in the literature.

12. We later test for the significance of this particular pooling method. The (unreported) regression results indicate that this pooled group when dummied is significant.

13. Coulson and DeVoretz (1989) argue that these occupations are especially sensitive to changing labor market conditions, but have the highest average human capital content of the relevant occupational groups.

14. The Durbin-H statistic was used to test for serial correlation since our model included a lagged endogenous variable.

15. For a complete discussion of PE test and its calculations see Green (19YO).

16. We tested for structural change during the early 1980s recession with a dummy variable for 1982-85. The dummy variable coefficients were significant. This supports our assertion that pohcy makers do respond to labor market conditions.

17. This increase in the flow is also caused by a policy aimed at reducing long queues, that is, quicker processing and an increase in the yearly target.

18. A direct comparison to the DeVoretz-Maki results is not possible since they estimated a linear model.

19. Without the lagged endogenous variable the DeVoretz-Maki model’s explanatory power decreased with only two significant variables; graduates and total LDC immigrants. In the current study when the lagged endogenous variable is omitted the total explanatory power of the model is also reduced (R’ = 0.13) with only one significant variable remaining, i.e., income.

20. See DeVoretz and Maki (1983).

21. Points ranged between zero to 10 and were defined over a three-digit Standard Industrial Classifi- cation level.

22. This standard did not hold for refugees and close family members, but they rarely fell in our occupational categories.

23. An example would be Canadian trained medical professionals opening a clinic which required more medical technicians which are supplied from abroad.

24. This immediate response is confirmed by our weak unreported distributed lag results. We experi- mented with alternative one and two-period distributed lags and several forms of polynomial distributed lag models. The results are available upon request. In short, when using any distributed lag the overall explanatory power of the model falls and all parameter estimates obtain the wrong sign or become insignificant or both.

25. No doubt different phases for excess demand for different occupations between the two countries rationalizes our findings.

26. Unskilled and semi-skilled immigrants to Canada can bypass economic criteria by entering either as refugees or under the large family reunification class.

REFERENCES

Akbari, S. A., “The benefits of immigration to Canada: Evidence on tax and public services,” Canadian Public Policy, Vol. XV. No. 4 (1989). pp. 424435.

Akbari, S. A., and D. J. DeVoretz, “The substitutability of foreign-born labor in Canadian production circa 1980” (Ottawa: Canada Employment and Immigration, 1988).

Arrow. K.. and W. Capron, “Dynamic shortages and price rises: Scientist case.” (?L~cIrIcr/y Jo~rmcrl of Economics (May 1959).

Borjas, G., lnternufiorud Differences it? /he Luhor Murkrt Performance of lmm@znfs (Kalamazoo, MI: W.E. Upjohn Institute. 198X).

Canada, Annual Salaries of Hospitul Nursing Personnel (Ottawa: Statistics Canada, various issues).

Canada. Degrees, Dipiomas, Certificates Awarded by

Degree Grunting lnsriru~ions (Ottawa: Statistics Canada, various issues).

Canada, Degrees, Diplomas. Certificates Awarded by Universities (Ottawa: Statistics Canada, various issues).

Canada, Educariorr in Cunadu (Ottawa: Statistics Canada, various issues).

Canada, Immigrurion Statistics (Ottawa: Department of Employment and Immigration, various issues).

Canada, Salaries and Qualificarions of Teachers in Public Elementnry nnd Secondary Schools (Ottawa: Statistics Canada, various issues).

Canada. Immigration to Canada (Ottawa: Government Printer. 1989).

Canada, The Immigration Bill (Ottawa: Department of Manpower and Immigration. 1976).

Clark, D. P., and H. Thompson, “Immigration. inter-


national capital flows, and long run income distribu- from poor to rich countries: leading issues of fact and tion in Canada,” Atlantic Economic Journal, Vol. 14, theory.” American Economic Review. Vol. 73. No. 2 No. 4 (Dec. 1986), pp. 24-29. (May 1983). pp. 173-177.

Coulson, R., and D. DeVoretz, “Human capital MacPhee, C. R., and M. Hassan, “Some economic content of Canadian immigration: 19661987,” Paper determinants of Third World professional immigra- oresented at the 16th Conference on the Use of tion to the United States: 1972-1987.” World De- Quantitative Methods in Canadian Economic His- tory (Toronto: 1989).

Dales, J. H., The Protective Tariff in Canada’s De- velopment (Toronto: University of Toronto Press, 1966).

Dales, J. H., “The cost of protectionism with high international mobility of factors,” Canadian Journal of Economics and Political Science, Vol. 30 (Nov. 1964). pp. 512-525.

DeVoretz, D. J., “Canada’s demand for Third World immigrants: A separable function’?” Paper presented at the Western Economics Association Meetings (Lake Tahoe. CA: June IY, 1YXY).

DeVoretz, D. J.. and D. Maki, “The immigration of Third World professionals to Canada: 1968-1973,” World Development, Vol. 11, No. 1 (1983). pp. 55- 64.

DeVoretz, D. J., and D. Maki, “The size and distribution of human capital transfers from LDCs to Canada 196673,” Economic Development and Cultural Change, Vol. 28, No. 4 (July 1980), pp. 77Y- 800.

DeVoretz, D. J., and D. Maki, “The brain drain and income taxation,” World Development, Vol. 3, No. 10 (1975), pp. X35-716.

Green, A.. lmmigrution and the Post-war Canadian Economy (Toronto: Macmillan of Canada, 1976).

Green, W. H., Econometric Analysis (New York: Macmillan Publishing Co., 1990).

Greenwood, M. J., “The economics of mass migration

ve/opment, Vol. 18, No. 8 (1990). pp. 1111-1118. Marr, W. L., and M. Percy, “Immigration policy and

Canadian economic growth,” in J. Whalley (Ed.), Domestic Policy and the International Environment (Toronto: University of Toronto Press, 1985).

Parai. L., “Canada’s immigration policy, 1962-74,” International Migration Review, Vol. 9 (1975), pp. 449-477.

Parai, L.. “The economic impact of immigration” (Ottawa: Canadian Immigration and Population Study, 1974).

Parai. L., “Immigration and emigration of professional and skilled manpower during the post-war period.” Study No. 1 (Ottawa: Economic Council of Canada, Queen’s Printer, 1965).

Rao, S., and C. Kasalis, “Labour shortages and immigration policy,” Canadian Public Policy (July 1982).

Roy, A. S., “An analysis of substitutability and complementarity of immigrants and Canadian-born work force,” Labour Market Bulletin, Vol. 4, No. 9 (October 1987), pp. 5-11.

United States Immigration and Naturalization Services, Annual Report (Washington, DC: Department of Justice, various years).

World Bank, World Tables (Baltimore, MD: Johns Hopkins University Press, various years).

World Bank, World Development Report (New York: Oxford University Press, 1989).


APPENDIX

Table A-l. Variable definitions

(1) (2) Variables Operational definitions

(3) Sources

1. Immigrants

2. Earnings (a) Teachers

(b) Professors

(c) Physicians

(d) Nurses

3. Non-ith immigration

4. Lagged Canadian graduates (a) Professors

(b) Nurses

(c) Physicians

(d) Teachers

5. Immigration to United States

Professors, teachers and actually entering Canada during 197546 under immigrant visas from 16 countries.

Median real annual salaries for all public secondary and elementary school teachers. Median real salaries of full-time university teachers. Net annual real earnings of self-employed physicians and surgeons. Mean real salaries of graduate nurses employed in Canada.

Immigration by occupation, from all countries including developed countries, except the source country in the dependent variable. The independent variable was lagged by one year.

All earned doctorates granted in all fields in Canada.

Bachelor of Nursing degrees granted in Canadian universities and colleges. MD and Master of Medicine degrees granted in Canadian universities and colleges. Bachelor and Master of Education degrees granted in Canadian universities and colleges.

Immigration by each LDC to United States in occupational categories; professional, technical and managerial.

Canada, Immigration Statistics (various issues).

Canada, Salaries and Qualifications of Teachers in Public Elementary and Secondary Schools (various issues). Canada, Education in Canada (various issues). Canada (various issues).

Canada (various issues).

Same sources and definition as the dependent variable.

For all categories used: Canada, Degrees, qiplomas, Certificates Awarded by Degree Granting Institutions (various issues).

US INS (various years).


Table A-2. Parameter estimates for Canadian lagged linear immigrant demand

function 1976-86

Panel A:* Variable Coefficient T-ratio

Income O.OtXl4 One-period grad lag -0.0003 Two-period grad lag 0.0005 Immigrant United States -0.oocm2

Lagged endogenous 0.45 Constant 2.28

R’ = 0.47 S.E.E. = 5.56 N = 269

Durbin-H statistic = -0.056

2.24 -0.84

1.49 -0.72 11.29 2.12

Panel B: P.E. test results

Estimates of A Std. Error T-ratio

Linear model 7.25 1.19 6.11 Log-linear model 0.014 0.045 0.3

*The estimating equation was linear form of equation (1) in text.

Table A-3. Professional and technical Third World immigrants as a percentage of Canadian degrees awarded: 1%2-M

Degree

(6) (5) 1%2-74 Third

.(2) 1974 professional World immigrants

(4) (1) 1974 professional (3)

immigrants as a as a percentage of 1962-74

1974 Third World percentage of 19741%2-74 professional

Degrees* 1%2-74 professional graduates (%)

immigrants? graduates (%)

degrees$ immigrantss (Ul) (43)

1. Commerce 4,604 2,646 22,435 .10,943 57 48 2. Engineers and

applied scientists 13,817 1,428 35,819 12,700 10 35 3. Teachers 13,194 606 81,223 9,451 4 I2 4. Physicians 2,042 354 8,286 94,815 17 58 5. Nurses 1,161 513 8,208 10,193 44 23 6. Medical and

dental technicians 1,078 n.a. 9,961 3,327 n.a. 33

7. Professors 1.8% 238 10,522 2,854 12 17

*Canada, Education in Canada (various issues). tDerived from Table 1. SCanada, Degrees. Diplomas, Certificates A warded by Universities (various issues). !&See Table 1.

Documents

Canada's demand for Third World highly trained immigrants: 1976–86