NBER WORKING PAPER SERIES

THE LABOR MARKET CONSEQUENCES OF REFUGEE SUPPLY SHOCKS

George J. BorjasJoan Monras

Working Paper 22656http://www.nber.org/papers/w22656

NATIONAL BUREAU OF ECONOMIC RESEARCH1050 Massachusetts Avenue

Cambridge, MA 02138September 2016

Borjas: Professor of Economics and Social Policy, Harvard Kennedy School; Research Associate, National Bureau of Economic Research; and Program Director, Program on Labor Mobility, IZA. Monras: Assistant Professor of Economics, CEMFI; and Research Affiliate, IZA. We are grateful to Andrea Ichino, Joan Llull, Jan Stuhler, and four referees for valuable comments on a previous draft of this paper. The paper was prepared for presentation at the 64th Panel Meeting of Economic Policy in October 2016 in Florence, Italy. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

© 2016 by George J. Borjas and Joan Monras. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.

The Labor Market Consequences of Refugee Supply ShocksGeorge J. Borjas and Joan MonrasNBER Working Paper No. 22656September 2016JEL No. J23,J6

ABSTRACT

The continuing inflow of hundreds of thousands of refugees into many European countries has ignited much political controversy and raised questions that require a fuller understanding of the determinants and consequences of refugee supply shocks. This paper revisits four historical refugee shocks to document their labor market impact. Specifically, we examine: The influx of Marielitos into Miami in 1980; the influx of French repatriates and Algerian nationals into France at the end of the Algerian Independence War in 1962; the influx of Jewish émigrés into Israel after the collapse of the Soviet Union in the early 1990s; and the exodus of refugees from the former Yugoslavia during the long series of Balkan wars between 1991 and 2001. We use a common empirical approach, derived from factor demand theory, and publicly available data to measure the impact of these shocks. Despite the differences in the political forces that motivated the various flows, and in economic conditions across receiving countries, the evidence reveals a common thread that confirms key insights of the canonical model of a competitive labor market: Exogenous supply shocks adversely affect the labor market opportunities of competing natives in the receiving countries, and often have a favorable impact on complementary workers. In short, refugee flows can have large distributional consequences.

George J. BorjasHarvard Kennedy School79 JFK StreetCambridge, MA 02138and NBERgborjas@harvard.edu

Joan MonrasCEMFICalle Casado del Alisal, 528014 Madridjm3364@gmail.com

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TheLaborMarketConsequencesofRefugeeSupplyShocks

GeorgeJ.BorjasandJoanMonras*

1.Introduction

TherecentinflowofhundredsofthousandsofSyrianrefugeesintomanyEuropean

countrieshasinevitablyrekindledinterestindocumentingthedeterminantsand

consequencesofsuch“refugeesupplyshocks.”AlthoughthewarinSyriastartedin2011,

andrefugeecampsformedintheareasoonthereafter,therefugeesinitiallymovedmainly

toLebanon,Jordan,andTurkey.AstheSyrianconflictcontinuedandescalated,however,

therefugeesbegantomovetoEuropethroughGreece,withalternateroutesquickly

emerginginHungary,Austria,andtheBalkans.Itisdifficulttoenumeratepreciselyjust

howmanyrefugeeshavealreadyenteredthecontinent,butmanynewsreportsclaimthat

over1millionasylumseekersarrivedinEuropeincalendaryear2015.

Thisinflowofrefugeeshasalreadygeneratedagreatdealofpoliticalconflictinall

thereceivingcountries,andhasexposedmajorfissuresintheeconomic,social,andcultural

fabricthatholdstogethertheEuropeanUnion.Muchofthecontroversysurroundsthe

long-termimplicationsoftheopen-doorpolicyimplicitinGermanPrimeMinister’sAngela

Merkel’sunilateralassertionthat“thefundamentalrighttoasylumforthepolitically

persecutedknowsnoupperlimit”(Alexe,2015).

ThefullconsequencesoftheepochaleventsnowreverberatingthroughoutEurope

willnotbeknownformanyyears(orperhapsevendecades).Nevertheless,thepersistent

influxoflargenumbersofrefugeesraisesfundamentalquestionsabouttheirimpactthat

encouragea“revisiting”ofotherrefugeesupplyshocksinothercountriesandatother

timestodetermineifthereareuniversallessonstobelearnedfromsuchshocks.

Thispaperprovidessucharevisiting.Despitetheobviousdifferencesinthefactors

thathavemotivatedrefugeeshocksthroughouthistory—includingthesizeandtimingof

*Borjas:ProfessorofEconomicsandSocialPolicy,HarvardKennedySchool;ResearchAssociate,

NationalBureauofEconomicResearch;andProgramDirector,ProgramonLaborMobility,IZA.Monras:AssistantProfessorofEconomics,CEMFI;andResearchAffiliate,IZA.WearegratefultoAndreaIchino,JoanLlull,JanStuhler,andfourrefereesforvaluablecommentsonapreviousdraftofthispaper.Thepaperwaspreparedforpresentationatthe64thPanelMeetingofEconomicPolicyinOctober2016inFlorence,Italy.

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theflows,thehumancapitaloftherefugees,andthecountriesandlocalitiesaffectedbythe

upheaval—thereareimportantsimilaritiesaswell,andthesesimilaritiescanhelpprovide

aunifyingframeworkforhowtothinkaboutthelabormarketconsequencesofcurrentor

futuresupplyshocks.

Almostbydefinition,refugeesupplyshocksareexogenousalonganumberof

importantdimensions.Thetimingofthesupplyshocktypicallyhaslittletodowith

economicconditionsinthereceivingcountries.Thesizeofthesupplyshockdependsat

leastpartlyonthecircumstancesthatcreatedtheexogenouspoliticalturmoil.Andtheskill

compositionoftherefugeesoftenhingeonthenatureofthepoliticalconflictthat

motivatedtheexodus.Insomecases,thesepoliticaleventsleadtoanoutflowofhigh-skill

workers,whileinothercasestheyleadtoanoutflowoflow-skillworkers.

Thepaperreexaminestheevidencesurroundingsomekeyhistoricalrefugeesupply

shocks.Inparticular,wedocumentthelabormarketconsequencesoffourdistinctshocks,

eachofwhichhasbeenanalyzedseparatelyinpreviousresearch:

(1)TheflowofCubanrefugeesintheMarielboatliftin1980,asupplyshockthat

affectedmainlythecityofMiami(Card,1990;Borjas,2016,2017;PeriandYasenov,2015).

(2)TheflowofrefugeesintoFrance,bothFrenchrepatriatesandAlgeriannationals,

thatfollowedtheconclusionoftheAlgerianWarofIndependencein1962(Hunt,1991).

(3)TheflowofJewishémigréstoIsraelfollowingthecollapseoftheSovietUnionin

theearly1990s(Friedberg,2001).

(4)TheflowofrefugeesintoseveralEuropeancountriesfromthelongYugoslav

Warsduringthe1990s(AngristandKugler,2003).

Table1summarizessomeoftheessentialdetailsthatcharacterizethesesupply

shocks.Thereareobviouslylargedifferencesinthenumberofrefugeesinvolved.The

Marielsupplyshock,forexample,involvedatotalofabout120,000refugees;theexodus

createdbytheYugoslavWarsinvolved250,000persons;theshockofSovietémigrésinto

Israelinvolvedalmost500,000refugees;andnearly1.5millionrefugeesenteredFrance

aftertheendoftheAlgerianconflict.Thedifferentshocksalsodifferedsubstantiallyinthe

skillcompositionoftherefugeepopulation.TheMarielshock,forinstance,consisted

mainlyofverylow-skillworkers,withmostofthemlackingahighschooleducation;the

SovietémigrésenteringIsraelweredisproportionatelyhigh-skill,withmostofthemhaving

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atleastacollegedegree;andtherefugeeflowexitingAlgeriaconsistedofbothextremes,

withmanylow-skillAlgeriannationalsandmanyatleastmoderatelyskilledFrench

repatriates.

Althougheachoftheseshockshasbeenexaminedindependentlyinpriorresearch,

ouranalysisdiffersinthreecrucialways.Theexistingstudies“pickandchoose”a

particularmethodologicalapproach,oftenbasedonthetypeofdataavailableoronthe

idiosyncraticcharacteristicsofaparticularshock,todocumenttheirimpact.Anobvious

problemwiththispiecemealapproachisthatitisuncleariftheempiricalfindingstruly

revealuniversalinsightsabouttheimpactofrefugeesupplyshocks,orinsteadreflectthe

factthataparticularresearcherchoseaparticularmethodologicalapproachtostudythe

impactofaparticularepisode.Putbluntly,arethefindingsdocumentedintheliterature

sensitivetothechoiceofmethodologicalapproachusedtoexaminetheimpactofa

particularsupplyshock?

Ouranalysisinsteadderivesasingleempiricalapproachbasedontheimplications

offactordemandtheory.Inprinciple,thismethodologicalapproachcanbeappliedto

measuretheconsequencesofanyrefugeesupplyshock.Thetheoreticalderivation

indicatesexactlythetypeofcorrelationbetweenlabormarketoutcomesandthenumberof

refugeesthatshouldbeestimatedinanyspecificcontext.Anditalsodelineatesprecisely

theconditionsunderwhichthatobservedcorrelationcanbeinterpretedasmeasuringa

causalimpactoftherefugee-inducedincreaseinthesupplyoflabor.

Second,ouranalysisplayscloseattentiontoisolatingtheparticulargroupsthatare

mostlikelytobeaffectedbyrefugeesupplyshocks.Asnotedearlier,thesupplyshocks

sometimesconsistofhigh-skillworkers,whileinothercasestheyconsistoflow-skill

workers.Oneimportantlessonfromourexaminationoftheevidenceisthattheadverse

labormarketimpactofrefugeesupplyshockscanonlybeproperlyestimatedwhenthe

analysiscloselymatchestheskillsoftherefugeeswiththoseofthenativeworkerswhoare

mostlikelycompetinginthesamelabormarket.

Equallyimportant,theemphasisontheskilldistributionsofnativeandofrefugees

impliesthatwecanalsoexaminetheimpactofthesupplyshocksonpotentially

complementarynativegroups.Forexample,thelow-skillMarielitosmayhavehada

beneficialimpactonthewageofhigh-skillMiamians,whilethehigh-skillSovietémigrés

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mayhavehadabeneficialimpactonlow-skillIsraelis.Thesepotentialcomplementarities

areobviouslyanimportantcomponentofanycompleteassessmentofthelabormarket

consequencesofrefugeesupplyshocks.Ouranalysisofthenaturalexperimentsgenerated

bythevarioussupplyshocksprovidesthefirstestimatesofthecross-effectsof

immigrationthatarebasedentirelyonobserveddataandarenotcontaminatedbyany

extraneousassumptionsaboutthefunctionalformoftheaggregateproductiontechnology.

Finally,ratherthanrelyonproprietaryorconfidentialdata,weusethepublicly

availablecensusesmaintainedatIPUMS.Althoughthesedataaresometimeslessthanideal,

theycanbeeasilyadaptedtomeasurethelabormarketconsequencesofrefugeesupply

shocksonbothcompetingandcomplementaryworkers.Inviewoftheverycontentious

policydebateovertheeconomicimpactofimmigration,theuseofpubliclyavailabledata

hasonenon-trivialimplication:Ourresultsarefullyreproducible.

Theempiricalanalysisreportedbelowusesthetheory-derivedempirical

specificationtoestimatetheimpactoftheMarielitos,oftheFrenchrepatriatesandAlgerian

nationalsmovingtoFrance,oftheflowofSovietémigrésintoIsrael,andoftherefugees

fromtheYugoslavwarsintoseveralEuropeancountries.Despitetheobviousdifferencesin

thehistoricaleventsthatweexamine,intheskillcompositionoftherefugees,andinthe

countriesandlocalitiesaffectedbytheshocks,theuseofaunifiedempiricalframeworkto

studyeachoftheepisodesrevealsacommonthread:Exogenousrefugeesupplyshocks

haveanadverseeffectonthelabormarketopportunitiesofcompetingnativesinthe

destinationcountries.Dependingontheepisodeandthedata,wedocumentthattheshock

sometimesreducesthewageofcompetingworkers;sometimesitreducestheir

employmentrates;andsometimesitreducesboth.Atthesametime,however,the

empiricalanalysisalsorevealsthatexogenoussupplyshocksoftenhaveabeneficialimpact

ontheemploymentopportunitiesofcomplementarynativeworkers.Inshort,refugee

supplyshockshavesizabledistributionalconsequencesinthelabormarketsofreceiving

countries.

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2.Framework

Itisinstructivetobeginthediscussionbyconsideringhowonewouldgoabout

estimatingthelabormarketimpactofimmigrationifonehadanidealempiricalsettingand

idealdata.Inparticular,supposethatthereceivingcountryhasacompetitivelabormarket

andthatvolatilepoliticalconditionsabroadrandomlygenerateaflowofrefugees.Itis

crucialtoemphasizethattherefugeesupplyshockisrandomalongallrelevantdimensions,

includingthetiming,thesizeandskillcompositionoftheflow,andtheeventualgeographic

sortingoftherefugeesinthereceivingcountry.

Theeconomyofthereceivingcountryiscomposedofrisolatedlabormarkets.

Theselabormarketscanbedefinedalonganumberofcharacteristicscommonlysharedby

groupsofworkers.Tofixideas,andbecausethisisthecontextmostoftenseeninthe

existingliterature,itisusefultothinkoftheindexrasindicatingaregionallabormarket

(althoughourdiscussioncanbeeasilyappliedtoalternativeclassifications,suchasan

occupation).Inthisidealsetting,workerscannotmovefromonelabormarketrtoanother

inresponsetoeithersupplyordemandshocks.Theproductiontechnologyinthefirms

populatingeachofthesemarketsusessdifferenttypesofworkersthataredefinedalong

anothercharacteristic,suchastheireducationalattainment.Pairs(r,s)oflabormarkets

andfactortypesdefineeachofthekdifferent“cells”inwhichthenationallabormarketcan

besubdividedandforwhichdataareavailable.

Wecanderiveastandardisoelasticlabordemandfunctionforeachofthesekcells

byassumingthatcompetitivefirmsmaximizeprofitsineachmarket.Priortotherefugee

supplyshock(t=0),thereareLrs0workersinregionrofskilltypes.Thepre-shockCES

aggregateproductionfunctionforregionrisgivenby:

(1) Qr0 = α s0Lrs0

δ

s∑⎡⎣⎢

⎤⎦⎥

1/δ

,

whereδ=(σ-1)/σ;andσistheelasticityofsubstitutionacrossworkertypes.Notethat

theweightsattachedtothevariousskillgroups(i.e.,theα’s)canvaryovertime,due

perhapstotechnologicalshiftsthatmayfavoroneskillgroupoveranother.

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Profitmaximizationimpliesthatwecanwritethewagepaidtoworkersincell(r,s)

att=0as:

(2) logwrs0 = logpr0 + logα s0 + η logQr0 − η logLrs0 ,

wherepr0isthepricelevelinregionrpriortothesupplyshock,andη(=1/σ)isthewage

elasticity.

ItisusefultothinkofthevariableLrs0asgivingthenumberofpre-existingworkers

incell(r,s)priortothesupplyshock.Forsimplicity,wewilloftenrefertothispre-existing

workforceas“natives,”butitshouldbeobviousthatLrs0couldpotentiallyincludeboth

native-andforeign-bornworkers.Intheshortrun,withthequantityofotherfactorsof

productionheldconstant,economictheorypredictsthatanincreaseinthesizeofthe

workforceinaparticularregion-skillcellreducesthe“own”wage.1Notealsothatwrs0,the

equilibriumwagepriortotherefugeesupplyshock,incorporatestheimpactofall

immigration-inducedsupplyshockspriortotherandompoliticalupheavalthatgenerates

thenewflowofrefugees.

Thelabormarketsinthereceivingcountryarethen“shocked”bythepolitical

upheavalabroad.ThisupheavalsendsaninfluxofMrsnewrefugeesintoeachregion-skill

cell.Wecanwritethepost-shockmarginalproductivityconditionas:

(3)

Thewagechangeobservedincell(r,s)asaresultoftherefugeesupplyshockcan

thenbewrittenas:

1Differentiatingequation(2)withrespecttoLrs0yields∂logwrs0/∂logLrs0=−(1−κs)/σ,whereκs

istheshareofincomeaccruingtoskillgroups.

logwrs1 = logpr1 + logα s1 + η logQr1 − η log(Lrs1 +Mrs ).

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(4)

Δ logwrs = Δ log pr + ηΔ logQr + Δ logα s − η log Lrs1 +Mrs

Lrs0,

= θr + θs − η log Lrs1(1+mrs )Lrs0

,

= θr + θs − η log Lrs1Lrs0

− η mrs ,

whereθr=Δlogpr+ΔlogQr,andiscapturedbyaregion-specificfixedeffect;θs=Δlogαs,

andiscapturedbyaskill-specificfixedeffect;andmrs=Mrs/Lrs1.2Notethatmrsgivesthe

relativesizeofthesupplyshock:thepercentincreaseinthenumberofworkersduetothe

entryofrefugeesintocell(r,s).

Inadditiontothefixedeffectsθrandθs,equation(4)hastworegressors.Not

surprisingly,thewagechangedependsontherefugeesupplyshock.Althoughthereis

muchconfusioninhowthissupplyshockshouldbemeasured(compare,forexample,

Borjas,2003;andCardandPeri,2016),themarginalproductivityconditionthatisthe

foundationofthetheory-basedempiricalapproachclearlyindicatesthatthemeasureof

thesupplyshockshouldgivethepercentbywhichimmigrantsincreasedthesizeofthe

workforce,withthebasebeingthenumberofnativeworkersinthepost-shockperiod.3

Equation(4)alsoshowsthatthewageincell(r,s)mayhavechangedbecausethe

numberofnativeworkersinthatlabormarketmighthaverisenorfallenbetweenthetwo

periods.Someofthechangeinthenumberofnativesmaybeduetodemographicfactors

thatareunrelatedtochangesineconomicconditionsduringtherelevantperiod,suchas

mortalityinthepre-existingworkforce,thelabormarketentryofworkersbornmany

yearsearlier,orseculartrendsintheskillmixofthenativepopulation.Butsomeofthe

changeinLrsmaybeendogenous,inducedbytherefugeesupplyshockitself.Inother

2Thederivationofequation(4)usestheapproximationlog(1+mrs)≈mrs,whichisappropriateas

longastherefugeesupplyshockis“small.”

3CardandPeri(2016)arguethatitispreferabletousethepre-shockperiodworkforceasbase(seealsoDustmannetal.,2016).Thebiasinducedbyanyparticularspecificationisrelatedtotheendogenouslaborsupplyresponseofthenatives.Wediscussthelaborsupplyresponseingreaterdetailbelow.

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words,theentryoftheMrsrefugeesmightgeneratealaborsupplyresponseinthenative

population.

Asastartingpoint,supposethatthechangeinthesupplyofpre-existingworkersis

exogenous,duetolong-termdemographicfactors.Wehavealreadyassumedthatthe

refugeesupplyshockis,bydefinition,exogenous.Thecorrectspecificationofaregression

modelthatestimatestheimpactoftherefugeesupplyshockwouldthenrelatethewage

changeinaparticularlabormarkettothepercentchangeinsupplyinthenative

populationandtothepercentchangeinsupplyattributabletotherefugees(aswellas

regionandskillfixedeffects).Thetwo“supply”regressorsshouldhaveidentical

coefficients,andthosecoefficients,asindicatedbyequation(4),shouldequalthewage

elasticityη.

3.StatisticalDifficulties

Itisobviousthatthereal-worlddatatypicallyavailabletomeasurehow

immigrationaffectslabormarketsdonotmeettheidealconditionsoftherefugeesupply

shockdiscussedabove.Althoughthetimingoftheshockmaybeindependentfrom

economicconditionsinthereceivingcountry,theactualnumberofrefugeesaswellastheir

distributionacrossthe(r,s)cellswillbeaffectedbythoseconditions.Afterall,onlythose

personswhohavethemosttogainbyleavingwillbetheoneslikelytoendupasrefugees.

Moreover,thoseself-selectedrefugeeswilltendtosettleinthoseregionsofthereceiving

countrythatofferthemostfavorableeconomicopportunities.

Nativeswillalsorespondtotherefugeesupplyshock.Theseresponsesimplythat

theregion-skillcellscannotbethoughtofasisolatedislands,andthatsupplyshocksthat

affectonecellhavespillovereffectsonothercells.Intheshortrun,forexample,native

workersorfirmsmightmovefromoneregionallabormarkettoanothertotakeadvantage

ofthechangesinthewagestructure.Inthelongrun,thedemographicvariablesthatmay

bethe“fundamentals”determiningendowmentsofeachfactorofproductionarenolonger

exogenous,asnativesmightpursueparticulartypesofhumancapitalinvestmentsand

avoidothers.

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Inadditiontotheseendogeneityissues,thereisameasurementprobleminherentin

thistypeofanalysisthatmightgeneratesubstantialbias:Theskillsthatrefugeesacquired

priortothepoliticalupheavalmightnotbeveryvaluabletoemployersinthereceiving

country.Inotherwords,someofthoseskillsmayevaporateduringthemove.Forinstance,

acollegedegreeacquiredabroadmightnothavethesame“knowledgecontent”asacollege

degreeacquiredinthereceivingcountry.Similarly,languagedifficultiesmightimposea

barrierformigrantswishingtoentercertainoccupations.Asaresult,theobservableskills

oftherefugees,asmeasuredbyyearsofeducationalattainmentorprofessionalcertificates,

provideerroneousinformationaboutwhichspecificfactorsofproductiontheyaretruly

competingwithorcomplementing.Thismeasurementerrorinthesizeofthesupplyshock

incell(r,s)will,ingeneral,biastheestimateofthewageelasticity.

Weusetheempiricalcounterpartofequation(4)toestimatethewageeffectsofthe

refugeesupplyshockandtodiscussvariousidentificationproblems.Ourbasicempirical

regressionspecificationisgivenby:4

(5) Δ logwrs = θr + θs − η log Lrs1Lrs0

− η mrs +εrs .

Itisobviousthatakeyrequirementforcorrectlyestimatingthewageelasticityηisthatthe

residualεrsbeindependentfromboththesizeoftherefugeesupplyshockandfromthe

sizeofthenativeresponse.Itiseasytoimaginemanyreal-worldsituationsinwhichsucha

restrictionwillfailtohold.

3.1Endogenousnativelaborsupply

Akeystatisticalproblemthataffectsestimatesofthewageelasticityarisesfromthe

endogeneityofnativelaborsupply.Remarkably,theexistingliteraturehas,atbest,only

superficiallyaddressedthebiasescreatedbythistypeofnativeresponse.5

4Itispossibletoextendthediscussionofthelaborsupplydecisionbytakingintoaccountthe

probabilityoffindingajob.Inthatcase,wecanderiveanequationsimilartoequation(5)fortheunemploymentrate;seetheappendixinMonras(2015b)forsuchaderivation.

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Theendogeneityofthechangeinnativelaborsupplyinaparticularregion-skillcell,

ΔlogLrs,canariseduetotwodistinctfactors.First,theamountoflaborthatnativepersons

alreadyparticipatinginthelabormarketwilloffertoemployerslikelydependsonthe

wage.Putdifferently,therefugeesupplyshockaffectsnativelaborsupplyattheintensive

margin.Second,thenumberofnativeswhochoosetooffertheirservicesinaparticular

labormarketwillrespondtochangesinthemarketwage,creatinganativeresponsetothe

refugeesupplyshockattheextensivemarginaswell.

Regardlessofwhichmarginwearereferringto,itiseasytoseehowendogenous

nativelaborsupplycontaminatesestimatesofthewageelasticitybytakingafirst-order

Taylor’sexpansionofthelogchangeinthesizeofthenativeworkforce.Equation(5)can

thenberewrittenas:

(5′) Δ logwrs = θr + θs − η Lrs1 − Lrs0Lrs1

− η mrs +εrs .

Wecanthenpositastandardmodelofthelaborsupplyresponseofnativesbywriting:

(6) Lrs1 − Lrs0Lrs1

= γ Mrs1

Lrs1+urs ,

wheretheparameterγmeasuresthenativelaborsupplyresponse.Iftherefugeesupply

shocklowersthemarketwage,thesupplyparameterγisunambiguouslynegativeaslong

asthesubstitutioneffectdominatestheincomeeffectintheneoclassicallaborsupply

framework.Inotherwords,astheentryofrefugeeslowersthepriceofleisure,notonlydo

fewernativeswork,butthosewhodoremainintheworkforceworkfewerhours.Wecan

substitutethelaborsupplyresponseinequation(6)toobtainthereducedform:

5Therearesomeexceptions.Forexample,Borjas(2003,TableIII)estimatesthewageimpactofimmigrationusingaregressionmodelthatincludesavariablegivingthenumberofnativeworkersintheskillgroup(whichisthendifferencedbyaddingappropriatefixedeffectstothemodel).However,thepropertiesofthewageelasticitiesresultingfromthisparticularspecificationhavenotbeenexaminedinthesubsequentliterature,despitethewidespreadadoptionofthe“skill-cell”approach.Similarly,Monras(2015a)includesthechangesinthelevelofregionalGDPandinnativelaborsuppliesofthevariousskillgroupsinhismainregressionspecification.

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(7) Δ logwrs = θr + θs − η (1+ γ ) mrs +εrs* .

Equation(7)showsthatifwesimplyexcludethechangeinthenative-born

workforcefromtheestimatedregressionmodel(asalmostallofstudiesintheexisting

empiricalliteraturedo),theregressioncoefficientthatrelateswagechangestothesupply

shockmeasuresanamalgamofthewageelasticityηandthelaborsupplyparameterγ.As

longas-1<γ<0,theOLSestimateofthefactorpriceelasticityisbiasedtowards0,

suggestingthattherefugeesupplyshockhadarelativelyweakimpactonwages.The

intuitionisobvious:thewageimpactoftherefugeesupplyshockisattenuatedbythefact

thatnativessuppliedlessworkefforttothelabormarket,andasaresulttherealsupply

shockwasnotaslargeasimpliedbymechanicallycalculatingthenumberofrefugees.

Equation(7)alsoillustratestheinterestingcasewherethedisplacementeffectisone-to-

one(orγ=−1).Thewagechangeincell(r,s)isthenuncorrelatedwiththerefugeesupply

shockbecausethe“complete”nativeresponseensuredthattherewasnosupplyshockto

speakof.

Itisworthnotingthatthemagnitudeofthesupplyparameterγ,whichdetermines

thesizeofthedownwardbiasinestimatesofthewageelasticity,dependsonhowthe

isolatedlabormarkets(r,s)aredefined.Forexample,Borjas,Freeman,andKatz(1997)

documentedthattheestimatedwageelasticityismorenegativethelargerthegeographic

sizeofthelabormarket(e.g.,statesasopposedtocities).Thisresultfollowseasilyfrom

equation(7)becauseitisprobablymorecostlytomoveacrossstatesthanacrosscities(i.e.,

γismorenegativethesmallerthegeographicarea).Similarly,insomecontextsitmaybe

sensibletodefinelabormarketsintermsofoccupations,ratherthanregions.Becauseit

maybemoredifficultfornativestoswitchoccupations(implyingγ isclosertozero),the

resultingbiasshouldberelativelysmall.

3.2Endogenousmigrantlocations

Apositivespuriouscorrelationbetweenεrsandmrsmayarisebecausemigrants

chooseinwhichlocalitiestosettleinthereceivingcountry.Supposethattherearetwo

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regionswheretherefugeescansettle;region1isthriving(i.e.,wagesaregrowingfast),

whileregion2isnot.Income-maximizingrefugeesarethenmorelikelytoendupinregion

1,creatingapositivecorrelationbetweenthechangeinthewageobservedincell(r,s)and

therefugeesupplyshock,andmakingitmoredifficulttodetectanypotentialwage

depressioncausedbythesupplyshockitself.

Thesearchforaninstrumentthatcorrectsforthisspecifictypeofendogeneity

dominatestheexistingdiscussionofthestatisticalproblemsthatarisewhenmeasuringthe

wageimpactofimmigration.BeginningwithAltonjiandCard(1991),thetypicalstudyuses

whathasbecomeknownasthe“migrationnetworks”instrument.Inparticular,Altonjiand

Cardproposedthataninstrumentformrscouldbethegeographicsortingofanearlier

waveofimmigrants,arguingthatthenewimmigrantswouldmostlikelyendupinthose

regionswheretheearlierimmigrantssettledbecausefamilynetworksreducethecostsof

migration.Iflabormarketconditionsinparticularareaswerenotverypersistentovertime,

thismeansthatnewmigrantsenterparticularregionsforreasonsthatareunrelatedto

currentlabormarketconditions.Themigrationnetworksinstrumenthasbeenrefined

(Card,2001)byconstructingamoresophisticatedlagbasedonnationalorigin:thenew

immigrantsfromcountryjaremorelikelytosettleinthosecitieswhereearlierwavesof

type-jimmigrantssettled.

Itiswidelyrecognizedthatusinga“laggedsupplyshock”asaninstrumentisinvalid

ifeconomicconditionsinlocallabormarketsareseriallycorrelated.Theinitialwavesof

type-jimmigrantschosetosettleinregionrforareason(includingfasterwagegrowth),

andifthisreasonpersistsovertime,theserialcorrelationviolatestheconditionthatthe

instrumentshouldbeindependentoftheerrorterminequation(5).

Althoughthemigrationnetworksinstrumentiswidelyusedintheliterature,very

fewstudiesexaminethevalidityofthezeroserialcorrelationassumption.Jaeger,Ruist,

andStuhler(2016)providearareandimportantexception,documentingthatthenon-zero

serialcorrelationactuallyfoundinreal-worldlocallabormarketsbadlycontaminatesIV

estimatesofthewageelasticity.TheJaeger-Ruist-Stuhlersolutiontotheserialcorrelation

problem,however,makesexactingdatademands,requiringthatweobservelocallabor

marketconditionsforaverylongspanoftimepriortothesupplyshock.Suchdataarenot

15

availableinthecontextoftherefugeesupplyshocksexaminedinthispaper.Instead,the

empiricalworkreportedbelowadoptstheapproachintroducedbyMonras(2015).He

arguesthatthecombinationofanetworksinstrumenttogetherwithasupplyshockthat

occurredattimetfortrulyexogenousreasons(combinedwithadequatecontrolsforthe

trendinlocaleconomicconditions)providesa“compromise”solutionthatcanhelpidentify

theeffectofmigrationeveninthepresenceofserialcorrelation.

Itisworthstressingthatthisparticularendogeneityissueremainsaconcernevenif

thecellsweredemarcatedbyoccupationratherthanregion.Theself-selectedrefugeeswill

likelyhaveskillsmarketableinoccupationsthatareinhighdemand,againcreatinga

spuriouspositivecorrelationbetweentheresidualinthewagegrowthregressionandthe

sizeoftherefugeesupplyshockinaparticularmarket,andbiasingtheestimateofη

towardszero.Wewilluseananalogous“employmentnetworks”logictoconstructan

instrumentinthiscontext,arguingthatthecostsofenteringanoccupationforanew

immigrantarelikelytobelowerwhenthatoccupationhasalreadybeenpenetratedby

theircompatriots.Thecompatriotscanprovidevaluable(andcheap)informationaboutjob

opportunitiesinparticularsectorsofthelabormarket.Theempiricalanalysisreported

belowusesthisalternativeapproachwhenanalyzingtheIsraelilabormarket,wherethe

smallgeographicsizeofthecountryseverelyhamperstheuseofgeographicvariation.

3.3Downgradingofimmigrantskills

Aparticularlychallengingmeasurementproblemariseswhenthepre-migration

skillsofimmigrantsarenotagoodpredictorofthegroupofnativeworkerswithwhom

theywillcompeteinthereceivingcountry.Forexample,someofthetrainingthatthe

eventualrefugeesacquiredpriortothemoveisspecifictothecountryoforigin,inevitably

leadingtoareductioninthestockofhumancapitalthatismarketableinthepost-

migrationperiod.Asaresult,theobservationthataparticularrefugeesupplyshock

containedmanyhigh-skillworkers“onpaper”doesnotnecessarilyimplythatitisthehigh-

skillnativeswhowillbeadverselyaffectedbythisshock.AsdemonstratedinDustmann,

Frattini,andPreston(2013),theclassificationissuesraisedbythistypeof“skill-

downgrading”cancontaminateestimatesofthewageimpactofimmigration.

16

Itiseasytodeterminethenatureofthebiasbyconsideringthegenericregression

modelthatallocatesimmigrantsandnativestospecificregion-skillcells.Tosimplifythe

discussion,supposethatthepre-existingsizeoftheworkforceremainsconstantafterthe

refugeesupplyshockandthattherearetwotypesofworkersineachofrregionallabor

markets:high-skill(h)andlow-skill(u).6Thedata,therefore,consistoftwoobservationsin

eachofrlocations.Equation(5)thenimpliesthatthewagechangeforeachofthetwo

typesofworkersisgivenby:7

(8a) Δ logwrh = θ− ηMrh

Lrh1+erh ,

(8b) Δ logwru = θ− ηMru

Lru1+eru .

Ifthepre-migrationskillsofgrouphsurvivedthemovetothereceivingcountry,

equations(8a)and(8b)wouldcorrectlyspecifytheregressionmodelthatestimatesthe

wageelasticityη.Suppose,however,thatafractionπofthehigh-skillrefugees“lose”their

skillsduringthemove.8Thetrueregressionmodelthatwouldcorrectlyestimatethewage

impactofimmigrationisthengivenby:

(9a) Δ logwrh = θ− η (1− π)Mrh

Lrh1+erh ,

6Thederivationofthebiaswouldbeunaffectedifweallowedforchangesinnativelaborsupplyby

usingthereducedformspecificationinequation(7)andreinterpretingtheestimateofthewageelasticityasonethatnetsoutthelaborsupplyresponse.

7Tosimplifythediscussion,supposethatthewagegrowthhasbeendeflatedbytheobservedwagegrowthobservedforeachregionandforeachskillgroup,sothattheregressionneednotincludethevectorsoffixedeffectsθrandθs.

8Moregenerally,wecanthinkofLasgivingthenumberofefficiencyunitsofaparticulargroupofpre-existingworkers,andπwouldbetherateatwhichtheefficiencyunitsdepreciateafterthemove.

17

(9b) Δ logwru = θ− ηMru + πMrh

Lru1+eru .

Notethatequations(9a)and(9b)correctlymeasurethesizeoftherefugeesupplyshock

affectingeachcellafterweaccountfortheskilldowngrading.

Byalgebraicallymanipulatingequations(9a)and(9b),wecanthenrewritethetrue

regressionmodelas:

(10a) Δ logwrh = θ− ηMrh

Lrh1−ηπ −Mrh

Lrh1+erh ,

(10b) Δ logwru = θ− ηMru

Lru1− ηπMrh

Lru1+eru .

Bycomparingequations(8a)and(8b)withequations(10a)and(10b),itiseasyto

seethatthedowngradingofskills,andtheresultingmeasurementerrorinthesizeofthe

supplyshock,effectivelyaddsaregressortothegenericregressionmodel.Thisadditional

regressortakesonavalueof(−Mrh/Lrh1)forthehigh-skilllabormarkets,and(Mrh/Lru1)for

thelow-skilllabormarkets.Thecoefficientofthisadditionalregressorwouldequal−ηπ.

Putdifferently,thebiasintroducedbyunobservedskilldowngradingcanbeeasily

reinterpretedasanomittedvariablebias,soitshouldberelativelysimpletodeterminethe

directionofthebias.Astraightforwardapplicationoftheomitted-variablebiasformula

(seetheAppendix)showsthattheOLScoefficientoftherefugeesupplyshockvariable

resultingfromestimatingthemisspecifiedmodelinequations(8a)and(8b)is:9

(10) plim η̂ = η− ηπ σh2

σh2 +σu

2 1−ρhuσu

σh

⎡

⎣⎢

⎤

⎦⎥,

9Thederivationofequation(10)assumesthatthenativeworkforceisequallysplitbetweenhigh-

andlow-skillworkers.

18

whereσ s2 isthevarianceinthemeasureofthesupplyshockfortypesworkersacross

markets;andρhuisthecorrelationbetweenthehigh-skillandthelow-skillsupplyshocks.

Equation(10)impliesthatiftherefugeesupplyshockhadnoeffectonwages(so

thatη =0),themisclassificationofsomehigh-skillimmigrantsintolow-skillcellsdoesnot

generateanybias.TheOLScoefficientmeasuringthewageelasticitywillstillbezero.

Ifthetruewageelasticityηisnegative,however,skilldowngradingbiasesthe

estimatedwageelasticity,andthenatureofthebiasobviouslydependsonhowthehigh-

andlow-skillsupplyshocksaredistributedacrossmarkets.Oneparticularlyinteresting

specialcaseariseswhenthesupplyshocksforhigh-skillandlow-skillworkersareequally

spreadout(sothatσh2 = σu

2 ).Itistheneasytoshowthatthewageelasticityisbiased

towardszeroregardlessofthevalueofρhu.Anotherinterestingspecialcaseoccurswhen

thecorrelationρhuequalszero,sothat(roughly)thecitieswherehigh-skillrefugeesendup

providenoinformationaboutwherethelow-skillrefugeessettle.Itisobviousfrom

equation(10)thattheestimatedwageelasticitywillagainbebiasedtowardszero.

3.4Complementaritiesacrossskillgroups

Uptothispoint,ourdiscussionhasfocusedonestimatingtheimpactofarefugee

supplyshockinaparticularregion-skillcellonthewageofnativeswhobelongtothatsame

region-skillcell—inotherwords,theidentificationofthe“own”wageeffectofimmigration.

Wehaveshownthat,undercertainconditions,thefunctionalformassumptionofan

aggregateCESproductionfunctioninaregionallabormarketproducesaverysimple

regressionmodelthatidentifiestheownwageeffectbyrelatingthewagechangeobserved

inaparticularcelltotherefugeesupplyshockinthatcell,evenwhileignoringthechanges

thatmighthaveoccurredinthequantitiesofotherfactorinputs.Thisregressionmodelhas

becomethedefactogenericregressionintheliterature(althoughitisnotoftenlinkedtoa

factordemandtheoreticalframework).

Theentryoftherefugeesintoaparticularskillgroupobviouslyhasramificationsfor

thewagesofworkersinotherskillgroups,andafullaccountingoftheimpactofthesupply

shockwouldrequiredocumentingnotjusttheownwageeffectofimmigration,butthe

“crosseffects”aswell.Becausethenumberofpotentialcross-effectsexplodesasthe

19

numberofskillgroupsincreases,theexistingliterature,includingboththeearlyworkof

Grossman(1980)andtheframeworkintroducedinBorjas(2003),reducesdimensionality

byexploitingpropertiesoffunctionalformassumptionsabouttheproductiontechnology.

Forexample,Borjas(2003)classifiesworkersinto32skillgroups(foureducationgroups

andeightexperiencegroups).Ifcapitalisalsoafactorinput,therearethenapotential

1,089wageeffectsthatneedtobeestimated.TheimpositionofanestedCESframeworkon

thedata,wherevariousskillgroupsareaggregatedintoefficiencyunits,leadstoa

remarkablereductioninthenumberofprimitiveparameters(i.e.,theelasticitiesof

substitution).InBorjas(2003),onlythreedistinctelasticitiesofsubstitutionaresufficient

toderiveall1,089potentialown-andcross-wageeffects.

Thisreductionintheparameterspace,however,obviouslycomesatgreatcost.

Specifically,thenestedCESframeworkgreatlylimitsthetypesofcross-group

complementaritiesthatareallowable.Moreover,thefunctionalformassumptions

introducenumericalconstraintsonthevalueofthewageeffects.Forexample,aconstant

returnstoscaleaggregateproductionfunctionthathascapitalandlaborefficiencyunitsas

inputsmustimplythatthelong-runwageeffectofimmigrationaveragedacrossallskill

groupsisidenticallyequaltozero.Thisnumericalconstraintthencascadesovertoallother

wageeffectsestimatedinsuchaframework,raisingquestionsaboutwhethertheresults

accuratelyreflecttheunderlyingdataandgreatlyreducingtheirvalueforpolicyanalysis.

Tominimizetheinfluenceofsuchextraneousassumptionsontheestimatedcross-

effectsofimmigration,weonlyassumetheexistenceofageneralizedproductionfunction.

Tosimplifytheexposition,weconsideraproductionfunctionwithtwoinputs,F(Lrh,Lru),

whereLrhgivesthenumberofhigh-skillworkersinregionr,andLrugivesthe

correspondingnumberoflow-skillworkers.10TheproductionfunctionFhasthetypical

properties(i.e.,concave,twicedifferentiable,etc.).Ifwesetthepricelevelasthenumeraire,

wecanthenwriteageneralcharacterizationofwhathappenstowagesinregionrandskill

groups(s=h,u)as:

10Assumingmoreworkertypesintroducesmoreregressorsintotheregressionmodel,butdoesnot

changethenatureoftheempiricalanalysis.

20

(11) Δ logwrs = α shΔ logLrh +α suΔ logLru .

whereαsjgivesthefactorpriceelasticitydefinedby∂logwrs/∂logLrj.11

Insteadofimposingfunctionalformassumptionsontheproductiontechnology,we

exploitthefactthattherefugeesinmanyofthehistoricalepisodesexaminedinthispaper

wereoftenconcentratedinoneparticularskillgroup.Low-skillrefugesmadeupavery

largefractionoftheMarielitosinMiamiandoftheAlgeriannationalsmovingtoFrance,

whilecollegegraduatesdominatedtheinfluxofSovietémigrésinIsrael.Toeasilyillustrate

ourapproach,supposethatweconsideranepisodewhereallrefugeesbelongtothelow-

skillgroup.Wecanthenrewriteequation(11)as:

(12) Δ logwrs = α shΔ logLrh +α suΔ logLru +α sumru ,

wheretheΔlogLrsvariablesarenowinterpretedasthechangeinthenumberofnative

workersincell(r,s);andmru=Mru/Lru1,themeasureoftherefugeesupplyshock.

Wecanthenestimateequation(12)separatelyforeachskillgroup.This

methodologicalapproachessentiallyexploitsthenaturalexperimentcreatedbythe

refugeesupplyshocktomeasurenotonlytheownwageeffect,butalsothecrosseffects.

Putdifferently,thecross-effectsareidentifiedbyrelyingontheexogenousnatureof

refugeesupplyshocksandonthehistoricalconcentrationoftherefugeesinaverysmall

numberofskillgroups.Thecrosseffectisgivenbythecoefficientthatrelatesthelabor

marketoutcomesofskillgroupsuntouched(atleastdirectly)bytherefugeestothe

measureofthesupplyshockintheskillgroupthatwasmostdirectlyaffectedbythe

politicalupheaval.

11Asimplederivationof(11)startswiththefactthatthemarginalproductivitycondition(say,for

high-skillworkers)iswrh = Fh (Lrh ,Lru ) .Totallydifferentiatingthefirst-orderconditionyields:dwrh = FhhdLrh + FhudLru . Equation(11)thenfollowseasilyfromthisdifferential,wherethefactorprice

elasticityα ij = κ icij ;κiistheshareofincomeaccruingtoskillgroupi;andcijistheelasticityofcomplementarity(cij=FijF/FiFj)betweengroupsiandj.

21

Itisimportanttore-emphasizethatthisapproachdoesnotimposeanyconstraints

onthepotentialvalueofthecross-effects.Infact,wecanevenuseequation(12)tore-

estimatetheown-effectwithoutimposingtheaggregateCESfunctionalformrestriction

usedtoderiveequation(5).Theregressionimpliedbyequation(12),therefore,effectively

letsthedatadecidewhatimpactrefugeeshadontheearningsofallnativegroups.

3.5Otherproblems

Inanideal(fromaresearcher’spointofview)supplyshock,themigrantswouldbe

randomlyselectedfromthepopulationofthesendingcountry.However,itishardlyever

thecasethatmigrantsarearandomsampleofthatpopulation.Forexample,Fernandez-

Huertas(2011)documentsthatMexicanworkersmovingtotheUnitedStatestendtobe

lessskilledthantheMexicanworkerswhochoosetoremainbehind.Althoughthistypeof

selectionmaybeduetoavarietyoffactors,Borjas(1987)showshowdifferencesinthe

returnstoskillsbetweenthesendingandreceivingcountriescansystematicallygenerate

variouspatternsofselection.

Eveninthecontextofexogenousrefugeesupplyshocks,thepoliticalchangeinthe

sendingcountryinevitablyaffectsdifferenttypesofpeopledifferently.Thosewhobenefit

fromthenewregimewillbemorelikelytostaybehind,whilethosewholosewillhave

greaterincentivestobecomerefugees.Forexample,aCommunisttakeover“taxes”the

economicwellbeingofentrepreneurs.Ifthereceivingcountryvaluesthosetypesofskills,

theself-selectionoftherefugeescreatesaspuriouspositivecorrelationbetweenthe

residualεrsinequation(5)andtheshareofrefugeesenteringthosemarkets,mrs.This

positivecorrelationwouldfurtherattenuatetheestimateofthewageelasticityη.Although

itisrecognizedthattheself-selectionofimmigrantscontaminatesthemeasuredwage

impactofimmigration,therehavenotbeenanystudiesthatattempttoquantifythisbias.

Inaddition,thesupplyshockmightgenerate“generalequilibrium”effectsbecause

therefugeesmightinfluencetheaveragelevelofproductivityintheaggregateeconomy.

Onesucheffectthathasreceivedsomeattentionisthepossibilitythatsomeimmigrants,

andparticularlyhigh-skillimmigrants,bringnewideasandknowledgethatexpandthe

productionfrontier.Specifically,thehigh-skillimmigrantsnotonlyintroduceincreased

22

competitionwithhigh-skillnatives,butalsocreateknowledgespilloversthatincreasethe

productivityofallotherworkersintheprocess.

Unfortunately,thetypicalattempttoestimatetheimpactofsupplyshocksonthe

averagewagelevelinareceivingcountryhasagainreliedonextraneousfunctionalform

assumptionsabouttheproductiontechnology.Thisapproachbuildsinanumericalanswer

forthegeneralequilibriumwageeffects.Intheabsenceofproductivityspillovers,for

example,iftheaggregateproductionfunctionwereCobb-Douglas,theelasticityrelatingthe

averagewageleveltothesizeoftheworkforcemustequal(thenegativeof)capital’sshare

ofincomeintheshortrunandzerointhelongrun.

Therelianceonfunctionalformassumptionstoquantifythegeneralequilibrium

effectsisnotsurprising.Theestimationoftheseaggregateeffectsfromactualdataraises

extremelydifficultchallenges.Howexactlywouldoneestimatetheimpactofasupply

shockontheaveragewagelevelfromavailabledata?Supposethatweobservethata

countryreceivingmorerefugeesisdoingbetterpost-shockthanitwaspre-shock.Isthis

duetowhatmigrantsbringtothereceivingcountry,orisitpossiblethatthereareother

unobservedfactors,unrelatedtoimmigration,thataredeterminingeconomicgrowthin

thatcountry?Makingbefore-and-aftercomparisonsintheaveragewageofacountry

providesverylittleinformationabouthowtherefugeesupplyshockaffectedtheoverall

levelofeconomicactivity.

Insum,ourdiscussionshowstheimportanceofthinkingcarefullyaboutboththe

underlyingtheoreticalmodelandthestatisticalproblemscreatedbyreal-worldsupply

shockswhenweattempttomeasurethelabormarketimpactofimmigration.Inonesense,

themeasurementofthewageimpactofrefugeesupplyshocksisatrivialexercise.The

canonicalmodelofsupplyanddemand,whichisfundamentaltoourunderstandingofhow

real-worldlabormarketswork,predictsthattherefugeeswillobviouslylowerthewageof

competingnativeworkersintheshortrun.Toconductyetanotherstudydocumentingthat

labordemandcurvesaredownwardsloping,therefore,wouldseemtobearather

pedestrianexercise.

Itturnsout,however,thatmeasuringtheelasticityofwageswithrespecttomigrant

inflowsintroducesthornymeasurementandstatisticalproblemsthathaveyettobefully

resolved.Infact,laboreconomistshavedevotedadisproportionateamountoftimeand

23

effortinthepastthreedecadestodocumentwhatis,intheend,atrivialempiricalfinding.

Theresultingconfusion(andsometimesobfuscation)intheliteraturehasnotbeena

productivecontributiontotheimmigrationpolicydebate.

Theexaminationofrefugeesupplyshocks—whicharetrulyexogenousonatleast

somedimensions—canperhapshelpclarifyandincreaseourunderstandingofhow

immigrationaffectsreal-worldlabormarkets.Thereal-worldconditionsthatgenerate

refugeesupplyshockswillalmostneverreplicatetheidealizedconditionsthatleadtothe

genericempiricalapproachthatiswidelyusedintheliterature.Aswehaveseen,however,

manyofthestatisticalproblemscreatedbyreal-worldcircumstancestendtobias

estimatesofthewageimpactofimmigrationinthesamedirection:attenuatingthe

negativewageeffectpredictedbyfactordemandtheory.

4.Mariel

OnApril20,1980,FidelCastrodeclaredthatCubannationalswishingtoemigrate

couldleavefreelyfromtheportofMariel.Cuban-AmericanslivingintheUnitedStates

quicklyorganizedaboatlifttobringtheirrelatives.ThefirstmigrantsarrivedonApril23,

andover100,000hadtakenadvantageofCastro’sinvitationbyJune3.Bythetimethe

boatliftendedthroughanagreementbetweentheUSandCubangovernmentsinOctober

1980,about125,000CubanshadmovedandMiami’sworkforcehadgrownbyabout8

percent.TheMarielitosweredisproportionatelylow-skill,withmostlackingahighschool

diploma.TheMarielsupplyshockincreasedthesizeofthislow-skillworkforceinMiamiby

nearly20percent.

WebeginourempiricalanalysisofrefugeesupplyshocksbyreexaminingtheMariel

datafromtheperspectiveofthefactordemandframeworkintroducedearlier.TheMariel

contextplaysaprominentroleintheliteraturethatexaminesthewageimpactof

immigration.Card’s(1990)landmarkstudyofthisparticularsupplyshockwasapioneerin

thenow-commonapproachofexaminingoutcomesfromnaturalexperimentstomeasure

parametersofgreatpolicyinterest.

TheCardstudylookedatlabormarketconditions,includingwagesand

unemployment,inMiamiintheyearsbeforeandafterMariel,andcomparedthechangein

24

thosevariablestowhatwashappeningincomparablecitiesthatwerepresumably

unaffectedbytherefugees.Surprisingly,thiscomparisonindicatedthattherelativewage

fortheaverageworkerinMiamiremainedunchanged,leadingCardtoconcludethateven

sizablesupplyshockshadlittleeffectonthepriceoflaborintheaffectedmarkets.

TherehasbeenaflurryofrenewedinterestintheMarielsupplyshockinthepast

year,sparkedbytheBorjas(2017)reappraisaloftheMarielevidence.12Usingakeylesson

fromthevoluminousresearchinthepasttwodecadesonthelabormarketimpactof

immigration,BorjasarguedthatitiscrucialtostudytheimpactoftheMarielitosby

focusingspecificallyontheearningsoftheworkersmostlikelytobeaffectedbythesupply

shock—namely,thelow-skillworkforce.Itturnsoutthatthecomparisonoflow-skillwages

inMiamiandvariouscontrolcitiesbeforeandafterMarieloverturnstheperceptionthat

Marielhadanegligibleeffect,showinginsteadthattherelativeearningsofmalehigh

schooldropoutsinMiamifellandthatthemagnitudeofthewagedropwassubstantial.

4.1SummaryStatistics

Table2summarizestheavailabledataonthesizeandskillcompositionofthe

Marielsupplyshock.TheCubanrefugeesbegantoarriveonlyafewweeksafterthe1980

decennialcensuswasconducted,sothatthefirstenumerationoftheMarielitosinlarge-

scalesurveyswasnotdoneuntil1990.Specifically,the1990censusreportsthenumberof

12SeePeriandYasenov(2015)andBorjas(2016).Theempiricaldebatehingesonwhetherwomen

andnon-CubanHispanicsshouldbeincludedinthesamplewhencalculatingtheaveragewageinalocallabormarket.Borjas(2016)notesthattheinclusionofwomenisproblematicbecausethefemalelaborforceparticipationratewasrisingrapidlyinthe1980s,anditgrewdifferentiallyindifferentmetropolitanareas.Theinclusionofwomentheninevitablychangesthesamplecompositionovertime,contaminatingwagetrends.Similarly,nearlyhalfoftheadditionalobservationsthatwouldbeaddedbyincludingnon-CubanHispanicsinthesampleareofimmigrantswhoarrivedafterMariel,againchangingthesamplecompositionandcontaminatingwagetrendsinlocallabormarkets.Finally,theoriginaldraftofthePeriandYasenov(2015)studyexaminedasampleofworkersaged16-61withoutanycontrolsforwhetheraparticularpersonwasenrolledinschool.Thisledtotheerroneousclassificationofhighschoolstudentsaged16-18as“highschooldropouts”becausethosestudentshadnotyetreceivedtheirhighschooldiploma.ItisworthnotingthatthepossibilitythatCard’sevidencedoesnotcorrectlyconveywhathappenedtothelow-skilllabormarketinMiamiwasfirstnotedintheonlineappendixofMonras(2014),whichexaminedwagetrendsinthepooledsampleofhighschooldropoutsandhighschoolgraduatesanddocumentedarelativedeclineinthewageofMiami’slow-skillworkforce.

25

Cuban-bornpersonswhomovedtotheUnitedStatesduringtheyears1980or1981.13We

definethisgrouptobethepopulationofrefugeesresultingfromtheMarielsupplyshock.

The1990censusenumerated120,605suchimmigrants.Thatcensusalsoreports

thegeographiclocationoftherefugeesasof1985,with69.4thousandoftheMarielitos(or

almost60percent)livinginMiamifiveyearsaftertheshock.Notethatalthoughallexisting

studiesoftheimpactoftheMarielsupplyshockfocusonlabormarketoutcomesinthe

Miamimetropolitanarearelativetosomesetofplacebocities,40percentoftheMarielitos

werelivingoutsidetheMiamiareawithin5yearsaftertheshock.Themainalternative

locationswereNewYorkCity(whichhoused13percentoftherefugees),LosAngeles(7

percent),andTampa(3percent).14

TheregressionframeworkderivedearlierallowsfortheMarielitostohavean

impactoncitiesotherthanMiami.Thisfactmarksonekeydistinctionbetweenour

regression-basedapproachandthetreated-untreateddifference-in-differences

methodologyemployedinboththeCard(1990)andBorjas(2017)studies.Wediscussthe

implicationsofthismethodologicaldistinctioningreaterdetailbelow.

Table2alsoconfirmstheinsightthatmotivatedtheBorjas(2017)reappraisal.The

Marielsupplyshockwascomposedofdisproportionatelylow-skillworkers.Over60

percentoftherefugeeslackedahighschooldiploma,ascomparedtoonly20percentofthe

native-bornworkforceinMiami.Incontrast,only7percentoftheMarielitoshadacollege

diploma,ascomparedtoover25percentofnativeworkers.Asaresult,eventhoughthe

MarielitosincreasedMiami’spopulationbyonly8percent,theyincreasedthenumberof

maleworkerswithoutahighschooldiplomaby32percent.

13Thedatafromlatersurveys,includingthe2000decennialcensus,indicatethatthenumberof

Cubanimmigrantswhoarrivedin1981isrelativelysmall,sothatthisdefinitionoftheMarielitosshouldnotcreatesubstantialmeasurementerror;seethedetaileddiscussioninBorjas(2017).

14Weidentifythe1985locationsfromthe1990censusdatabothbecauseofthelargersamplesizeofthedecennialcensusandbecausethecensusspecificallyidentifiespersonsborninCuba(asopposedtohavingCubanancestry,whichistheonlyinformationavailableintheCPS).Tofurtherincreasetheprecisionofourmeasureofthesupplyshock,weremoveotherimmigrantsarrivingintheUnitedStatesbetween1980and1985fromthebasepopulationineachcell.Specifically,wemeasuremrs = Crs1 / (Lrs1 − Crs1 − Irs1 ), whereCrsgivesthenumberofMarielitosincell(r,s);Irsgivesthenumberof“other”immigrantswhoarrivedin1980-85;andLrs1givesthesizeofthecellin1985.Theregressionresultsarealmostidenticalifwedonotexcludetheotherimmigrantsfromthebase.

26

ThebottompanelofTable2reportstherateofwagegrowthduringtherelevant

periodforeacheducationgroup,bothinMiamiandoutsideMiami.WeusetheMarchCPS

datatocalculatethepre-andpost-Marielaveragelogwageinasampleofnon-Hispanic

menaged25-59.15Wepoolworkerswhoreportedearningsdataincalendaryears1977-79

tocalculatetheaveragepre-Marielwage,andpooldataforcalendaryears1981-84to

calculatethepost-Marielwage.Wedonotuseearningsdatafromthe1980calendaryear

becausetheMarielitosarrivedtowardsthemiddleofthatyear.

Thesummarystatisticsreportedinthebottompanelofthetableshowsthattherate

ofwagegrowthforhighschooldropoutswasfarlowerinMiamithanoutsideMiami.

Interestingly,thetablealsoshowsthattherateofwagegrowthforhighschoolgraduates,a

groupwhosesizewasonlyincreasedmodestlybytheMarielitos,isnoticeablyhigherin

MiamithanoutsideMiami.Similarly,theunemploymentrateofhigh-skillworkers

decreasedinMiami,whileincreasingintherestofthecountry.Thesepatternshintatthe

possibilitythatrefugeesupplyshocksgeneratenotonlyadverseownwageeffects,butalso

improvelabormarketconditionsforcomplementaryworkers,aresultthatwasoverlooked

inearlierstudies.

4.2Results

Weinitiallyusetheregressionmodelsderivedinequations(5)and(7)toidentify

theowneffectsoftheMarielsupplyshock.Theanalysisusesthesampleof38metropolitan

areas,includingMiami,whichcanbeconsistentlymatchedoverthe1977-1984period.16

Weclassifyworkersintofoureducationgroups:highschooldropouts,highschool

graduates,somecollege,andcollegegraduates.17Weexaminethelabormarketoutcomes

ofnon-Hispanicmenaged25-59,agroupthatapproximatestheprime-agenative-born

15Ourempiricalanalysisofallfourrefugeeepisodesfocusesonexamininglabormarketoutcomesforprime-agemen.Thisisthegroupofworkersmostattachedtothelabormarket,sothatwageandemploymenttrendsarelesslikelytobecontaminatedbychangesinsamplecomposition.

16Weusetheaggregated3-digitversionofthemetareavariableintheIPUMSfiles(ratherthanthe4-digitversionthatwouldgenerateasampleof44metropolitanareas)toavoidincludingintheanalysislocallabormarketsthathaveveryfewobservations.

17Theunitofobservationthatdefinesamarketcouldbefurtherrefinedtoacity-education-agecell.Suchadefinition,however,leadstoaverysmallaveragenumberofobservationspercellintherefugeeshocksexaminedinthispaper.

27

workforceinMiami,thecitymostaffectedbytheMarielitos,around1980.Theunitof

observationintheregressionsisacity-educationcell,sothattheidentifyingvariation

arisesbothfromthefactthattheMarielitossettledinaspecificsetoflocationsandwere

disproportionatelyrepresentedintheleast-skilledgroup.

Table3reportstheregressioncoefficientsthatestimatetheowneffectoftheMariel

supplyshock.Throughouttheanalysis,theregressionsareweightedby (n1n0 ) / (n1 + n0 ) ,

wherentgivesthenumberofobservationsusedtocalculatethedependentvariableina

particularcity-educationcellattimet.18Asimpliedbythetheory-basedregression

specificationinequations(5)and(7),alltheregressionsincludeeducationfixedeffectsand

metropolitanareafixedeffects.19Weusethreealternativedependentvariables:therateof

wagegrowthinacity-educationcell(wherethewagevariablemeasuresweeklyearnings);

thechangeintheaverageunemploymentrate(wheretheunemploymentrateisdefinedas

theratioofthenumberofpersonsunemployedtothenumberofpersonsinthelabor

force);andthechangeintheaverageemploymentrate(definedastheratioofthenumber

ofemployedtothesizeofthecorrespondingpopulation).

ItisusefultobeginbydiscussingtheregressioncoefficientsfromthesimplestOLS

specificationsreportedinthefirsttwocolumnsofPanelBofthetable,wherethe

dependentvariableisthechangeintheaveragelogweeklywage.Thetheory-based

specificationderivedearlierrequirestheinclusionofthevariableΔlogLrs,aregressorthat

givesthelogchangeinthesizeofthenativeworkforceinthecell.Thetablereports

coefficientsfromtwoalternativeregressionmodelsthataddresstheendogeneityofthis

variableindifferentways.First,wesimplyexcludethevariablefromtheregressionsothat

theestimatedwageelasticityisareducedformcoefficientthatincorporatesthenative

laborsupplyresponse(andisbiasedtowardszero)Alternatively,wereplacethevariableΔ

18Thesearetheoptimalweightswhenconstructingaggregatedfirst-differencedcellsfrommicro-

leveldata.Thevarianceofthedifferencedaverageresidual(assumingthevarianceoftheperson-specificerrortermisnotseriallycorrelatedandhasconstantvariance)isgivenby (σε

2 / n0 + σε

2 / n1 ) .Theoptimalweighttakesintoaccountthefactthatmeasurementerrorofthemeanvalueinthecellislessaccurateifthenumberofobservationsinthatcellissmall.

19TheinclusionofthesefixedeffectsdonotsaturatetheregressionbecausethenatureoftheMarielsupplyshockledtoveryunbalancedsupplyshiftsacrossbothcitiesandeducationgroups.

28

logLrswiththecorrespondingchangeinthenative-bornpopulationinthatcell,sothatthe

coefficientofthisvariableitselfbecomesatypeofreduced-formcoefficient.20Notethatthe

coefficientofthevariablemeasuringthesizeoftheMarielsupplyshockisabout-1.3,and

statisticallysignificant,regardlessofhowweaddresstheendogeneityofthenativelabor

supplyresponse.21Figure1helpsvisualizethewageimpactoftheMarielitos.Itisclearthat

thenegativeownwageeffectisdrivenmostlybythechangingmarketconditionsfacing

low-skillworkersintheverysmallnumberofcitieswheremostoftherefugeessettled.

AcrucialfeatureoftheMarielsupplyshockisthattherefugeescouldonlyleave

fromtheportofMariel.ManyoftheCuban-AmericanswhoalreadylivedintheUnited

StatesboughtorrentedboatstheywouldthentaketoMarieltopickuptheirrelatives(as

wellasotherpotentialrefugees)waitingattheport.Itisinevitablethatthegeographic

sortingofthenewarrivalswouldbeverysimilartothatofthepre-existingCuban

populationintheUnitedStates,agroupthatsponsoredandphysicallyenabledtheentryof

theMarielitos.Giventheextremeclusteringofthepre-MarielCubanrefugeesintheMiami

metropolitanarea,withabout50percentofthatpopulationlivinginMiamiin1980,itis

notsurprisingthatabout60percentoftheMarielitosendedupthereaswell.

Weaddressthepotentialendogeneitycreatedbythegeographicdistributionofthe

Marielitosbyusingthegeographicsortingofthepre-MarielCubanimmigrantstopredict

wherethenewrefugeeswouldsettle.22ThefirstpanelofTable3showstherelevant

coefficientfromthefirststageregression,summarizingtherelationbetweenthesizeofthe

Marielsupplyshockincell(r,s)andtheshareofCubansinthatcellpriorto1980.Not

surprisingly,thecoefficientisstronglypositive.23

20Thisreduced-formspecificationimpliesthattheregressioncoefficientoftherefugeesupplyshock

willgenerallydifferfromthatofthechangeinthepopulationofthespecificcell.21Thewageelasticityestimatedintheregressionframeworkisverysimilartothe-1.5elasticity

producedbyapplyingadifference-in-differencesapproachtotheMarchCPSdata;seeBorjas(2017).

22Weusedatafromthe1980censustocalculatethedistributionofpre-MarielCubansacrosstheregion-skillcells.

23Inotherwords,weusethelaggedshareofCubansintheworkforceastheinstrument.Thefirst-stageregressioncoefficientthenessentiallyestimatesbyhowmuchthepre-existingimmigrantworkforceinagivencellincreasedthesupplyofmigrantstothatcellasaresultoftherefugeeshock.Somestudiesintheliterature(e.g.,OttavianoandPeri,2007)usethepredictedlocationoftheactualflowsobservedinthedata.IftheinstrumentissufficientlystronginthesealternativeIVspecifications,thefirst-stagecoefficient,byconstruction,willhoveraround1.0.

29

TheIVestimatesofthewageelasticityreportedinthesecondpanelareagainabout

-1.3,sothatthereislittleindicationthatcontrollingfortheendogeneityofthegeographic

sortingoftherefugeesplaysanyroleindeterminingtheirlabormarketimpact.24The

similaritybetweentheOLSandIVestimatesintheMarielcontextisnotsurprising.The

physicalcharacteristicsoftheboatliftensurethatthegeographicsortingoftheMarielitos

afterarrivalhadlittletodowitheconomicconditionscirca1980.

Thebottomtwopanelsofthetablereportanalogousregressionsusingthechangein

theunemploymentandemploymentratesasdependentvariables.Noneofthecoefficients

aresignificantlydifferentfromzero.TheowneffectsoftheMarielsupplyshock,therefore,

seemtoberestrictedtochangesinwages.Thisfindingmayperhapsbeinformativeabout

howlabormarketsadjusttosupplyshocksduringaperiodofveryhighinflation.TheUS

inflationratewas13.5percentin1980and10.3percentin1981.

Table4reportsselectedcoefficientsfromthemorecomprehensiveregression

modelthatidentifiesbothown-andcross-effects.Wecancarryoutthisanalysisbecause

mostoftheMarielitoswerehigh-schooldropouts,allowingustoexaminetheirimpacton

theotherskillgroups.Todoso,weestimateequation(12)separatelyineachofthefour

educationgroupsusedintheanalysis(i.e.,highschooldropouts,highschoolgraduates,

somecollege,andcollegegraduates).Theregressionmodelalsoincludesvariables

measuringthechangeinthenativepopulationineachofthegroups.Thisregression

specificationenablesustodetectpotentialcomplementaritiesacrossfactortypeswithout

imposinganyfunctionalformrestrictionsontheproductiontechnology.

Asbefore,theestimatedownwageeffectisnegativeandsignificant,withawage

elasticityofabout-0.9.Similarly,theestimateoftheownemploymenteffectisnot

distinguishablefromzero.25Theanalysis,however,showsthatthecrosseffectsare

numericallyimportant.Althoughthesupplyshockofthepredominantlylow-skill

24WealsoestimatedtheMarielregressionsusingdatafromtheOutgoingRotationGroup(ORG)CPS

filesratherthantheMarchCPS,andobtainedsimilarresults,although,asinBorjas(2017),thepointestimateoftheownwageelasticityissmaller.TheownwageelasticityestimatedintheORGwhentheregressionmodelincludesthechangeinthesizeofthenativepopulationis-0.51(0.11)intheOLSregression,and-0.43(0.16)intheIVregression.Theseelasticityestimatesareagainvirtuallyidenticaltothe-0.5elasticityimpliedbyapplyingadifference-in-differencesmethodologytotheORGdata.

25Theinstrumentinthisregressionusesonlyvariationinthelocationoftheleast-skilledCubans.

30

Marielitosloweredthewageofhighschooldropouts,itraisedthewageofworkerswitha

highschooleducation,andthiseffectisbothnumericallyandstatisticallysignificant.The

cross-wageelasticityisabout+0.7.Inaddition,theunemploymentrateofworkerswith

morethanahighschooldiplomaalsofellsignificantly.

Insum,ouranalysisoftheMarielsupplyshockyieldsaremarkableresult.As

impliedbythesimplestmodeloffactordemandinacompetitivemarket,supplyshockscan

havebothnegativeandpositiveeffectsonthepre-existingworkforce.Thoseworkerswho

mostresembletherefugeessufferthewageloss,whilethewagegainsaccruetothose

workerswhocomplementtheskillsbroughtinbytherefugees.

Thedataalsoindicatethatthenegativeandpositiveeffectsofsupplyshocksneed

notoccuralongthesamedimensions.IntheMarielcontext,theowneffectstendtoshow

upaswagecuts,whilecrosseffectsareobservedinbothwagesandemployment.Thereis

obviouslymuchtolearnabouthowlabormarketsadjusttosupplyshocks.Regardlessof

howthemarketreachesanewequilibrium,however,itisevidentthatrefugeesupply

shockscanhaveimportantdistributionalconsequences.

4.3AlternativeApproachestoNaturalExperiments

ItisofinteresttocontrasttheresultssummarizedinTables3and4withthe

evidencereportedinexistingstudiesoftheMarielsupplyshock.Aswenotedearlier,there

isakeymethodologicaldifferencebetweenourtheory-basedregressionsandthe

atheoreticalapproachexemplifiedinearlierstudies.BothCard(1990)andBorjas(2017)

pursuedadifference-in-differencesapproach,comparingthechangedconditionsinthe

Miamilabormarkettothechangedconditionsinasetofcontrolcities.

Itisobviouslyverydifficulttoconstructperfectcontrolgroupsor“placebos”

outsidealaboratorysetting.Agoodplaceboneedstosatisfytwodistinctconditions.First,

thetreatedandcontrolgroupsmustbecomparableinimportantways.Card(1990)

comparedMiamitoacontrolgroupoffourcities:Atlanta,Houston,LosAngeles,andTampa.

Thisparticularplacebowaspartlyselectedbylookingatemploymentdynamicsinvarious

citiesbothbeforeandaftertheMarielsupplyshock.TheBorjas(2017)reappraisalshowed

thattheconstructionofthecontrolgroupplaysakeyroleinanyevaluationoftheimpactof

theMarielitos.Usinganalternativecontrolgroupbasedonemploymenttrendspriortothe

31

supplyshock,aswellasemployingtheAbadie,Diamond,andHainmueller(2010)synthetic

controlmethod,consistentlyresultedinlarger(i.e.,morenegative)estimatesoftheown

wageeffectofthesupplyshock.

Asecondconditionthatagoodplacebomustsatisfyisthatthereshouldnotbeany

spilloversbetweenthetreatmentandcontrolgroups.Thiscondition,althoughconceptually

important,hasbeenignoredinallexistingMarielstudies.Itistrivialtoseehowsuch

spilloversariseinthiscontext.Nearly40percentoftheMarielitoschosetosettleincities

outsideMiami.Infact,twoofthecitiesinthecontrolgroupusedinCard’s(1990)study

werecitiesthatactuallyreceivedmanyrefugees:7.4thousandsettledinLosAngelesand

another3.1thousandsettledinTampa.Thegenericdifference-in-differencesapproach,

therefore,suffersfromthefactthatsomeofthecitiesinthecontrolgroupweretreatedby

theexogenoussupplyshockaswell.

Unlikethetraditionaldifference-in-differencescalculationsthatcompareMiamiand

aplacebo,ourregression-basedanalysisallowsfortherefugeesupplyshocktoaffectmany

differentmarkets,alongboththeregionandskilldimensions.Weidentifytheimpactby

exploitingthedifferentnumbersofMarielitossettlingindifferentcitiesandthedifferent

numbersofMarielitosindifferenteducationgroups.Inotherwords,theregression

approachfullyincorporatesthefactthattherefugeesupplyshock“treated”manymarkets,

andinfacttreatedthosemarketsdifferentially,andthenusesthatdispersiontoidentify

howsupplyshocksalterlabormarketoutcomes.

5.ÉmigréstoIsraelfromtheformerSovietUnion

Priortothelate1980s,itwasextremelydifficultforSovietJewstomigrateto

Israel.26ThepressuresforsuchmigrationbegansoonaftertheSix-DayWarin1967,when

IsraelbegantomoreforcefullystateitsdemandthatSovietJewsbeallowedtorejointheir

familiesorbuildanewlifeinIsrael.TheSovietreluctancetoallowsuchmigrationbecame

animportantobstacleinattemptstoimproverelationsbetweentheSovietUnionandthe

26SeeBuwalda(1997)foradetailedhistory.

32

West,anditwasnotuntilMichaelGorbachev’sGlasnostinitiativein1986thattheSoviet

UnionbegantoconsiderandallowtheemigrationofitsJewishpopulation.

In1986and1987,asmallnumberofvisasweregrantedtoSovietJewswhowished

toemigrate.Mostoftheseémigrés,however,chosetosettleintheUnitedStatesorCanada,

andonlyasmallfractionmovedtoIsrael.TheUnitedStateswasaparticularlyappealing

destinationbecausethecountryallowedSovietemigrantstoqualifyforrefugeestatus,

makingitrelativelyeasytoobtainentryvisas.

By1989,theUnitedStateshadchangedtherulethatautomaticallyclassifiedSoviet

émigrésasrefugees,makingitalmostimpossibleforSovietJewstomovetothatcountry

unlessanAmericanrelativecouldsponsortheirentry.Incontrast,Israel’sLawofReturn

continuedtheopen-doorpolicyofwelcomingallJews.AsFriedberg(2001)notes:

“Between1989and1995,610,100immigrantsarrivedfromthe[formerSovietUnion],

increasingthesizeoftheIsraelipopulationby13.6%.”

5.1SummaryStatistics

Weusedatadrawnfromthe1983and1995Israelicensusmicrodatamaintainedby

IPUMS.Eachofthesedatafilesrepresentsa10percentrandomsampleoftheIsraeli

population.Thecensusesreportinformationoncountryofbirthandtheyearofmigration

(ifbornabroad).Usingthe1995census,weclassifyaSovietémigréassomeoneborninthe

formerSovietUnionwhomigratedtoIsraelbetween1990and1995.Forexpositional

convenience,wewillrefertothepre-existingpopulationofIsraelicitizensas“natives”even

thoughaverylargefraction(42percent)wasbornoutsideIsrael.AsTable5shows,the

Sovietémigrésmadeupalmost10percentofthepopulationin1995.27

ThetablealsosummarizeskeycharacteristicsoftheSovietémigrés.Incontrastto

theMarielitos,theémigréswereveryhighlyskilled.Fewofthem(onlyabout11percent)

lackedasecondaryeducation,ascomparedtoathirdoftheIsraelpopulation.Incontrast,

27TheinflowofSovietémigréswassolargethatwemeasurethesizeoftheshockas

mk = Sovietk / (Lk1 + Sovietk ) ,whereSovietkgivesthenumberofémigrésincellk.Thepointestimatesofthewageimpactdonotchangesignificantlyifweexcludethenumberofémigrésfromthedenominator,buttheIVcoefficientislesspreciselyestimated.Thisisprobablybecausethederivationofourestimatingequationusestheapproximationthattherefugeesupplyshockis“small,”anassumptionthatisfalseformanycellsintheIsraelicontext.

33

43percentoftheémigréshadcompletedauniversityeducation,ascomparedtoonly18

percentoftheIsraelinatives.

Thetabledocumentsinterestingdifferencesbetweentheoccupationaldistributions

oftheémigréandnativepopulations.Notethat14percentoftheémigrés,despitetheir

veryhigheducationalattainment,endedupas“unskilledworkers,”eventhoughonly7

percentofthenativeIsraelipopulationworkedinsuchjobs.Similarly,over50percentof

theémigrésworkedas“skilledworkersinindustryandconstruction,”againafarhigher

representationthanthe35percentofnativesinthatoccupation.28

Thebottompanelofthetablepresentssummarystatisticsgivingthewagegrowth

ofnativeIsraelisobservedinselectededucation/occupationcategories.Weexaminethe

changeinannualearnings(theonlywagemeasurethatisavailableinbothIsraeli

censuses).Itissuggestivethattheeducation-occupationcellthatwasmostaffectedbythe

Sovietémigrés,universitygraduateswhoendupas“skilledworkersinindustryand

construction,”experiencedaremarkablylargedropinearningsduringtheperiod.

Wewillshowbelowthatthismismatchbetweenthepre-existingskillsofthe

émigrés(asmeasuredbytheireducationalattainment)andthetypeofjobtheyactually

endedupdoinginIsraelmayhaveplayedanimportantroleingeneratingFriedberg’s

(2001)conclusionthattheémigrésdidnotaffecttheIsraeliwagestructure.A

reexaminationofthedatathatallowsfortheveryhigh-skillémigréstoinfluencethe

earningsofworkersemployedinoccupationsthattypicallyemploylow-skillworkers(and

henceworkerswithlowereducationlevels)overturnsthisresultanddemonstratesthat

theémigrésindeedadverselyaffectedthewageof“trulycompeting”workers,andlikely

increasedthewageofcomplementaryworkers.

5.2Results

Israelisasmallcountry;itslandsizeisroughlythesizeofElSalvadororNewJersey.

Asaresult,itmakeslittlesensetodefinealabormarketintermsofaregion-skill

classification.Theshortcommutingdistancefromonecitytoanotherwouldgenerate

28Thefullnameoftheoccupationis“skilledworkersinindustry,andconstruction,andotherskilled

workers.”

34

sufficientspilloversacrossmarketstomakeitdifficulttomeasuretheimpactofasupply

shockbyexploitingdispersionattheregionallevel.Notsurprisingly,Friedberg's(2001)

examinationoftheSovietsupplyshockfocusedontheimpactoftheémigrésonwages

acrossoccupations,sothatthese"markets"arelesslikelytobeaffectedbythespillovers

resultingfromnativeinternalmigration.

AlthoughweadaptFriedberg'schoiceofanoccupation(ratherthanalocallabor

market)todefinetherelevantunitofanalysis,ouranalysisdiffersinacrucialway.Asthe

summarystatisticsreportedabovesuggest,theeducationalattainmentoftheémigré

providesanadditionalmeasureofskillsthatislikelytoaffectproductivityandwages—

eveniftheémigrésmustinitiallyworkinjobsthatdonotreflecttheircredentials.

Therefore,wedefinealabormarketasaparticularoccupation-educationpairing.

Weclassifyworkersintofoureducationcategories:lessthanprimaryschooling,

completedprimaryschooling,completedsecondaryschooling,andcompletedauniversity

education.29WealsousetheoccupationclassificationavailableintheIPUMSfilesofthe

Israelicensus,whicharetheeightbroadoccupationgroupslistedinTable5.Asinour

studyoftheMarielsupplyshock,werestricttheempiricalanalysistomaleIsraelinatives

aged25-59.Finally,thenatureoftheIsraelicensusdataimpliesthatwecanonlyusethe

changeinlogannualearningsasthedependentvariable.Theoccupationofemploymentis

onlyavailableforpersonswhoworksothatwecannotanalyzetheimpactofthesupply

shockoneithertheemploymentortheunemploymentrate.

Table6summarizesthemainregressionresultsusingthesimplerspecificationthat

focusesonidentifyingtheownwageeffects.ConsiderinitiallytheOLSresultsinthefirst

twocolumnsofthebottompanel.Theestimatedcoefficientisabout-0.73(withastandard

errorof0.27).Notethattheestimateofthewageelasticityofabout-0.7isunchangedwhen

weaddaregressorgivingthechangeinthesizeofthenativepopulationintheparticular

cell.

ThetablealsoreportsthewageeffectresultingfromtheIVspecification.The

instrumentistheshareofearlierSovietmigrants(whowereobservedinthe1983census)

employedinaparticularoccupation-educationpairing.Thekeycoefficientinthefirststage

29Friedberg(2001)examinestheeducation-adjustedwagesofworkersinaparticularoccupation.

35

oftheIVishighlysignificant,sothatthenewémigrésfoundemploymentinroughlythe

sameoccupationsthatemployedthecompatriotsthatarrivedpriortothecollapseofthe

SovietUnion.TheIVestimateofthewageelasticityis-0.62(0.32),verysimilartothe

coefficientobtainedintheOLSregression.Inshort,aregressionanalysisbasedonthe

notionthatalabormarketconsistsofanoccupation-educationcellunambiguously

indicatesthattheSovietémigrésadverselyaffectedtheearningsofcomparableworkers.

Figure2visualizesthisinsight.Thefigureshowsalarge"cloud"ofoccupation-

educationcellsthatwereunaffectedbytheSovietinflux.Italsoshowsthattherelatively

fewcellsthat“welcomed”theémigrésarethesourceofthenegativewageeffect.The

affectedcellsarecomposedoftheselectoccupationsthatattractedhigh-skillémigrés.Not

surprisingly,thoseoccupationsweretheonesthatexperiencedthelowestwagegrowth

between1983and1995.30

AsshowninTable5,thesizeoftheSovietsupplyshockwaslargestforworkerswho

hadauniversitydegree.Forthisparticularskillgroup,theinflowoftherefugees

representeda26percentincreaseinsupply.AswithouranalysisoftheMarielsupply

shock,weexploitthisfacttoderiveasimplemethodforestimatingthepotentialcross-

effects.Specifically,weestimatethecross-effectsmodelgivenbyequation(12)separately

foreachoftheeducationgroups,wherethekeyregressorgivesthesupplyshock

experiencedbyuniversitygraduatesinaparticularoccupationgroup.31

Table7reportsIVregressioncoefficientsfromthecross-effectsspecification.The

resultsagainindicatethattheown-effectsofthehigh-skillSovietémigrésarenegative,

implyingawageelasticityofabout-0.7.Thetablealsoreveals,however,thattherewere

somepositivecomplementaritiesbetweenthehigh-skillémigrésandtheleastskilled

Israelinativeswhohadnotcompletedtheirprimaryeducation.Theearningsofthelowest

30TherewasacurrencychangeinIsraelin1986,oneyearafterthe1985censusthatweusetoestablishthebaselineinthepre-shockperiod.Thewagedatain1985isdenominatedinShekelswhilethepost-shockperioddataisdenominatedinNewShekels.Therefore,theverticalaxisinFigure2reflectsboththechangeinthecurrencyaswellasrealwagegrowth.Ouranalysisexaminesrelativedifferencesacrosseducation-occupationcells.Thecurrencychangeisabsorbedbytheconstantintheregressions.

31Theregressionalsoincludesavariablethatcontrolsforthechangeinthesizeofthenativepopulationinthe“own”occupation-schoolinggroup.Becauseofthesmallnumberofobservationswithineacheducationgroup,weexcludethe“cross”changesinnativelaborsupply.Theresultsreportedbelowwouldbeverysimilarif,instead,weaggregatedthedatatotwoeducationgroupsandincludedboththeown-andcross-nativesupplyresponses.

36

educationgroupincreasedaftertherefugeesupplyshock,withacross-elasticityof+0.35

(0.18).

Notealsothattherefugeesupplyshockhad,ifanything,aslightnegativeimpacton

theearningsofintermediateskillgroups..Thecoefficientsthatmeasuresthecrosswage

elasticitybetweenthehigh-skillémigrésandthemiddle-skillIsraelisareabout-0.1

(thoughnotsignificant).Thisresultislikelytobeaconsequenceoftheskilldowngrading

thatmanySovietémigrésencounteredaftertheyenteredtheIsraelilabormarket,anissue

wediscussinmuchgreaterdetailshortly.Theskilldowngradingobviouslyimpliesthat

somehigh-skillémigréswerecompetinginthesamelabormarketaslower-skillednatives,

sothatthecross-effectsmeasuredbytheregressionsreportedinTable7actually

incorporatean“owneffect”ontheintermediateskillgroupsaswell.Butitisunlikelythat

theskilldowngradingcuttheefficiencyunitsofacollege-educatedSovietémigrétothatof

anIsraelinativewhohadnotcompletedaprimaryeducation,explainingwhyitistheleast

skilledIsraelinativeswhogainedfromtheSovietsupplyshock.

TheseresultsarecomparabletotheonesobtainedintheMarielcontext.Theentry

ofthelow-skillMarielitosincreasedthewageofnativeswhoweremorehighlyskilled,

whiletheentryofthehigh-skillSovietémigrésincreasedthewageofnativeswhowere

leastskilled.Thesecross-effectsdocumentthepotentiallylargedistributional

consequencesthatrefugeesupplyshockscanhaveonthereceivingcountry’slabormarket.

5.3SkillDowngrading

Inimportantways,theevidencesummarizedinTable6isbothsimilartoandvery

differentfromtheevidencereportedinFriedberg(2001),thestudythathasmostcarefully

examinedtheconsequencesofthisspecificsupplyshock.Aswenotedearlier,theFriedberg

analysisusesanoccupationastheunitofanalysisandexaminesthetrendineducation-

adjustedwageswithinanoccupation.FriedbergalsoreportsbothOLSandIVestimatesof

theownwageeffectattributabletotheSovietinflux.

Infact,theownwageeffectsthatFriedbergestimatedinherOLSregressionsare

verysimilartothosereportedinTables6and7,showingasignificantreductioninthe

wageofthoseoccupationsmostaffectedbytheSovietémigrés.Forexample,Friedberg

(1990,TableII)reportsanownwageelasticityof-0.616(0.206).Friedbergthenargued

37

thattheoccupationalsortingofthenewémigrésinIsraelwasendogenous,asincome-

maximizingémigréswouldobviouslygravitatetowardsthehighest-payingoccupations.

Tocontrolforthisendogeneity,Friedbergusedthemigrant'soccupationinthe

SovietUnion,priortomigration,asaninstrumentforthemigrant'seventualoccupationin

Israel,arguingthatthepre-migrationoccupationalchoicewasobviouslyunaffectedbythe

Israeliwagestructure.Theuseofthisparticularinstrument,whichisavailableinasmall

surveyofSovietémigrésusedbyFriedbergbutisnotavailableintheIPUMSfiles,leadsto

anIVestimateofthewageelasticitythatispositiveandinsignificant,leadingherto

concludethat"theinfluxofRussianstoagivenoccupationinIsraeldoesnotappeartohave

adverselyaffectedthewagegrowthofnativesworkinginthatoccupation”(Friedberg,

2001,p.1395).

ItisimportanttoemphasizethatthedifferencebetweentheOLSandIVresultsin

theFriedbergstudyispuzzling,andremainsunexplained.32Aslongasémigrésareincome-

maximizers,enteringthemostprofitableoccupations,theendogeneitycreatedbytheself-

sortingoftheémigrésintohigh-payingjobsshouldbiastheOLScoefficienttowardszero.In

short,Friedberg’scorrectionforthistypeofendogeneityshouldhavepresumablyledtoa

morenegativewageelasticity,andnottoamorepositiveone.

Table6showsthatourIVestimateofthewageelasticityremainsnegativeand

significant,andis,infact,aboutthesamemagnitudeastheOLScoefficient.Thereisa

crucialdifference,however,betweenthetwoinstruments:Friedberg'sinstrumentisbased

ontheoccupationthattheSovietémigrésheldintheSovietUnionpriortomigration;our

instrumentisbasedontheactualoccupationsthatearlierwavesofémigréswithsimilar

educationpursuedinIsrael.

Thedifferenceintheestimatesofthewageelasticityimpliedbythetwodifferent

instrumentsis,ofcourse,relatedtothepossibilitythattheskillstheémigrésacquiredin

theSovietUnionmaynotbecompletelytransferabletotheIsraelilabormarket.Infact,itis

easytodocumentthatthepre-existingskillsoftheémigrésarenotaverygoodpredictorof

thetypeofjobtheyactuallyendupdoing.

32Cohen-GoldnerandPaserman(2011)makearelatedpoint,arguingthatFriedbergusedaweak

instrumentthatledtoanunderstatementofthewageimpactoftheémigrésupplyshock.

38

Table5alsoreportstheoccupationdistributionsoftheémigrésandnativeswho

haveauniversitydegree.Recallthathalfoftheémigrésareinthisparticulareducation

category.Thetableclearlyshowsasubstantialdowngradinginthetypeofjobthatahigh-

skillémigréheldinIsrael.Onlyonepercentofnativeuniversitygraduates,forexample,end

upas"unskilledworkers."Amongémigrés,however,theprobabilityofworkinginsuch

jobsincreasesten-fold.Onlyfourpercentofnativeuniversitygraduatesendupbeing

"skilledworkersinindustryandconstruction."Amongtheémigrés,however,the

probabilityincreases9-fold,to36percent.Inshort,thedataclearlyindicatethatpre-

existingeducationalskills,althoughobviouslycorrelatedwiththetypeofjobthatthe

émigréswilldoinIsrael,cangenerateverylargeerrorsinpredictingthepost-migration

allocationofémigrésacrossoccupations.Theobviousskilldowngradingcanhelpexplain

notonlythedifferentwageelasticitiesproducedbythetwoinstruments,butalsothe

puzzlingresultintheFriedbergstudywheretheuseofinstrumentalvariablesleadstoa

morepositivewageelasticity.

ConsiderthespecificexamplewherefluencyinHebrewrepresentsabarrierinto

certainoccupations.Forinstance,supposetherearetwooccupationsinIsrael,onewhere

workersneedtobefluentinHebrew(e.g.,aTVpersonality)andonewhereworkersdonot

(e.g.,workingatamanufacturingassemblyline).Asaresultofthedifferenceinlanguage

requirements,thetypicalSovietémigré,eventhoughhemightholdauniversitydegree,

willinevitablyendupinoccupationswhereHebrewfluencyisunimportant.

Infact,itiseasytodocumentthattypeofsortingintheIsraelilabormarket.The

1983IsraelicensusreportswhetherHebrewwasafirstlanguageforeachenumerated

person.WecanconstructameasureoftheshareofworkerswhohaveHebrewasafirst

language(excludingmigrantsfromtheSovietUnion)ineachoccupation-educationcell.

Figure3revealsastrongnegativerelationshipbetweenthesizeoftheSovietsupplyshock

ineachcellandthefractionofpeoplewhospeakperfectHebrew.TheSovietsupplyshock

wasfarsmallerinthoseoccupationsthatrequireHebrewfluency.

Supposefurtherthatthewageelasticityηisindeednegative,sothatwhenanew

waveofSovietémigrésarrivesinIsrael,theaveragewageintheoccupationswhere

Hebrewfluencyisunimportantfalls.TheOLSwageelasticityreportedinTable6is

39

essentiallymeasuringthewagechangeintheoccupationswhereHebrewfluencyis

irrelevant(i.e.,theoccupationsactuallyaffectedbythesupplyshock)relativetothewage

changeinoccupationswhereHebrewfluencyisrequired(i.e.,theoccupationslessaffected

bythesupplyshock).OurIVestimateispickingupexactlythesameeffect.Thefirst-stage,

whichusesaninstrumentontheoccupationswherepriorSovietwaveswereactually

employedinIsrael,willpredictthatfewoftheémigrésenteroccupationswithstrict

Hebrewfluencyrequirements.Asaresult,theOLSandIVspecificationswouldleadto

almostidenticalestimatesofthewageelasticity.

Friedberg’s(2001)instrument,theoccupationwheretheémigréwasemployedin

theSovietUnion,ignoresthatskillsarenotperfectlytransferableacrosscountriesandthat

theémigrésmayonlybeabletoentercertainoccupationsinIsrael.Thisimpliesthatthe

first-stageregressionwillallocateaworkerwhousedtobeaTVpersonalityintoasimilar

occupationinIsrael,anoccupationthatmayrequirenear-perfectHebrewfluencyandthat,

infact,employsveryfewsuchémigrés.Asaresult,theFriedbergIVwageelasticitymaybe

comparingwagesbeforeandaftertheshockinoccupationsthathavestrictHebrewfluency

requirements(i.e.,anoccupationwheretherewaslittlesupplyincrease)withwage

changesinjobswhereHebrewfluencyisunimportant(i.e.,occupationswherethesupply

increasewasmuchlarger).Thiswouldresultinapositiveestimateofthewageelasticity.In

short,Friedberg'sIViseffectivelygivingmoreweighttooccupationsthat,infact,didnot

receiveashock.

Todocumenttheimportanceofskilldowngradingwhenmeasuringwageimpactsin

theIsraelicontext,wecarriedouttwodistinctexercises.First,foreacheducationlevelwe

candistributetheémigrésaccordingtothenativedistributionacrossoccupationsin1983.

Thispreventstheacross-occupationskilldowngradingandplaysarolesimilartothe

instrumentusedinFriedberg'sstudy.Alternatively,wecankeepthedistributionof

émigrésacrossoccupationsasobservedinthedata,allowingémigréstoenteroccupations

normallyperformedbylowereducatedworkers,butwithineachofthoseoccupationswe

canthenassumethattheémigréinflowwasdistributedintothedifferenteducationgroups

accordingtothenativedistributionofeducation,wherenativestendedtobelesseducated.

Thisallowsforskilldowngradingalongboththeoccupationandeducationdimensions.

40

Table8reportstheregressionresultsfrombothexercises.Whenusingthe

distributionofnativesacrossoccupationstoassigntheSovietémigrés,weobtainan

estimateofthewageelasticityequalto0.257(0.683),whichresemblestheFriedberg

(2001,TableII)IVestimateof0.549(1.28).If,instead,wekeeptheoccupationdistribution

ofmigrantsasobserved,butassignthemtodifferenteducationlevelsfollowingthenative

distributionwithineachoccupation,weobtainanestimateof-0.72.Notethatthisown

wageelasticityisvirtuallyidenticaltotheOLSandIVestimatesreportedinTables6and7.

Insum,theevidencestronglyindicatesthatSovietémigréslandedinoccupations

thatwerequitedifferentfromtheoccupationstheyheldintheformerSovietUnion,leading

themtocompetewithnativesintheoccupationstheyactuallyenteredratherthaninthe

occupationstheyheldbeforemigration.Moreover,itisalsopossiblethattherewassome

skilldowngradingevenwithinoccupations,withsomehighlyeducatedmigrants

performingtasksnormallydonebymiddle-skillIsraelis.

Putdifferently,skilldowngradingoccurredalongthetwodimensionsthatweuseto

definethevariouscells,andignoringthefactthatmeasuredskillsmaynotbehighly

correlatedwithmarketableskillscanleadtoasubstantialattenuationofthewageimpact

ofimmigration.

6.TheAlgerianWarofIndependence

TheAlgerianWarendedwiththesigningoftheEvianAccordsonMarch19,1962.

AlthoughFrance“insistedthatthesettlercitizensstayandbecomeapartoftheAlgerian

nation”(Choi,2016,pp.2,4),theso-calledsettlercitizensandotherAlgerianshadother

ideas,andAlgerianindependencequicklysparkedaflowofrefugeestoFrance.Inthe

summerof1962alone,“750,000Frenchcitizensincluding100,000naturalizedJewsand

severalthousandpro-FrenchMuslimAlgeriansfledthenationalisttakeover.”Overtime,

thenumberofrefugeesincreased,asthepre-independencepopulationofAlgeriaincluded

“900,000whitecolonialsofmixedEuropeandescentknownotherwiseaspiedsnoirs.”

AsthisverybriefsummaryoftheeventsthatfollowedtheEvianAccordssuggests,

theindependenceofAlgeriasparkedtwodistincttypesofrefugeeflowsintoFrance.The

firstconsistedoftheFrenchrepatriates,theFrenchnationals(or“settlercitizens”)who

41

livedinAlgeriaandreturnedtoFranceafter1962.ThesecondconsistedofAlgerian

nationals.Infact,thenumberofAlgeriannationalsmovingtoFranceincreasedsharplyin

1964“withthearrivalofover75,000harkis,theMuslimAlgeriansoldierswhohadfought

ontheFrenchsideduringtheWarofIndependence”(Choi,2016,p.6).

Hunt(1992)examinedthelabormarketimpactofthefirstoftheserefugeeflows,

consistingofrepatriates,ontheFrenchlabormarket.Heranalysissuggeststhatthe

repatriateshadonlyasmall(butadverse)impactontheunemploymentrateorwageof

Frenchnativeworkers.

Aswascommonintheearlystudiesthatexaminedrefugeesupplyshocks,however,

Hunt’sregressionanalysisignoredthatthesupplyshockofrepatriatesmayhavebeen

particularlylargeinsomeskillgroups,andmuchlessimportantinothergroups.In

particular,herregressionanalysisconsistedofessentiallycorrelatingthechangeina

measureof(age-andeducation-adjusted)labormarketoutcomesinaparticularcityona

measureofthetotalsupplyshockofrepatriatesaffectingthatcity.Aswehaverepeatedly

emphasized,itiscrucialtocarefullymatchtheskilllevelofFrenchnativeswiththeskill

leveloftherefugeestocorrectlymeasurethelabormarketimpactofthesupplyshock.

Inaddition,theHuntstudyoverlookedthefactthattheendoftheAlgerianwar

ignitedasizableandconcurrentflowofAlgeriannationals.Itisunlikelythatthetwo

refugeeflowsareuncorrelated.Ifnothingelse,thetimingofbothflowswasmotivatedby

thesamepoliticalupheaval.

OurexaminationoftherefugeesupplyshockssparkedbytheendoftheAlgerian

conflictshowsthattheskillcompositionofthetwogroupsofrefugeesandtheirgeographic

clusteringinFrancediffernotonlyfromeachother,butalsofromthatoftheFrenchnative

workforce.AmorecarefulidentificationoftheFrenchworkerswhomighthavebeenmost

affectedbyeithersupplyshocksuggeststhattheendoftheAlgerianWardidindeedhave

adverseandsizablerepercussionsoncompetingworkersintheFrenchlabormarket.

6.1Summarystatistics

42

Weusethe1962and1968FrenchcensusmicrodatamaintainedatIPUMSto

determinethesizeandskillcompositionofthetworefugeeshocksoriginatinginAlgeria.33

Eachcensusenablesustocountanddocumentthecharacteristicsofpersonswhowerenot

livinginFranceatthetimeoftheearliercensus,whichoccurssixyearspriortothe

enumeration.

Table9reportsthecountsofpersonsinthreekeydemographicgroups:thenumber

ofFrenchrepatriates(orFrenchnationalswhowerenotlivinginFranceatthetimeofthe

lastcensus);thenumberofAlgerianrefugees(orAlgeriannationalswhowerenotlivingin

Franceatthetimeofthelastcensus);andthenumberofFrenchnatives(orFrench

nationalswhowerelivinginFranceatthetimeofthelastcensus).

The1968Frenchcensusenumerated1.4millionpersonsofFrenchnationalitywho

werenotlivinginFrancein1962.AlthoughthecensusdatamaintainedatIPUMSdonot

indicatewherethesepersonsresidedin1962,thehistoricalcontextsuggeststhatasizable

fractionofthisgrouporiginatedinAlgeria.34Thesupplyshockofrepatriatesincreasedthe

sizeofthenativeFrenchpopulationbyabout3percent.

Inaddition,162,000AlgeriannationalsmigratedtoFrancebetween1962and1968,

sothatthissupplyshockincreasedthesizeofthepopulationbyabout0.4percent.Note,

however,thatnearly23percentofFrenchrepatriatesandalmosthalfoftheAlgerian

nationalsweremenintheirprimeworkyears,comparedtoonly20percentofFrench

natives35

Ourempiricalanalysisoftheimpactofthetwosupplyshocksfocusesonthegroup

ofnativeFrenchmenaged25-59,agroupthathad9.1millionoersonsin1968.The

33Itisimportanttonotethatthe1962censusenumerationwascarriedoutbeforethebulkofrefugeesarrivedinFranceaftertheEvianaccordsweresignedinlateMarch1962.Inotherwords,itisunlikelythatthelaborsupplydecisionsofFrenchnativesenumeratedinthe1962censuswereaffectedbytheinfluxofrefugeeswhowouldsoonenterthecountry.

34Weexperimentedwithalternativedefinitionsoftherepatriatepopulation,suchasincludingFrenchnationalswhohadmovedtoFrancepriorto1962.Theanalysisreportedbelowoptsforthemostconservativedefinitioninthesensethatitleadstorelativelyweaklabormarketimpactsoftherepatriates.Itisimportanttonotethat,concurrentwiththerepatriateandAlgeriansupplyshocks,therewasalsoalotofchurninthenumberofforeign-bornpersonsinFranceduetotheentryandexitofoveramillionguestworkers,mainlyfromSpain,Portugal,andItaly.

35Table9alsosuggeststhatthebulkoftheAlgerianrefugeeinfluxwasdisproportionatelymale:88percentoftherefugeesaged25-59weremen.TherespectivestatisticfortheentirepopulationofAlgerianrefugeeswas78percent.

43

repatriatesincreasedthesizeofthispopulationby3.3percent,whiletheAlgerianrefugees

increaseditssizebyalmost1percent.

Table9alsodocumentstheremarkabledifferenceintheskillcompositionofthe

variousgroups.Practicallyall(96percent)oftheAlgerianrefugeeshadlessthanaprimary

education,ascomparedtoonly37percentoftheFrenchnativesand26percentofthe

repatriates.TheextremeconcentrationoftheAlgerianrefugeesintheleastskilledcategory

impliesthatthisspecificsupplyshockincreasedthenumberoflow-skillworkersinthe

aggregateFrenchlabormarketby2.2percent.

Incontrast,theskillcompositionoftheFrenchrepatriateswasmuchmorebalanced,

andcomparabletothatofFrenchnatives,withaslightskewtowardsamoreskilled

composition.Amongmenaged25-59,forexample,26percentofFrenchnativesand37

percentofFrenchrepatriateshadatleastasecondaryeducation.

Thetworefugeeflowsalsodifferedintheirgeographicsettlementaftertheyarrived

inFrance.ThegeographicsortingoftheFrenchrepatriatesverymuchresembledthatof

Frenchnatives,exceptthattheregionProvence-Alpes-Coted'Azurreceivedasomewhat

largershare.However,amuchlargernumberoftheAlgerianrefugeessettledintheParis

andsouthernregions.Forexample,16percentofAlgerianssettledinRhone-Alpes,aregion

thathostedonly9percentofFrenchnatives,andanadditional35percentsettledinIlede

France,butonly19percentofFrenchnativeslivedintheParismetropolitanarea.

Weagainexploitvariationacrossregion-educationcellstoestimatethelabor

marketimpactofthetwodistinctrefugeesupplyshocks.TheavailableFrenchcensusdata

enablesustodefine88suchcells(22regionsand4educationgroups).Theextreme

bunchingoftheAlgerianrefugees,bothintermsoftheireducationalattainmentandtheir

geographicdistribution,intoarelativelysmallnumberofcellscreatesagreatdealof

dispersioninthesizeofthesupplyshockacrosslabormarkets.Thisvariationhelpsto

morepreciselyidentifythelabormarketimpactoftheAlgeriannationals.Incontrast,the

similarityintheskillsand(tosomeextent)geographicsortingoftheFrenchnationalsand

44

theFrenchrepatriatessuggeststhattheremaynotbesufficientvariationtoprecisely

identifytheimpactofthisparticularsupplyshock.36

ThebottompanelofTable9hintsatthenatureoftheevidence.TheProvence-

Alpes-Coted'Azurregion,wherealargenumberoftheverylow-skilledAlgeriannationals

eventuallysettled,witnessedanincreaseintheunemploymentrateofFrenchnativeswith

lessthanaprimaryeducationof2percentagepoints(doublethenationalaverage),anda

decreaseintheemploymentrateof3percentagepoints(incontrasttoanincreaseinthe

employmentrateforthisskillgroupof1percentagepointinthenationallabormarket).

6.2Results

Table10reportstheregressioncoefficientsobtainedfromalternativespecifications

ofthegenericregressionmodelthatidentifiestheowneffectofsupplyshocksinequations

(5)and(7).Becausetherearetwodistinct,thoughconcurrent,supplyshocks,the

regressionspecificationisexpandedtoincludethemeasureofthesupplyshockforeachof

thetwotypesofrefugees.

TheFrenchcensusdatadonotreportanyinformationonaworker'searnings,so

thatweusetwoalternativevariablestomeasurethelabormarketimpactoftherefugees:

theunemploymentrate(definedasthefractionofthelaborforceparticipantsina

particularcellwhoareunemployed);andtheemploymentrate(definedasthefractionof

thepopulationinthecellthatisemployed).Thedependentvariablesusedinthe

regressionsgivethechangeineachoftheseemploymentindicatorsforeachregion-

educationcellbetween1962and1968.

TheOLScoefficientsarereportedinthefirsttwocolumnsofthebottomtwopanels

ofthetable.ItisevidentthattheflowofAlgerianrefugeeshadasizableandstatistically

significantpositiveeffectontheunemploymentrateofFrenchnatives,aswellasanegative,

significant,andquantitativelylargereffectontheiremploymentrate,inlinewithwhatthe

summaryevidencereportedinthebottompanelofTable9suggested.Inotherwords,the

supplyshockofAlgerianrefugeesdrovecompetingFrenchnativesoutofthelabormarket,

36ThisfactexplainswhywedonotincludelocationfixedeffectsintheregressionsreportedinTable

10.IncludingthesefixedeffectsdoesnotchangetheresultsfortheAlgerianinflows,butmakesthecoefficientsfortheFrenchrepatriatessupplyshockveryunstable.

45

andmadethejob-findingprocessmoredifficultforthosenativeswhostayedinthemarket.

BecausetheAlgerianrefugeeflowwasdisproportionatelycomposedofworkerswithvery

lowskillsandclusteredinasmallnumberoflocations,theregressionsareessentially

indicatingthatverylow-educatednativeworkersinasmallnumberofFrenchcitieswere

indeedadverselyaffectedbytheAlgeriansupplyshock.

ItiseasytoseethepositiveimpactoftheAlgeriansupplyshockonthe

unemploymentrateofcomparableFrenchnativesintherawdata.Thebottompanelof

Figure4showsthescatterdiagramillustratingtherelationbetweenthechangeinthe

unemploymentrateinaparticularregion-educationcellandthesizeofthecorresponding

Algeriansupplyshock.ItisobviousthattheunemploymentrateincreasedmostforFrench

workersinthoseregion-educationcellsmostaffectedbytheentryoftheAlgerianrefugees.

Moreover,theeffectofthissupplyshockontheunemploymentrateisnumerically

large.A5percentincreaseinthesizeofthecellduetoaninfluxofAlgerianrefugees,which

isroughlythesizeoftheshockinthemostaffectedregion-educationcell(nativeswhodid

notcompletetheirprimaryeducationlivinginProvence-Alpes-Coted’Azur)increasedthe

unemploymentrateofthisgroupby1.3percentagepoints.TheFrenchunemploymentrate

forprime-age,low-skillmeninthemid-1960swasonly2percent,sothatthesupplyshock

hadasubstantialimpactonFrenchunemployment.

Incontrast,wefindthatalthoughtheimpactoftherepatriatesontheemployment

andunemploymentratesofFrenchnativesgenerallyhasthe“right”signintheOLS

regressions,thecoefficientisalwaysinsignificant.Theweakeffectbecomesstatistically

significantonlyintheunemploymentrateregressionsafterweaccountfortheendogeneity

ofthegeographicdistributionoftherepatriates.Thefirst-stagecoefficientsreportedinthe

toppanelofTable10showthatboththegeographicsortingoftheAlgerianrefugeesand

theFrenchrepatriateswasstronglycorrelatedtowherepreviousAlgerianrefugeesand

repatriatessettled.37Assumingthatthelaggedgeographicsortingisavalidinstrument,the

37Itisimportanttonotethattheflowofrepatriates,unliketheflowofAlgeriannationals,began

priortotheendofthewarin1962.ManyFrenchnationalsarerecordedtohavereturnedtoFranceasearlyas1954.TheFrenchcensusdataavailableatIPUMSdoesnotenableustodeterminetheoriginoftheserepatriates.However,theirskillandlocationdistributionissimilartothelargerflowofrepatriatesthatfollowedtheconclusionoftheAlgerianindependencewar.

46

IVregressionsinthebottomtwopanelsshowthatboththerepatriatesandtheAlgerian

refugeeshadasignificantimpactontheunemploymentratesofFrenchnatives.

Finally,thefactthatthesupplyshockofFrenchrepatriateswas“balanced”across

theeducationcellsmakesitdifficulttoestimatetheresultingcross-effectsusingthe

regressionframeworkderivedearlier.Wesimplifiedtheestimationofcross-effectsby

explicitlyrelyingonthefactthatrefugeesupplyshocksareoftenveryunbalancedintheir

skillcomposition,sothatweneedonlylookathowthelabormarketoutcomesofdifferent

skillgroupsrelatetothesupplyshockexperiencedbytheoneskillgroupthatwasmost

affected.Wecanobviouslycarryoutthisexercisetoestimatethecrosseffectsresulting

fromthesupplyshockofAlgeriannationals,butitisnotpossibletousethemethodologyto

estimatethecorrespondingcrosseffectsfromthesupplyshockofFrenchrepatriates.

AsTable9shows,thesupplyshockofAlgeriannationalswasextremelyunbalanced.

AlmostalltheAlgerianswhoarrivedtoFrancebetween1962and1968hadnotcompleted

theirprimaryeducation,suggestingthatwecanuseequation(12)todeterminehowthe

low-skillAlgeriansaffectedtheemploymentopportunitiesofmoreskilledFrenchnatives.

Table11reportsselectedcoefficientsfromthecross-effectsregressions.Not

surprisingly,theregressionsstillreportanadverseowneffect—employmentratesare

lowerandunemploymentratesarehigherforFrenchnativeswhodonothaveaprimary

education.However,wecannotdetectanyevidenceofbeneficialcross-effectsinthis

episode.Theunemploymentrateofmoreskillednativesdidnotfallwhenverylow-skill

Algeriannationalsenteredtheirspecificlabormarket.Moreover,theevidenceindicates

thattheemploymentrateofskilledFrenchnativesalsofell,althoughitfellbysignificantly

lessthanthedropexperiencedbylow-skillworkers.Wehavebeenunabletodeterminethe

reasonfortheabsenceofbeneficialcomplementaritiesintheAlgeriancontext.Oneobvious

conjectureisthatthesupplyshockofAlgeriannationalswasquiteuniqueintermsofjust

howlow-skilltherefugeeswererelativetothebaselinepopulation.

7.TheBalkanrefugees

FormanyofthepeoplelivinginEuropeduringthe1990s,thenamesofSrebrenica,

Sarajevo,Pristina,andPodgoricaareindeliblyassociatedwithincidentsfromthelastsetof

47

warsfoughtonEuropeansoil.Afterthecollapseofcommunism,theformerrepublicof

Yugoslaviasplitintofivenewcountriesbetween1991and1992:Slovenia,Croatia,Bosnia-

Herzegovina,Serbia,andMacedonia.Thisbreakup,however,wasnotwithoutconflict.

Variousepisodesofcivilandmilitaryunresthittheformercommunistcountrybetween

1990and2000.Thereweremanycasualties,andmanymorepeoplelosttheirhomesand

soughtrefugebymovingelsewhere,eitherinternallywithintheterritoryoftheformer

YugoslaviaortoothercountriesinEurope.

ItisdifficulttoestimatepreciselyhowmanyoftheBalkanrefugeescreatedbythe

continuousconflictmovedtoEuropeancountries.Thedifferenttimingandlocationofthe

variouswars,aswellthepersistenceofthefighting,generateddistinctwavesofrefugees.

Forexample,thefirstwarsstartedinnorthernYugoslavia,whenSloveniaandCroatiain

1991,andthenBosniain1992,declaredindependence.ThewarinCroatiaandBosnia

lasteduntil1995whentheFederalRepublicofYugoslaviarecognizedCroatiaandBosnia-

Herzegovinaasindependentcountries.In1996,ethnicAlbaniansinKosovoformedthe

KosovoLiberationArmytofightforthecreationofanethnicallyseparateGreaterAlbania.

TheWarinKosovoin1998and1999involvedthesouthernregionofformerYugoslavia,

andaffectedlargenumbersoffamilies.Thecalculationofthenumberofrefugeescreated

bythisseeminglyendlessseriesofdistinctconflictsisfurthercomplicatedbythefactthat

manyoftherefugeeseventuallyreturnedtopartsoftheformerYugoslaviaoncethewars

ended.

TherefugeesfromtheformerYugoslaviatendedtomovetoparticularcountriesin

Europe.Therefugeesthensettledinparticularregionswithinthosecountries.Werelyon

thevariationacrossregionswithindifferentEuropeancountriestoidentifythelabor

marketimpactofthisspecificrefugeesupplyshock.

7.1SummaryStatistics

WeusecensusdataforsevenEuropeandestinationcountries:Austria,Greece,

Ireland,Portugal,Romania,Spain,andSwitzerland.Thesecountrieswerechosenbasedon

thefollowingcriteria.First,weonlyuseEuropeancountrieswithpubliclyavailablecensus

dataintheIPUMSarchive.Second,weonlyusecountrieswherewecanconstructa

"before"and"after"snapshotoftherelevantnationallabormarkets.Thetimingofthe

48

YugoslavWarssuggeststhatthecountriesmusthaveconductedacensusaround1990and

anothercensusaround2000.38Third,weneedtoenumerateanddeterminetheskill

distributionoftheBalkanrefugees,aswellasmeasuretheirimpactonthelabormarket

opportunitiesofcomparablenatives.Inotherwords,boththe“pre”and“post”censusesfor

eachcountrymustreportinformationoncountryoforiginandlabormarketoutcomes,and

mustreporteducationalattainmentinamannerthatiscomparableacrosscountries.

AlthoughothercountrieswererecipientsoflargenumbersofBalkanrefugeesatthe

time,thecensusdatapubliclyavailableforthoseothercountriesdonotsatisfyourcriteria.

TheFrenchcensus,forexample,doesnotreportthecountryoforiginofforeign-born

persons.Similarly,thecodingofeducationalattainmentfortheUKcensusesdiffers

significantlyfromthatusedbyothercountries.Finally,therelevantdataarenotavailable

foreitherGermanyorSweden.

Table12showsthatalmost260,000personsbornintheformerYugoslaviamoved

tothesevenEuropeancountriesinouranalysisduringthe1990s.39Thisrepresentsavery

modestincreaseofonly0.3percentintheaggregatepopulationofthosecountries.

However,aswithmanyrefugeesupplyshocks,therefugeesclusteredinarelativelysmall

numberofplaces.AlmostalloftheBalkanrefugeessettledintwoofthecountriesincluded

inouranalysis,AustriaandSwitzerland,withAustriareceiving76percentoftherefugees

andSwitzerlandreceiving17percent.And,withinthosetwocountries,therefugeeswere

furtherclusteredinspecificregions,providingsufficientvariationfortheidentificationof

theirlabormarketimpact.Forexample,Viennareceived34percentoftherefugeesin

Austria,butonly19percentofthenativepopulationresidedinthatcity.

Weagainexaminethelabormarketoutcomesofthenative-bornpopulationofmen

aged25-59inthevariousreceivingcountries.Table12reportsthattheBalkanrefugees

weredisproportionatelyofintermediateskills.While44percentofprime-agemeninthe

38Specifically,weusethe1991and2001censusesinouranalysisofAustria,Greece,Portugal,and

Spain;the1991and2002censusesforIreland;the1992and2002censusesforRomania;andthe1990and2000censusesforSwitzerland.

39WeobtainthisnumberbycomparingthestockofmigrantsfromYugoslaviacirca1990tothestockofmigrantsfromtheformerYugoslaviacirca2000.

49

receivingcountrieshadcompletedasecondaryeducation,67percentoftheBalkan

refugeeshaddoneso.

OuranalysisoftheBalkanrefugeesepisodeagaindefinesalabormarketasa

particularregion-educationcell,wheretheregionindexnowidentifiesaparticularregion

withinaparticularcountryofdestination.Thepubliclyavailablecensusdataallowsusto

identify65suchgeographicareas(across7differentcountries)inthreedifferenteducation

groups,sothatouranalysisexploitsvariationacross195cells.

AlthoughouranalysiscomplementsAngristandKugler’s(2003)initialexamination

ofthisspecificrefugeesupplyshock,thereareseveralkeydifferencesbetweentheirstudy

andours.Forexample,AngristandKuglerusedannualdatareportinglabormarket

outcomesandmigrantflowsinallEuropeancountries.40Theseannualdata,however,do

notprovideanyinformationontheeducationalattainmentoftheBalkanrefugeesoronthe

specificlocallabormarkets(inareceivingcountry)thatwereaffectedbythesupplyshocks.

Exploitingannualvariationonlabormarketoutcomesandonthesizeofsupplyshocks

enablesAngristandKuglertomorepreciselymeasurethechangesinemployment

observedaroundtheyearsoftheBosnianandKosovoWars.Butthelackofinformationon

educationalattainmentandthespecificwithin-countryregionsmostaffectedbythe

refugeesimpliesthattheymustrelyonaggregatedifferencesacrosscountriestoidentify

thelabormarketimpact.Inasense,ourapproachgeneratesagreaterdegreeofdispersion

acrossmarketsthatcanhelpidentification.Atthesametime,however,ourapproachlimits

thenumberofcountriesthatcanbeusedinsuchananalysis.

Figure5illustratesthatwithinoursetof7countries,itismainlysomeregionsin

AustriaandSwitzerlandthatwitnessedsignificantsupplyshocksofrefugeesfromthe

formerYugoslavia.Infact,therearesomeregionsinAustriawheretheinfluxofBalkan

refugeesincreasedthesizeoftheworkforcebyabout5percentinsomeeducationgroups,

whilein(someverysmallcellsin)Switzerlandthesizeofthesupplyshocksometimes

neared20percent.

40TheAngrist-KuglerannualdataaredrawnfromtheLaborForceSurveymaintainedbythe

Eurostat.

50

7.2Results

Table13reportscoefficientsobtainedfromthegeneric“owneffects”regression

modelsderivedinequations(5)and(7).ThepooledcensusesfromthesevenEuropean

countriesdonotcontainanyinformationonaworker'searnings,sothatourdependent

variablesare:thechangeintheunemploymentrate(definedasthefractionofthelabor

forceparticipantsinaregion-educationcellwhoareunemployed);andthechangeinthe

nativeemploymentrate(definedasthefractionofthepopulationinthecellthatis

employed).Notethatallregressionspecificationsreportedinthetableincludecountry-of-

destinationfixedeffects,sothattheimpactofthesupplyshockisbeingidentifiedfromthe

variationacrossregion-educationcellswithinaparticularcountry.41

TheOLScoefficientsofthe“own”labormarketimpactarereportedinthefirsttwo

columnsofthebottomtwopanelsofthetable.42ItisevidentthattheBalkanrefugeeshada

positiveandsignificanteffectonthenativeunemploymentrateandanegative(but

insignificant)effectonthenativeemploymentrate.Thepointestimatesuggeststhata5

percentrefugeesupplyshockincreasestheunemploymentrateofcompetingnativesby

about1percentagepoint.BecausethisparticularsupplyshockwaslargestinAustriaand

Switzerland,wheretheunemploymentratesin2000were5.5and2.0percent,respectively,

theBalkanrefugeeshadasizableeffectonnativelabormarketopportunitiesinthosetwo

countries.

Figure5illustratestherawdatathatgeneratesthispositivecorrelationbetweenthe

supplyshockandthechangeintheunemploymentrate.Itisevidentthatthepositive

unemploymenteffectisgeneratedbythewithin-countryvariationinthesizeofthesupply

shock.

Ofcourse,theBalkanrefugeesmaybeendogenouslychoosingwhichparticular

labormarkettomoveto(intermsofchoosingbothaparticularcountryofdestinationand

aparticularregionwithinthatcountry),obviouslypreferringtosettleinlocationsthat

offerthebestemploymentopportunities.Toaddresstheendogeneityconcern,weagain

41Itisimportanttocontrolforcountryfixedeffectsbecausedifferentcountriesweretryingto

convergeinmacroeconomicconditionspriortoenteringthecommoncurrencyunion.42Theregressionresultsaresimilarifweestimatetheregressionsusingonlyregional-education

variationinthetwocountries(AustriaandSwitzerland)thatreceivedmostoftheBalkanrefugees.

51

usethemigrationnetworkinstrument.Thequestion,ofcourse,iswhetherthepastshareof

workersfromtheformerYugoslavia(priortoitsbreakup)isagoodpredictorofwherethe

new(post-breakup)migrantsmoved.

Ourinstrumentalvariablesregressionagainexploitsthevariationacrossregions

withineachcountry.Interestingly,someregionsin(mainly)AustriaandSwitzerlandhad

largersharesofmigrantsfromtheformerYugoslaviapriorto1990andalsoreceivedmany

moremigrantsduringthe1990s.ThefirsttwocolumnsofthetoppanelofTable13reports

thefirststagecoefficient,whichispositiveandsignificant,andsuggeststhata10percent

highershareofmigrantsinaparticularregionpriorto1990resultedina1.4percent

increaseintheinflowrateduringthe1990s—relativetootherregionsinthesamecountry.

TheuseofIVtocontrolforthegeographicsortingoftheBalkanrefugeesdoesnot

fundamentallyalterourresults,buttheIVcoefficientsofthelabormarketimpactaremore

impreciselyestimated.Itisworthnotingthatourestimatesofthe“own”employment

effectsseemweakerthanthoseestimatedbyAngristandKugler(2003)usingcross-

countryvariation.Forinstance,AngristandKugler(2003,pp.F318,F322)reportthat100

moremigrantsleadto35or83fewernativejobs(dependingonwhethertheimpactis

estimatedusingOLSorIV,respectively).43

Aswenotedearlier,theBalkanrefugeesweredisproportionatelylocatedinthe

middleoftheeducationdistribution;67percentoftherefugeeshadacompletedsecondary

education,ascomparedto44percentofnatives.Weusethecross-effectsregressionmodel

derivedinequation(12)toseparatelyexaminehowthisparticularsupplyshockaffected

theemploymentoutcomesofnativepersonsatthetwoextremesoftheskilldistribution.

Table14summarizestheevidenceoncrosseffects.Notethattheexpanded

regressionmodelinequation(12)stillyieldsthefindingofadverseowneffects.Inother

words,therewasanincreaseintheunemploymentrateofnativeworkerswithasecondary

educationandadecreaseintheiremploymentrate.Equallyimportant,theinfluxofa

disproportionatelylargenumberofintermediate-skillrefugeesloweredtheunemployment

43TheAngrist-Kuglerpointestimatesassumeabaselineimmigrationlevelof5percent.Incontrast,

usingasettingsimilartoours,Glitz(2012)examinesvariationacrossGermanregionsthatweredifferentiallyaffectedbytheinflowofSovietmigrantsafterthecollapseoftheSovietUnion,andobtainsemploymenteffectsthatarequantitativelysimilartothosereportedinTable13.

52

rateandincreasedtheemploymentrateoflow-skillnativeswhohadatmostaprimary

education.Althoughthebeneficialcross-effectsonlow-skillnativesareoftennot

statisticallysignificant,thepointestimatesconsistentlysuggestthattheiremployment

outcomesimprovedbecauseoftheentryofsomanyrefugeesinthenexthigherrungofthe

skilldistribution.However,theevidenceonthepresenceofbeneficialcross-effectsforthe

mostskilledEuropeannatives,thosewhohadcompletedauniversityeducation,isfar

weaker.

8.Summary

Therecent(andcontinuing)entryofhundredsofthousandsofrefugeesintomany

Europeancountrieshasalreadygeneratedagreatdealofpoliticalcontroversyandraised

manyquestionsthatrequireafullerunderstandingofthedeterminantsandconsequences

ofrefugeesupplyshocks.Thispaperrevisitedsomeofthehistoricalrefugeeflowsto

documentthelabormarketconsequencesofrefugee-inducedincreasesinlaborsupply.

Specifically,ouranalysisreexaminestheevidencesurroundingfourepisodes:(1)

TheinfluxoftheMarielitosintoMiamiin1980;(2)theinfluxofFrenchrepatriatesand

AlgeriannationalsintoFranceattheendoftheAlgerianWarofIndependencein1962;(3)

theinfluxofJewishémigrésintoIsraelafterthecollapseoftheSovietUnionintheearly

1990s;and(4)theinfluxofrefugeesfromtheformerYugoslaviaintosomeEuropean

countriesduringthelongseriesofBalkanwarsbetween1991and2001.

Althoughthelabormarketconsequencesofeachoftheseshockshavebeen

separatelyexaminedinpriorstudies,ourexaminationoftheevidencediffersfromthe

priorliteratureinthreekeyways.First,weuseacommonempiricalapproach,basedonthe

implicationsoffactordemandtheory,todocumentthelabormarketconsequencesofeach

oftherefugeesupplyshocks.Despitetheobviousdifferencesinthehistorical,economic,

andpoliticalforcesthatmotivatedthevariousrefugeeflows,theuseofthesameempirical

frameworktostudyeachoftheepisodesrevealsacommonthreadintheevidence:

Exogenoussupplyshocksadverselyaffectthelabormarketopportunitiesofcompeting

nativesinthedestinationcountries.

53

Insomecontexts,ofcourse,thisresultimpliesthatarefugeesupplyshockwill

mainlyharmlow-skillworkersinsomeregionsofthereceivingcountry(aswasthecase

withtheinfluxofMarielitosintoMiamiortheinfluxofAlgeriannationalsintoFrance).In

othercases,however,itisthehigh-skillworkforceinthereceivingcountrythatbearsthe

bruntoftheimpact(aswasthecasewithhigh-skillIsraeliscompetingwithlargenumbers

ofhigh-skillSovietémigrés).

Second,theverydifferentskilldistributionsofnativesandrefugeesinsomeofthese

episodessuggeststhatthesenaturalexperimentscanbefurtherexploitedtoidentifythe

impactofthesupplyshocksonpotentiallycomplementarynativegroups.Forexample,the

low-skillMarielitosmayhaveincreasedthewageoremploymentopportunitiesofhigh-skill

Miamians,whilethehigh-skillSovietémigrésmayhavebenefitedlow-skillIsraelis.These

complementaritiesshouldobviouslybeanimportantpartofanyassessmentofhow

refugeesupplyshocksaltertheemploymentopportunitiesofnativeworkers.Ourempirical

analysisdocumentsthat,inmanycases,thesebeneficialeffectsdoindeedexistandare

numericallyimportant.

Finally,ratherthanrelyonproprietaryorconfidentialdata,weonlyusethepublicly

availablecensusmicrodatamaintainedatIPUMS.Ouruseofeasilyaccessibledatato

examinetheimpactofrefugeesupplyshocksimpliesthatourresultsarefullyreproducible.

Thereproducibilityoftheevidenceinthiscontextisessentialbecausetherecentrefugee

supplyshocksinEuropehavealreadysparkedextremelycontentiouspolicydebatesin

manyreceivingcountries.

Ourempiricalanalysisofthefourhistoricalepisodesofrefugeesupplyshocks

teachesanimportantlesson.Althoughtheseepisodesdifferincountlessways,auniversal

themeseemstoconnecttheevidence.Putbluntly,thehumanitarianprinciplesthat

encouragereceivingcountriestoacceptasmanymigrantsaspossiblehaveimportant

distributionalconsequences,aspredictedbythecanonicalmodelofsupplyanddemandin

thelabormarket.

54

Appendix:SkillDowngradingasanOmittedVariable Asimplewaytothinkaboutskilldowngradingistoassumethatanexogenous(andconstant)fractionπofthehigh-skillrefugeesactuallyenterthelow-skillmarket.Equations(10a)and(10b)showthatthechangeinlabormarketoutcomesforthetwoskillgroupshanduaredeterminedby:

Δ logwrh = θ− ηMrh

Lrh1−ηπ −Mrh

Lrh1+erh ,

Δ logwru = θ− ηMru

Lru1− ηπMrh

Lru1+eru .

Thisimpliesthattheestimatingequationcanbewrittenas:(A1) Yr = α + βXr + γ Zr + εr , wherethevectorYr=(Δlogwrh, Δ logwru)and,

Xr = (xrh , xru ) =Mrh

Lh1,Mru

Lru1

⎛⎝⎜

⎞⎠⎟,

Zr = (zrh , zru ) =−Mrh

Lrh1,Mrh

Lru1

⎛⎝⎜

⎞⎠⎟.

Withoutlossofgenerality,wecanmeasurevariablesasdeviationsfromtheirmeans.

Ifweestimateequation(A1)usingOLS,butexcludingZ,wehaveastandardproblemofomittedvariablebias.ThebiasdependsonthecovariancebetweenXandZ:

plim β̂ = β + γ plimxrjzrjr , j∑xrj2

r , j∑ .

Wecanfurthersimplify:

Bias = γ plimxrjzrjr , j∑xrj2

r , j∑ = γ plimxrhzrh + xruzrur∑r∑xrh2 + xru

2r∑r∑ .

Defineσh

2 =Var(Mrh / Lrh1) ;σu2 =Var(Mru / Lru1) ;andσhu = Cov(Mrh / Lrh1,Mru / Lru1) .

Thevariances(σh2 ,σu

2) measurethedispersioninhigh-skillandlow-skillrefugeesupply

55

shocksacrossmarketsr,andthecovarianceσhumeasurestherelationbetweenhigh-skillsupplyshocksandlow-skillsupplyshocks.Itthenfollowsthat:

plim xrhzrhr∑⎛⎝⎜

⎞⎠⎟= plim Mrh (−Mrh )

Lrh1Lrh1r∑⎛⎝⎜

⎞⎠⎟= −σh

2,

plim xruzrur∑⎛⎝⎜

⎞⎠⎟= plim MruMrh

Lru1Lru1r∑⎛⎝⎜

⎞⎠⎟= plim Mru

Lru1

Mrh

Lrh1

Lrh1Lru1r

∑⎛⎝⎜⎞⎠⎟= σhuR,

where R = plim(Lrh1 / Lru1). Forsimplicity,weconsiderthecasewhere“skills”aredefinedsothattheskilldistributionofthenativeworkforceis“balanced,”andR=1.Italsofollowsthat:

plim xrh2 + xru

2

r∑

r∑⎛⎝⎜

⎞⎠⎟= plim Mrh

Lrh1

⎛⎝⎜

⎞⎠⎟

2

r∑ + Mru

Lru1

⎛⎝⎜

⎞⎠⎟

2

r∑

⎛

⎝⎜

⎞

⎠⎟ = σh

2 +σu2.

Thecorrelationbetweenhigh-andlow-skillsupplyshocksacrossmarketsisgivenby

ρhu =σhu /σhσu. Combiningexpressionsyieldsequation(10)inthetext:

plim η̂ = η− ηπ σh2

σh2 +σu

2 1−ρhuσu

σh

⎡

⎣⎢

⎤

⎦⎥.

56

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58

Figure1.TheimpactoftheMarielsupplyshockonnativewages

Notes:Thisfigureplotsthechangeinthewageofnativemenaged25-59againstthesizeofthemigrantinflowineachcity-educationcellusingtheMarchCPSsurveyyearsof1978-1980asthepre-migrationperiodandtheMarchCPSsurveyyearsof1982-1985asthepost-migrationperiod.Eachdotrepresentsacity-educationcell.Thesizeofthedotsrepresentsthesizeofthecells.Blue,red,green,andyellowdotsindicate“lessthanprimary”,“Primarycompleted”,“Secondarycompleted”,and“Universitycompleted”respectively.Thefigureexploitsvariationacross38metropolitanareasand4educationgroups.

59

Figure2.TheimpactoftheSovietémigrésonnativewages

Notes:Thisfigureplotsthe1983-1995changeintheannualearningsofnativeIsraelimenaged25-59againstthesizeofthemigrantinflowineachcell.Eachdotrepresentsaneducation-occupationcell.Blue,red,green,andyellowdotsindicate“lessthanprimary”,“Primarycompleted”,“Secondarycompleted”,and“Universitycompleted”respectively.Thesizeofthedotsrepresentsthesizeofthecells,measuredbytheoptimalweightsusedintheregressiontables.Thefigureexploitsvariationacross4educationsgroupsand8occupationcategories.

60

Figure3.Sovietinflowsandlanguageusepriortothesupplyshock

Notes:ThefigureplotstheinflowofSovietémigrésagainsttheshareofworkerswhospeakHebrewastheirfirstlanguagein1983andwhowerenotfromtheSovietUnion.Weremoveeducationfixedeffectsfrombothvariables.Eachdotrepresentsaneducation-occupationcell.Blue,red,green,andyellowdotsindicate“lessthanprimary”,“Primarycompleted”,“Secondarycompleted”,and“Universitycompleted”respectively.Thefigureexploitsvariationacross4educationsgroupsand8occupationcategories.

61

Figure4.TheimpactofthesupplyshocksaftertheAlgerianWaronthenativeunemploymentrate

A.TheFrenchrepatriates

B.TheAlgeriannationals

Notes:Thefigureplotsthe1962-1968changeintheunemploymentrateofFrenchnativemenaged25-59againstthesizeofthemigrantinflowineachcell.Eachdotrepresentsaregion-educationcell.ThetopfigureshowstheimpactoftheFrenchrepatriatesandthebottomfigureshowstheimpactoftheAlgeriannationals.Blue,red,green,andyellowdotsindicate“lessthanprimary”,“Primarycompleted”,“Secondarycompleted”,and“Universitycompleted”respectively.Thesizeofthedotsrepresentsthesizeofthecells.Thefigureexploitsvariationacross4educationgroupsand22locations.

62

Figure5.TheimpactoftheBalkanrefugeesonthenativeunemploymentrate

Notes:Thefigureplotsthechangeintheunemploymentrateofnativemenin7EuropeancountriesagainstthesizeofthemigrantinflowineachcellbetweentheCensusyearclosestto1990andtheCensusyearclosestto2000foreachofthecountriesused.Eachdotrepresentsacountryofdestination-regionwithinthecountry-educationcell.Countryfixedeffectsareremovedinthegraph.Differentcolorsrepresentthedifferentcountriesused:Austria,Greece,Ireland,Portugal,Romania,Spain,andSwitzerland.Thesizeofthedotsrepresentsthesizeofthecells.Thefigureexploitsvariationacross3educationgroupsand65locations.

Table1.Overviewofthefourrefugeesupplyshocks

Numberofrefugees

(in1000s)

Refugeesupplyshock: AllMenaged25-59

Localities/occupationsmostaffected

Predominantskillsoftherefugees

Increaseinsupplyofmostaffectedgroup

1.Mariel,1980 120.6 47.9 Miami Highschooldropouts31.9%(malehighschooldropoutsinMiami)

2.SovietémigréstoIsrael,1990 476.5 101.6

Skilledworkersinindustryandconstruction Collegegraduates

267.9%(malecollegegraduatesin“skilled

workersinindustryandconstruction”)

3.TheAlgerianIndependenceWar,1962

A.FrenchRepatriates 1358.9 302.0Provence-Alpes-Cote

d'AzurBalancedacross

groups10.2%(meninProvence-

Alpes-Coted'Azur)

B.AlgerianNationals 162.1 77.1Provence-Alpes-Cote

d'AzurLessthanprimary

schooling

5.8%(menwithlessthanprimaryschoolinginIle

deFrance)

4.TheYugoslavWars,1991-2001 258.6 65.1SomecitiesinAustriaandSwitzerland

Secondaryschoolingcompleted 4.6%(meninVienna)

Table2.SizeandskillcompositionoftheMarielsupplyshock Censusdata,1990 Marielitos Natives %increaseinsupplyAllpersons(in1000s) 120.6 247339.0 0.05Aged25-59 73.2 105674.6 0.1Men,25-59 47.9 51696.4 0.1

%ofmenaged25-59witheducation: Highschooldropouts 62.2 20.1 0.3Highschoolgraduates 17.3 27.7 0.1Somecollege 13.8 26.3 0.0Collegegraduates 6.6 25.9 0.0

Samplesize,men25-59 2211 2577549 Censusdata1990,Miamicounts Marielitos Natives %increaseinsupplyAllpersons(in1000s) 69.4 852.7 0.08Aged25-59 54.7 576.0 0.09Male,aged25-59 34.5 290.5 0.12

%ofmenaged25-59witheducation: Highschooldropouts 62.4 23.2 31.9Highschoolgraduates 15.9 21.7 8.7Somecollege 14.5 27.5 6.3Collegegraduates 7.2 27.6 3.1

Samplesize,men25-59 833 6692 MarchCPSdata,pooled1978-1984surveys Samplesize Δlogwage ΔunemploymentrateOutsideMiami Highschooldropouts 8718 -0.17 0.06Highschoolgraduates 20299 -0.15 0.04Somecollege 12431 -0.12 0.03Collegegraduates 19898 -0.06 0.01

Miami Highschooldropouts 146 -0.41 0.04Highschoolgraduates 218 0.02 0.03Somecollege 107 -0.09 -0.06Collegegraduates 192 -0.02 -0.03

Notes:Thetoptwopanelsreportdatafromthe1990Censusbasedon1985locations,withagelevelsreferringto1985.TheMarielitosareCubanimmigrantswhoarrivedintheUnitedStatesin1980or1981;thenativesarepersonswhoareneithernon-citizensnornaturalizedcitizens.Thebottompanelreportsstatisticscalculatedinthesampleofnon-Hispanicmenaged25-59,wholiveinoneofthe38metropolitanareas.The(Δlogwage)and(Δunemploymentrate)variablesgivetheaveragechangebetweenthepooled1978-1980CPSsurveysandthepooled1982-1985surveys.The1981survey,whichreportsearningsforthe1980calendaryear,isnotusedinthecalculations.

65

Table3.TheimpactoftheMarielsupplyshockoncompetingworkers OLS IV (1) (2) (3) (4)A.Firststage Laggedsupplyshock 1.260 1.262 --- --- (0.053) (0.053) Changeinnativepopulation --- -0.002 --- --- (0.001)

B.Changeinlogweeklywage Marielsupplyshock -1.313 -1.350 -1.264 -1.310 (0.338) (0.346) (0.320) (0.322)Changeinnativepopulation --- 0.039 --- 0.039 (0.045) (0.038)

C.Changeinunemploymentrate Marielsupplyshock 0.060 0.066 0.007 0.015 (0.072) (0.075) (0.079) (0.083)Changeinnativepopulation --- -0.007 --- -0.006 (0.019) (0.016)

D.Changeinemploymentrate Marielsupplyshock -0.001 -0.001 0.052 0.053 (0.092) (0.097) (0.102) (0.107)Changeinnativepopulation --- -0.000 --- -0.001 (0.025) (0.021)

Notes:Robuststandarderrorsarereportedinparentheses.Theunitofobservationisacity-educationcell,andthedataconsistof38metropolitanareasand4educationgroups.The“Marielsupplyshock”variablegivestheratioofthenumberofMarielitosinthecelltothenumberofnativesinthecellasof1985.The“changeinnativepopulation”variablegivesthelogdifferenceinthenumberofnativepersonsinthecellbetween1980and1985.ThefirststageregressioninPanelArelatestherelativeinflowofMarielitosinthecellasof1985totheshareofCubansinthecellasof1980.Allregressionshave152observationsandincludebotheducationfixedeffectsandmetropolitanareafixedeffects.

66

Table4.OwnandcrosseffectsoftheMarielsupplyshock

Highschool

dropouts

Highschool

graduate

Some

college

College

graduates

A.Changeinlogweeklywage -0.857 0.653 0.217 0.097

(0.383) (0.331) (0.458) (0.442)

B.Changeinunemploymentrate -0.156 -0.136 -0.386 -0.170

(0.223) (0.192) (0.197) (0.080)

C.Changeinemploymentrate 0.147 0.164 0.419 0.046

(0.295) (0.235) (0.303) (0.136)

Notes:Standarderrorsarereportedinparentheses.Theunitofobservationisacity,andthereare38

metropolitanareasintheanalysis.Thetablereportsthecoefficientofthe“Marielsupplyshockforlow-skill

workers,”whichgivestheratioofthenumberofMarielitoswhoarehighschooldropoutstothenumberofnativeswhoarehighschooldropoutsin1985intheparticularcity.Theregressionsalsocontainregressors

givingthechangeinthesizeofthenativepopulationofeachofthefoureducationgroups.Theregressionsare

estimatedseparatelyforeacheducationgroupusingIVandhave38observations.

67

Table5.SizeandskillcompositionofSovietémigrésinIsrael,1995

Émigrés

Natives%increaseinsupply

Allpersons(in1000s) 476.4 4924.4 9.7Aged25-59 223.6 1898.7 11.8Menaged25-59 101.6 934.4 10.9

%ofmenaged25-59witheducation: Lessthanprimary 4.5 11.7 4.2

Primarycompleted 6.2 20.7 3.3Secondarycompleted 46.0 49.6 10.1Universitycompleted 43.2 18.0 26.2

%ofmenaged25-59workingas: Academicprofessionals 14.7 11.6 15.3

Associateprofessionalsandtechnicians 8.2 9.5 10.4Managers 1.0 9.4 1.3Clericalworkers 3.6 10.1 4.3Agents,salesworkersandserviceworkers 5.7 13.9 5.0Skilledagriculturalworkers 1.3 3.3 4.9Skilledworkersinindustryandconstruction 51.1 35.0 17.6Unskilledworkers 14.3 7.2 24.1

%ofmenaged25-59withuniversityeducationworkingas: Academicprofessionals 29.9 50.5 17.1

Associateprofessionalsandtechnicians 11.6 10.4 32.2Managers 1.6 18.0 2.6Clericalworkers 4.8 8.4 16.4Agents,salesworkersandserviceworkers 5.3 6.6 23.3Skilledagriculturalworkers 1.0 1.2 24.0Skilledworkersinindustryandconstruction 35.6 3.8 267.9Unskilledworkers 10.2 1.2 249.3

SampleSize:Menaged25-59 10160 93443 Δlogearnings SamplesizeAverageinIsrael,excludingskilledworkersinindustryandconstruction

Lessthanprimary 0.12 12470Primarycompleted 0.13 25717Secondarycompleted 0.07 58279Universitycompleted 0.17 24770

Skilledworkersinindustryandconstruction Lessthanprimary 0.00 2271Primarycompleted 0.01 3123Secondarycompleted -0.12 2748Universitycompleted -0.39 542

Notes:ThesampleofSovietémigrésconsistsofpersonsbornintheformerSovietUnionwhodidnotresideinIsraelin1990.ThesampleofIsraelinativesisIsraelinativesconsistsofpersonswhowerenotbornintheformerSovietUnion.ThebottompanelreportsstatisticscalculatedinthesampleofIsraelinativemenaged25-59.The(Δlogearnings)variablegivestheaveragechangeinannualearningsbetweenthe1983and1995censusesfortheparticulargroup.

68

Table6.TheimpactofSovietémigrésoncompetingworkersinIsrael

OLS IV

(1) (2) (3) (4)

A.Firststage

Laggedsupplyshock 2.686 2.659 --- ---

(0.514) (0.552)

Changeinnativepopulation --- 0.007 --- ---

(0.037)

B.Changeinlogannualearnings

Émigrésupplyshock -0.730 -0.740 -0.616 -0.611

(0.266) (0.298) (0.316) (0.334)

Changeinnativepopulation --- 0.009 --- -0.004

(0.083) (0.071)

Notes:Robuststandarderrorsarereportedinparentheses.Theunitofobservationisanoccupation-

educationcell,andthedataconsistof8occupationsand4educationgroups.The“émigrésupplyshock”

variablegivestheratioofthenumberofSovietémigrésinthecelltothetotalsizeofthecellasof1995.The

“changeinnativepopulation”variablegivesthelogdifferenceinthenumberofnativepersonsinthecell

between1983and1995.ThefirststageregressioninPanelArelatestheshareofSovietémigrésinthecellas

of1995totheshareofSovietimmigrantsinthecellasof1983.Allregressionshave32observationsand

includeeducationfixedeffects.

69

Table7.OwnandcrosseffectsoftheSovietémigrésinIsrael Lessthan

primaryPrimarycompleted

Secondarycompleted

Universitycompleted

Changeinlogannualearnings 0.350 -0.070 -0.083 -0.739 (0.184) (0.117) (0.121) (0.208)

Notes:Standarderrorsarereportedinparentheses.Theunitofobservationisanoccupation,andthereare8occupationsintheanalysis.Thetablereportsthecoefficientofthe“émigrésupplyshockforhigh-skillworkers,”whichgivestheratioofthenumberofSovietémigréswhocompletedauniversityeducationrelativetothenumberofnativeswhoalsocompletedauniversityeducationin1995intheparticularoccupation.Theregressionsalsocontainregressorsgivingthechangeinthesizeofthenativepopulationfortheowneducationgroup.TheregressionsareestimatedseparatelyforeachoccupationgroupusingIVandhave8observations.

70

Table8.Sensitivityteststoskilldowngrading

Regressor: (1) (2) (3) (4)

Measureofsupplyshock:

Predictedinflowusingnativeoccupational

distributionwithinaneducationgroup 0.257 -0.228 --- ---

(0.683) (0.937)

Predictedinflowusingnativeeducational

distributionwithinanoccupationgroup --- --- -0.718 -0.729

(0.251) (0.320)

Changeinnativepopulation --- -0.087 --- 0.006

(0.104) (0.100)

Notes:Robuststandarderrorsarereportedinparentheses.Theunitofobservationisanoccupation-

educationcell,andthedataconsistof8occupationsand4educationgroups.Thedependentvariableisthe

changeinlogannualearningsbetween1983and1995fornativeIsraelisineachcell.Theregressorgivingthe

“predictedinflowusingnativeoccupationaldistributionwithinaneducationgroup”givestheémigrésupply

shockcalculatedafterassigningSovietémigrésineacheducationgrouptooccupationsaccordingtothe

occupationaldistributionofnativeswithineacheducationgroup.Theregressorgivingthe“predictedinflow

usingnativeeducationaldistributionwithinanoccupationgroup”givestheémigrésupplyshockcalculated

afterassigningSovietémigrésineachoccupationtoaneducationalcategorybasedontheeducation

distributionofnativesineachoccupationcategory.Allregressionshave32observationsandinclude

educationfixedeffects.

71

Table9.SizeandskillcompositionoftheAlgeriansupplyshock,1968 %increaseinsupply

French

repatriatesAlgeriannationals

Frenchnatives

FrenchRepatriates

Algeriannationals

Allpersons(in1000s) 1358.9 162.1 45732.6 3.0 0.4Aged25-59 595.0 87.8 18610.0 3.2 0.5Male,Aged25-59 302.8 77.1 9079.9 3.3 0.8

%ofmenaged25-59witheducation: Lessthanprimary 26.1 96.3 37.2 2.3 2.2

Primarycompleted 36.8 2.5 36.4 3.4 0.1Secondarycompleted 25.8 1.0 20.2 4.3 0.0Universitycompleted 11.2 0.2 6.1 6.1 0.0

%ofmenaged25-59livingin: IledeFrance 21.3 35.2 18.9 3.8 1.6

Lorraine 3.1 7.3 4.4 2.3 1.4RhoneAlpes 9.7 16.4 8.8 3.7 1.6Provence-Alpes-Coted'Azur 19.2 15.6 6.3 10.2 2.1

%oflow-skillmenaged25-59livingin: IledeFrance 17.3 34.6 13.1 3.1 5.8

Lorraine 2.8 7.5 4.3 1.5 3.9RhoneAlpes 10.6 16.8 8.2 3.0 4.5Provence-Alpes-Coted'Azur 22.9 15.8 6.2 8.6 5.6

Samplesizeofmen,aged25-59 15139 3857 453993

Δunemploymentrate Δemploymentrate SamplesizeAverageinFrance:

Lessthanprimary 0.01 0.01 462579Primarycompleted 0.01 0.01 330784Secondarycompleted 0.00 0.00 159991Universitycompleted 0.00 0.00 49703

AverageinProvence-Alpes-Coted'Azur: Lessthanprimary 0.02 -0.03 32188Primarycompleted 0.01 0.00 20872Secondarycompleted 0.01 0.01 9886Universitycompleted 0.01 0.01 3466

Notes:ThesampleofFrenchrepatriatesconsistsofFrenchcitizenswhowerenotlivinginFrancein1962;thesampleofAlgeriannationalsconsistsofAlgerianswhowerenotlivinginFrancein1962;andthesampleofFrenchnativesconsistsofFrenchcitizenswhowerelivinginFrancein1962.ThebottompanelreportsstatisticscalculatedinthesampleofFrenchnativemenaged25-59.The(Δunemploymentrate)and(Δemploymentrate)variablesgivetheaveragechangebetweenthe1962and1968censusesfortheparticulargroup.

72

Table10.TheimpactofFrenchrepatriatesandAlgeriannationalsonFrenchnatives

OLS IV (1) (2) (3) (4)A.Firststage:shareofrefugees Laggedrepatriatesupplyshock 1.283 0.067 --- --- (0.115) (0.053) LaggedAlgeriansupplyshock -0.063 0.558 --- --- (0.076) (0.027)

B.Changeinunemploymentrate Repatriatesupplyshock 0.063 0.067 0.089 0.096 (0.040) (0.041) (0.038) (0.039)Algeriansupplyshock 0.270 0.265 0.247 0.240 (0.067) (0.069) (0.067) (0.069)Changeinnativepopulation --- -0.006 --- -0.009 (0.011) (0.011)

C.Changeinemploymentrate Repatriatesupplyshock -0.075 -0.057 -0.100 -0.083 (0.066) (0.069) (0.077) (0.081)Algeriansupplyshock -0.647 -0.666 -0.636 -0.651 (0.206) (0.211) (0.222) (0.226)Changeinnativepopulation --- -0.022 --- -0.019 (0.029) (0.027)

Notes:Robuststandarderrorsarereportedinparentheses.Theunitofobservationisaregion-educationcell,andthedataconsistof22regionsand4educationgroups.The“repatriatesupplyshock”and“Algeriansupplyshock”variablesgivetheratioofthenumberofFrenchrepatriatesorthenumberofAlgeriannationalsinthecelltothenumberofFrenchnativesinthecellasof1968.The“changeinnativepopulation”variablegivesthelogdifferenceinthenumberofnativepersonsinthecellbetween1962and1968.ThefirststageregressioninPanelArelatesthesesharestotherespectivesharesasof1962.Allregressionshave88observationsandincludeeducationfixedeffects.

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Table11.OwnandcrosseffectsofthesupplyshockofAlgeriannationals Lessthan

primary

Primary

Secondary

UniversityA.Changeinunemploymentrate 0.319 0.059 0.014 -0.039 (0.097) (0.067) (0.085) (0.093)

B.Changeinemploymentrate -0.662 -0.295 -0.349 -0.229 (0.239) (0.131) (0.139) (0.169)

Notes:Standarderrorsarereportedinparentheses.TheunitofobservationisaFrenchregion,andthereare22regionsintheanalysis.Thetablereportsthecoefficientofthe“Algeriansupplyshockforlow-skillworkers”variable,whichgivesthecoefficientoftheratioofthenumberofAlgeriannationalswhohavelessthanprimaryeducationtothenumberofnativeswithoutaprimaryeducationin1968intheparticularcity.Theregressionsalsocontainregressorsgivingthechangeinthesizeofthenativepopulationforeachofthefoureducationgroups.TheregressionsareestimatedseparatelyforeacheducationgroupusingIVandhave22observations.

74

Table12.SizeandskillcompositionofrefugeesfromtheformerYugoslavia,2000 Refugees Europeannatives %increaseinsupply

Allpersons(in1000s) 258.6 94052.4 0.3

Aged25-59 170.2 49435.0 0.3

Male,Aged25-59 65.1 24611.1 0.3

Educationdistribution,menaged25-59

Primarycompletedorless 25.1 44.4 0.1

Secondarycompleted 67.0 44.1 0.4

Universitycompleted 7.9 11.5 0.2

%ofmenaged25-59livingin: Austria 75.8 7.7 2.6

Greece 2.9 10.0 0.1

Ireland 0.9 3.6 0.1

Portugal 0.2 9.9 0.0

Romania 0.9 20.5 0.0

Spain 2.0 41.5 0.0

Switzerland 17.4 6.8 0.7

%ofmenaged25-59inAustrialivingin: Burgenland,AUT 2.3 3.6 1.7

Niederosterreich,AUT 12.4 19.7 1.6

Wien,AUT 33.5 18.9 4.6

Karnten,AUT 6.8 6.9 2.6

Steiermark,AUT 11.8 14.9 2.1

Oberosterreich,AUT 16.1 16.9 2.5

Salzburg,AUT 7.4 6.3 3.1

Tirol 6.3 8.5 1.9

Vorarlberg,AUT 3.3 4.4 2.0

Samplesize:menaged25-59 5871 1744826

AverageinAustria Δunemploymentrate Δemploymentrate Samplesize

Primarycompletedorless 0.03 -0.01 76838

Secondarycompleted 0.01 -0.01 268539

Universitycompleted 0.01 -0.00 30759

AverageinVienna:

Primarycompletedorless 0.02 -0.01 17787

Secondarycompleted 0.03 -0.01 48006

Universitycompleted 0.00 -0.00 10100

Notes:ThesampleofrefugeesfromtheBalkanWarsconsistsofpersonsbornintheformerYugoslavia,butwhomigratedtooneofthesevenEuropeancountriesbetween1990and2000.ThesampleofEuropean

nativesconsistsofpersonsnotbornintheformerYugoslavia.Thebottompanelreportsstatisticscalculated

inthesampleofEuropeannativemenaged25-59.The(Δunemploymentrate)and(Δemploymentrate)variablesgivetheaveragechangebetweenthe1990and2000censusesfortheparticulargroup.

75

Table13.TheimpactoftheBalkansupplyshockoncompetingworkers OLS IV (1) (2) (3) (4)A.Firststage:shareofrefugees LaggedBalkansupplyshock 0.152 0.144 --- --- (0.036) (0.036) Changeinnativepopulation --- 0.004 --- --- (0.005)

B.Changeinunemploymentrate Balkansupplyshock 0.209 0.209 0.456 0.487 (0.078) (0.103) (0.311) (0.376)Changeinnativepopulation --- -0.000 --- -0.003 (0.016) (0.017)

C.Changeinemploymentrate Balkansupplyshock -0.001 -0.000 -0.084 -0.091 (0.020) (0.022) (0.109) (0.116)Changeinnativepopulation --- -0.000 --- 0.001 (0.002 (0.002

Notes:Robuststandarderrorsarereportedinparentheses.Thetableexploitsvariationacross3educationgroupsand65regionslocatedin7differentcountries.Theunitofobservationisacountry-region-citycell.The“Balkansupplyshock”variablegivestheratioofthenumberofBalkanrefugeesinthecelltothenumberofnativesinthecellasof2000.The“changeinnativepopulation”variablegivesthelogdifferenceinthenumberofnativepersonsinthecellbetween1990and2000.ThefirststageregressioninPanelArelatestheshareofBalkanrefugeesinthecellasof2000totheshareofYugoslavianmigrantsinthecellasof1990.Allregressionshave195observationsandincludebotheducationfixedeffectsandcountryofdestinationfixedeffects.

76

Table14.CrosseffectsoftheBalkansupplyshock Primary

educationorless

Secondary

UniversityA.Changeinunemploymentrate -1.412 1.056 -0.008 (0.951) (0.754) (0.411)

B.Changeinemploymentrate 0.330 -0.103 -0.038 (0.169) (0.058) (0.051)Notes:Standarderrorsarereportedinparentheses.Theunitofobservationisacountry-regioncell,andthereare65regionslocatedin7differentcountries..Thetablereportsthecoefficientofthe“Balkansupplyshockformiddle-skillworkers,”whichgivestheratioofthenumberofBalkanrefugeeswhohadcompletedtheirsecondaryeducationtothenumberofnativeswhoalsocompletedasecondaryeducationin2000intheparticularcountry-regioncell.Theregressionsalsocontainregressorsgivingthechangeinthesizeofthenativepopulationforeachofthethreeeducationgroups.TheregressionsareestimatedseparatelyforeacheducationgroupusingIVandhave65observations.