The long run impact of immigration on labor market in an advanced economy

• Published in: International journal of social economics Vol. 42; no. 4; pp. 356 - 367
• Main Authors: Islam, Faridul, Khan, Saleheen
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Group Publishing Limited 13-04-2015
• Subjects: Averages; Causality; Earnings; Economic conditions; Economic growth; Economic models; Economics; Employment; Foreign labor; GDP; Gross Domestic Product; Immigrants; Immigration; Immigration policy; Industrialized nations; Labor market; Labor supply; Noncitizens; Per capita; Population growth; School dropouts; Skills; Social economics; Unemployment; Wage rates; Wages & salaries; Workers; Australia; United States > US; Migration/immigration; Economic philosophy/theory
• ISSN: 0306-8293; 1758-6712
• DOI: 10.1108/IJSE-12-2013-0291

Purpose
– The purpose of this paper is to examine the dynamic relationship among immigration rate, GDP per capita, and and real wage rates in the USA.
Design/methodology/approach
– The paper implements the Johansen-Juselius (1990, 1992) cointegration technique to test for a long-run relationship; and for short-run dynamics the authors apply Granger causality tests under the vector error-correction model.
Findings
– The results show that the long-run causality runs from GDP per capita to immigration, not vice versa. Growing economy attracts immigrants. The authors also find that immigration flow depresses average weekly earnings of the natives in the long-run.
Originality/value
– The authors are not aware of any study on the USA addressing the impact of immigrants on labor market using a tripartite approach by explicitly incorporating economic growth. It is therefore important to pursue a theoretically justified empirical model in search of a relation to resolve on apparent immigration debate.