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《国际政治经济学》文献资料（Political Economy of Migration）Labor market competition and individual preferences over immigration policy

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LABOR MARKET COMPETITION AND INDIVIDUAL PREFERENCES OVER IMMIGRATION POLICY Kenneth F.Scheve and Matthew J.Slaughter* Abstract-This paper uses three years of individual-level data to analyze consider labor market competition when evaluating immi- the determinants of individual preferences over immigration policy in the United States.We have two main empirical results.First,less-skilled gration policy.I workers are significantly more likely to prefer limiting immigrant inflows In this paper,we provide new evidence on the determi- into the United States.Our finding suggests that,over the time horizons nants of individual immigration-policy preferences and on that are relevant to individuals when evaluating immigration policy, what these preferences imply about how economies absorb individuals think that the U.S.economy absorbs immigrant inflows at least partly by changing wages.Second,we find no evidence that the relation- immigrants.We use a direct measure of these preferences ship between skills and immigration opinions is stronger in high-immi- from the 1992,1994,and 1996 National Election Studies gration communities. (NES)surveys (Sapiro et al.,1998),which are extensive surveys of current political opinions based on an individual- level,stratified random sample of the U.S.population.Our I.Introduction direct measure is the responses of U.S.citizens to a question NDIVIDUAL preferences over immigration policy are an asking about the number of immigrants U.S.policy should Lessential input into any complete model of immigration permit.Building on the NES surveys,we construct an policymaking.To understand both the policies implemented individual-level data set identifying both stated immigra- as well as the accompanying political conflict,we need to tion-policy preferences and potential immigration exposure know who supports more-or less-restrictionist policies and through several channels.We then evaluate how these why.Preferences surely depend on a host of considerations. preferences vary with individual characteristics that alter- including political ideology,ethnic and racial identity,and native theories predict might matter. expectations about the economic impact of new immigrants. We have two main empirical results.First,less-skilled workers are significantly more likely to prefer limiting Among economic considerations,the anticipated effect of immigrant inflows into the United States.This result is immigration on wages is likely to play a key role,as current robust to several different econometric specifications that factor income is a major determinant of individual eco- account for determinants of policy preferences other than nomic welfare.Because current factor income depends skills.Our finding suggests that,over the time horizons that primarily on individual skill levels,there may be a signifi- are relevant to individuals when evaluating immigration cant link from skills to wages to immigration-policy pref- policy,individuals think the U.S.economy absorbs immi- erences. grant inflows at least partly by changing wages.Further. Different economic models,however,make contrasting they form policy opinions in accord with their interests as predictions about the nature of this link.In the Heckscher- labor force participants.These preferences are consistent Ohlin model of international trade,immigrants sometimes with a Heckscher-Ohlin trade model and with a factor- have no impact on native wages.Factor-proportions analy- proportions analysis labor model.Second,we find no evi- sis,a framework often used by labor economists researching dence that the relationship between skills and immigration immigration,predicts that immigrants pressure the wages of opinions is stronger in high-immigration communities. similarly skilled natives nationwide.Area analysis.an alter- These preferences are inconsistent with an area-analysis native framework in the labor literature,predicts that immi- labor model. grants pressure the wages of similarly skilled natives who Section II relates our work to the political-economy reside in gateway communities where immigrants settle.In literature on immigration.Section III presents alternative short,there is theoretical uncertainty about the wages- economic models of immigration-policy preferences.Sec- mediated link between skills and preferences in addition to tion IV discusses the data and our model specifications. the empirical uncertainty regarding whether individuals Section V presents the empirical results,and section VI concludes. Received for publication January 26,1999.Revision accepted for II.The Political Economy of Immigration Policy publication April 14,2000. *Yale University,and Dartmouth College and NBER,respectively. Previous research on the determinants of immigration For generous data assistance,we thank George Borjas and John Cocklin For helpful comments,we thank two anonymous referees and Jim Alt, policy in receiving countries has emphasized the variation Patty Anderson,Danny Blanchflower,Irene Bloemraad,George Borjas, in immigration politics across countries and over time Lawrence Broz,Gary Freeman,Jeffry Frieden,Alan Kessler,Alejandro (Joppke,1998;Kessler,1998;Perotti,1998:Money,1997: Poire,Dave Richardson,and seminar participants at Harvard University. For financial support,Scheve thanks the Center for Basic Research in the Social Sciences and the Weatherhead Center for International Affairs,and I The terms area analysis and factor-proportions analysis we borrow Slaughter thanks the Russell Sage Foundation. from Borjas et al.(1996). The Review of Economics and Statistics,February 2001,83(1):133-145 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology This content downloaded from 202.120.14.193 on Mon,15 Feb 2016 10:04:26 UTC All use subject to JSTOR Terms and Conditions

LABOR MARKET COMPETITION AND INDIVIDUAL PREFERENCES OVER IMMIGRATION POLICY Kenneth F. Scheve and Matthew J. Slaughter* Abstract-This paper uses three years of individual-level data to analyze the determinants of individual preferences over immigration policy in the United States. We have two main empirical results. First, less-skilled workers are significantly more likely to prefer limiting immigrant inflows into the United States. Our finding suggests that, over the time horizons that are relevant to individuals when evaluating immigration policy, individuals think that the U.S. economy absorbs immigrant inflows at least partly by changing wages. Second, we find no evidence that the relationship between skills and immigration opinions is stronger in high-immigration communities. I. Introduction I NDIVIDUAL preferences over immigration policy are an essential input into any complete model of immigration policymaking. To understand both the policies implemented as well as the accompanying political conflict, we need to know who supports more- or less-restrictionist policies and why. Preferences surely depend on a host of considerations, including political ideology, ethnic and racial identity, and expectations about the economic impact of new immigrants. Among economic considerations, the anticipated effect of immigration on wages is likely to play a key role, as current factor income is a major determinant of individual economic welfare. Because current factor income depends primarily on individual skill levels, there may be a significant link from skills to wages to immigration-policy preferences. Different economic models, however, make contrasting predictions about the nature of this link. In the HeckscherOhlin model of international trade, immigrants sometimes have no impact on native wages. Factor-proportions analysis, a framework often used by labor economists researching immigration, predicts that immigrants pressure the wages of similarly skilled natives nationwide. Area analysis, an alternative framework in the labor literature, predicts that immigrants pressure the wages of similarly skilled natives who reside in gateway communities where immigrants settle. In short, there is theoretical uncertainty about the wagesmediated link between skills and preferences in addition to the empirical uncertainty regarding whether individuals consider labor market competition when evaluating immigration policy.' In this paper, we provide new evidence on the determinants of individual immigration-policy preferences and on what these preferences imply about how economies absorb immigrants. We use a direct measure of these preferences from the 1992, 1994, and 1996 National Election Studies (NES) surveys (Sapiro et al., 1998), which are extensive surveys of current political opinions based on an individuallevel, stratified random sample of the U.S. population. Our direct measure is the responses of U.S. citizens to a question asking about the number of immigrants U.S. policy should permit. Building on the NES surveys, we construct an individual-level data set identifying both stated immigration-policy preferences and potential immigration exposure through several channels. We then evaluate how these preferences vary with individual characteristics that alternative theories predict might matter. We have two main empirical results. First, less-skilled workers are significantly more likely to prefer limiting immigrant inflows into the United States. This result is robust to several different econometric specifications that account for determinants of policy preferences other than skills. Our finding suggests that, over the time horizons that are relevant to individuals when evaluating immigration policy, individuals think the U.S. economy absorbs immigrant inflows at least partly by changing wages. Further, they form policy opinions in accord with their interests as labor force participants. These preferences are consistent with a Heckscher-Ohlin trade model and with a factorproportions analysis labor model. Second, we find no evidence that the relationship between skills and immigration opinions is stronger in high-immigration communities. These preferences are inconsistent with an area-analysis labor model. Section II relates our work to the political-economy literature on immigration. Section III presents alternative economic models of immigration-policy preferences. Section IV discusses the data and our model specifications. Section V presents the empirical results, and section VI concludes. II. The Political Economy of Immigration Policy Previous research on the determinants of immigration policy in receiving countries has emphasized the variation in immigration politics across countries and over time (Joppke, 1998; Kessler, 1998; Perotti, 1998; Money, 1997; Received for publication January 26, 1999. Revision accepted for publication April 14, 2000. * Yale University, and Dartmouth College and NBER, respectively. For generous data assistance, we thank George Borjas and John Cocklin. For helpful comments, we thank two anonymous referees and Jim Alt, Patty Anderson, Danny Blanchflower, Irene Bloemraad, George Borjas, Lawrence Broz, Gary Freeman, Jeffry Frieden, Alan Kessler, Alejandro Poire, Dave Richardson, and seminar participants at Harvard University. For financial support, Scheve thanks the Center for Basic Research in the Social Sciences and the Weatherhead Center for International Affairs, and Slaughter thanks the Russell Sage Foundation. 1 The terms area analysis and factor-proportions analysis we borrow from Borjas et al. (1996). The Review of Economics and Statistics, February 2001, 83(1): 133-145 ? 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology This content downloaded from 202.120.14.193 on Mon, 15 Feb 2016 10:04:26 UTC All use subject to JSTOR Terms and Conditions

134 THE REVIEW OF ECONOMICS AND STATISTICS Freeman,1992,1995).There is general agreement that tions tended to restrict immigration to maintain the relative systematic differences in policies across countries depend income of the less skilled.3 on varying political institutions,divergent national histories In contrast to the policy focus of Goldin and Timmer and of settlement and colonialism,and the different effects of a Williamson,Citrin et al.(1997)use individual-level survey changing international context.Moreover,it seems clear data to study the immigration-policy preferences of a cross that even within countries the character of immigration section of U.S.citizens.Controlling for a wide range of politics changes over time.For example,a country's interest factors that potentially shape preferences,they conclude groups can dominate the policymaking process during some "that personal economic circumstances play little role in periods,while,in other periods,partisan electoral competi- opinion formation"(p.858).Specifically,they find that tion is central.In contrast to this observed variation across labor market competition does not influence preferences. time and space,very little research has focused on the Using information from a national poll,Espenshade and distribution of individual preferences over immigration pol- Hempstead (1996)find some mixed evidence that less- icy.Who supports free movement?Who advocates further educated and lower-family-income individuals are more restrictions?We contend that only once these questions likely to support immigration restrictions.They interpret about preferences have been adequately answered can a this evidence as suggesting that people care about immigra- convincing account of cross-country and over-time varia- tion's labor market impacts on wages,employment,and work conditions. tion in policymaking be constructed. Accounts of individual preferences can usefully be di- All these studies provide valuable information on the economic determinants of immigration-policy preferences vided into economic and non-economic determinants.Non- and political action.Our work builds upon them in three economic factors include individual beliefs about civil important ways. rights and expectations regarding the cultural impact of First,our study uses a direct measure of individual immigrants.The civil-rights dimension of immigration- immigration-policy preferences.Some studies cited above policy preferences has both a nondiscrimination aspect as infer from observed political actions or policy outcomes well as a more straightforward "free movement of persons" something about immigration-policy preferences.These in- element.Individual policy preferences are also likely to direct-preference measures face the important limitation of depend both on the degree to which individuals think being endogenous outcomes of the interaction between immigrants change native culture and on the desirability of immigration-policy (and possibly other,for example,for- those changes. eign-policy)preferences and domestic political institutions Economic determinants are generally hypothesized to be Policy preferences and institutions together determine pol- a function of the aggregate costs and benefits of immigra- icy actions,so the mapping from preferences to actions is tion,the fiscal impact on the public sector,and the impact of not unambiguous.Scheve and Slaughter(2001)discuss this immigrants on native labor market returns.This last con- point further. sideration is arguably the most critical economic factor Second,our study draws heavily on the trade and labor influencing individual policy preferences,and it is often the economics literature on immigration to test properly for the most controversial factor as well.Consequently,it is the economic determinants of immigration preferences.We test main issue addressed in this paper.2 three alternative models of how immigration affects the In previous work,Goldin (1994)and Timmer and Wil- economic welfare of natives.In contrast,none of the related liamson(1998)present historical evidence on the potential studies explicitly lays out any models of immigration.In- impact of labor market outcomes on immigration policy. stead,they all simply assume that immigration hurts natives Goldin finds that House Representatives in 1915 were more via lower wages,unemployment,and other adverse out- likely to vote in favor of a literacy test to restrict immigrant comes.Many important issues have not been explored,such inflows the lower were wage increases from 1907 to 1915 in as whether immigration preferences are systematically dif- the Representatives'district cities.Goldin interprets this as ferent in gateway communities. indirect evidence that immigrants'pressure on native wages Third,our study uses measures of individual economic contributed to tighter immigration restrictions.Pooling five exposure to immigration that follow closely from economic countries from 1860 to 1930,Timmer and Williamson find theory.This issue applies most strongly to Citrin et al. that more-restrictionist immigration policies were signifi- (1997)and Espenshade and Hempstead (1996).Empirical cantly correlated with lower unskilled wages relative to labor economists commonly measure skills via educational average per capita income.They interpret this correlation as attainment or occupation classification;our empirical work evidence that countries with more-unequal income distribu- 3 Hanson and Spilimbergo (1999)analyze the impact of economic conditions in the United States and Mexico on a different aspect of 2 Borjas (1995)concludes that the main economic impact of U.S immigration policy:border enforcement and apprehensions.They find that immigration is on the distribution of income,not on its aggregate level. the Mexican(that is,not U.S.)purchasing power of U.S.nominal wages Borjas (1999)presents a comprehensive analysis of current U.S.immi- is strongly correlated with border apprehensions of illegal Mexican gration policy.See also Freidberg and Hunt(1995). immigrants This content downloaded from 202.120.14.193 on Mon,15 Feb 2016 10:04:26 UTC All use subject to JSTOR Terms and Conditions

134 THE REVIEW OF ECONOMICS AND STATISTICS Freeman, 1992, 1995). There is general agreement that systematic differences in policies across countries depend on varying political institutions, divergent national histories of settlement and colonialism, and the different effects of a changing international context. Moreover, it seems clear that even within countries the character of immigration politics changes over time. For example, a country's interest groups can dominate the policymaking process during some periods, while, in other periods, partisan electoral competition is central. In contrast to this observed variation across time and space, very little research has focused on the distribution of individual preferences over immigration policy. Who supports free movement? Who advocates further restrictions? We contend that only once these questions about preferences have been adequately answered can a convincing account of cross-country and over-time variation in policymaking be constructed. Accounts of individual preferences can usefully be divided into economic and non-economic determinants. Noneconomic factors include individual beliefs about civil rights and expectations regarding the cultural impact of immigrants. The civil-rights dimension of immigrationpolicy preferences has both a nondiscrimination aspect as well as a more straightforward "free movement of persons" element. Individual policy preferences are also likely to depend both on the degree to which individuals think immigrants change native culture and on the desirability of those changes. Economic determinants are generally hypothesized to be a function of the aggregate costs and benefits of immigration, the fiscal impact on the public sector, and the impact of immigrants on native labor market returns. This last consideration is arguably the most critical economic factor influencing individual policy preferences, and it is often the most controversial factor as well. Consequently, it is the main issue addressed in this paper.2 In previous work, Goldin (1994) and Timmer and Williamson (1998) present historical evidence on the potential impact of labor market outcomes on immigration policy. Goldin finds that House Representatives in 1915 were more likely to vote in favor of a literacy test to restrict immigrant inflows the lower were wage increases from 1907 to 1915 in the Representatives' district cities. Goldin interprets this as indirect evidence that immigrants' pressure on native wages contributed to tighter immigration restrictions. Pooling five countries from 1860 to 1930, Timmer and Williamson find that more-restrictionist immigration policies were significantly correlated with lower unskilled wages relative to average per capita income. They interpret this correlation as evidence that countries with more-unequal income distributions tended to restrict immigration to maintain the relative income of the less skilled.3 In contrast to the policy focus of Goldin and Timmer and Williamson, Citrin et al. (1997) use individual-level survey data to study the immigration-policy preferences of a cross section of U.S. citizens. Controlling for a wide range of factors that potentially shape preferences, they conclude "that personal economic circumstances play little role in opinion formation" (p. 858). Specifically, they find that labor market competition does not influence preferences. Using information from a national poll, Espenshade and Hempstead (1996) find some mixed evidence that lesseducated and lower-family-income individuals are more likely to support immigration restrictions. They interpret this evidence as suggesting that people care about immigration's labor market impacts on wages, employment, and work conditions. All these studies provide valuable information on the economic determinants of immigration-policy preferences and political action. Our work builds upon them in three important ways. First, our study uses a direct measure of individual immigration-policy preferences. Some studies cited above infer from observed political actions or policy outcomes something about immigration-policy preferences. These indirect-preference measures face the important limitation of being endogenous outcomes of the interaction between immigration-policy (and possibly other, for example, foreign-policy) preferences and domestic political institutions. Policy preferences and institutions together determine policy actions, so the mapping from preferences to actions is not unambiguous. Scheve and Slaughter (2001) discuss this point further. Second, our study draws heavily on the trade and labor economics literature on immigration to test properly for the economic determinants of immigration preferences. We test three alternative models of how immigration affects the economic welfare of natives. In contrast, none of the related studies explicitly lays out any models of immigration. Instead, they all simply assume that immigration hurts natives via lower wages, unemployment, and other adverse outcomes. Many important issues have not been explored, such as whether immigration preferences are systematically different in gateway communities. Third, our study uses measures of individual economic exposure to immigration that follow closely from economic theory. This issue applies most strongly to Citrin et al. (1997) and Espenshade and Hempstead (1996). Empirical labor economists commonly measure skills via educational attainment or occupation classification; our empirical work 2 Borjas (1995) concludes that the main economic impact of U.S. immigration is on the distribution of income, not on its aggregate level. Borjas (1999) presents a comprehensive analysis of current U.S. immigration policy. See also Freidberg and Hunt (1995). 3Hanson and Spilimbergo (1999) analyze the impact of economic conditions in the United States and Mexico on a different aspect of immigration policy: border enforcement and apprehensions. They find that the Mexican (that is, not U.S.) purchasing power of U.S. nominal wages is strongly correlated with border apprehensions of illegal Mexican immigrants. This content downloaded from 202.120.14.193 on Mon, 15 Feb 2016 10:04:26 UTC All use subject to JSTOR Terms and Conditions

LABOR MARKET COMPETITION AND INDIVIDUAL PREFERENCES OVER IMMIGRATION POLICY 135 uses both these measures.4 In contrast,Citrin et al.primarily to the supply of skills has become increasingly concentrated interpret educational attainment as a demographic variable in the lower educational categories"(p.6).We assume that rather than an economic factor.Although previous studies NES respondents are aware of these facts.> have justified this choice on the relationship between edu- Given these two assumptions,we think that the economic cation and tolerance,we demonstrate that education mea- determinants of an individual's immigration-policy prefer- sures labor market skills once other considerations (such as ences depend on how an immigration-induced shift in the gender and political ideology)are controlled for.Citrin et al. U.S.relative endowment towards less-skilled workers af- measure skills with income and with eight dichotomous fects that individual's factor income.To maintain focus on occupation variables.Only four of the eight cover working equilibrium wage determination,in all models we assume individuals,and these-white collar,pink collar,low-threat that wages are sufficiently flexible to ensure full employ- blue collar,and high-threat blue collar-are not defined or ment.This allows us to abstract from unemployment,both justified with reference to economic theory or evidence. equilibrium and frictional,although unemployment is con- Espenshade and Hempstead use dichotomous variables for sidered in our empirical work.To maintain focus on differ- educational attainment and family(not individual)income, ent skill groups,in all models we assume just two factors of with all specifications using both types of variables.Overall, production:skilled labor and unskilled labor.This keeps our these earlier studies use questionable skill measures,and analysis as simple as possible.6 they do not report specifications with single measures only, nor do they test the joint significance of all skill measures together.These uncertainties regarding measurement and A. The Heckscher-Ohlin Model specification suggest the need for further analysis. The Heckscher-Ohlin (HO)trade model usually makes two key assumptions.First,there is one national labor m. Economic Models of Immigration-Policy market for each factor.Thanks to sufficient mobility of Preferences natives (and immigrants upon arrival),there are no geo- graphically segmented "local"labor markets.The second To make the connection between individual economic key assumption is there are more tradable products(that is, interests and immigration-policy preferences,we focus on sectors)than primary factors of production,with products how immigration affects individual factor incomes.Differ- differentiated by their factor intensities.Multiple products ent economic models make contrasting predictions about are essential for establishing many fundamental trade-the- the nature of the link from immigration to factor incomes to ory results,such as comparative advantage. policy preferences,and this section briefly summarizes three With these assumptions,in equilibrium a country chooses models:the Heckscher-Ohlin trade model,the factor-pro- (via the decentralized optimization of firms)the output mix portions analysis model,and the area-analysis model. that maximizes national income subject to the constraints of Across all three models we make two important assump- world product prices,national factor supplies,and national tions.First,we assume that current factor income is a major determinant of people's economic well-being.Second,we technology.This output mix consists of both which products actually get produced as well as the quantities of production. assume that U.S.citizens think that current immigrant In turn,this output mix helps determine the country's inflows increase the relative supply of less-skilled workers. national factor prices.The general intuition is that the As will be seen below,although this assumption about the technology parameters and world price for each produced skill-mix effects of immigrants is not explicitly stated in the sector help determine national wages.In the standard case NES question about immigration preferences,this assump- tion clearly reflects the facts about U.S.immigration in wherein the country makes at least as many products as the recent decades.Borjas,Freeman,and Katz (1997)report number of primary factors,equilibrium wages are a function that"on average,immigrants have fewer years of schooling of just the world prices and technology parameters of the than natives-a difference that has grown over the past two produced sectors.These wages do not depend on the prices decades,as the mean years of schooling of the immigration and technology of the nonproduced sectors.They also do population increased less rapidly than the mean years of not depend directly on the level of endowments (only schooling of natives.As a result,the immigrant contribution 5This skills gap between immigrants and natives does not address other interesting facts about the distribution of skills among immigrants.For 4 For example,in the recent research on the rising U.S.skill premium, example,Borjas et al.(1997)show that the skill distribution of U.S. the two most commonly used measures of the skill premium have been the immigration has been somewhat bimodal at both the high-and low-skill relative wage between college graduates and high-school graduates and ends of the distribution. the relative wage between nonproduction workers and production workers 6 In the political-economy literature,some researchers analyze thethe- (in manufacturing only).See Katz and Murphy (1992)or Lawrence and ory of economic determinants of immigration-policy preferences.Ben- Slaughter (1993),for example.Berman,Bound,and Griliches (1994) habib (1996)considers a one-good model in which natives have different document for the United States that employment trends for this job endowments of capital.Kessler (1998)focuses on how trade and immi- classification measure track quite closely the employment trends measured gration affect native factor returns in standard trade models.Bilal,Grether by the white-collar/blue-collar job classification,which in turn closely and de Melo (1998)consider the case of a three-factor,two-household, reflects the college/high-school classification. two-country world. This content downloaded from 202.120.14.193 on Mon,15 Feb 2016 10:04:26 UTC All use subject to JSTOR Terms and Conditions

LABOR MARKET COMPETITION AND INDIVIDUAL PREFERENCES OVER IMMIGRATION POLICY 135 uses both these measures.4 In contrast, Citrin et al. primarily interpret educational attainment as a demographic variable rather than an economic factor. Although previous studies have justified this choice on the relationship between education and tolerance, we demonstrate that education measures labor market skills once other considerations (such as gender and political ideology) are controlled for. Citrin et al. measure skills with income and with eight dichotomous occupation variables. Only four of the eight cover working individuals, and these-white collar, pink collar, low-threat blue collar, and high-threat blue collar-are not defined or justified with reference to economic theory or evidence. Espenshade and Hempstead use dichotomous variables for educational attainment and family (not individual) income, with all specifications using both types of variables. Overall, these earlier studies use questionable skill measures, and they do not report specifications with single measures only, nor do they test the joint significance of all skill measures together. These uncertainties regarding measurement and specification suggest the need for further analysis. I[I. Economic Models of Immigration-Policy Preferences To make the connection between individual economiic interests and immigration-policy preferences, we focus on how immigration affects individual factor incomes. Different economic models make contrasting predictions about the nature of the link from immigration to factor incomes to policy preferences, and this section briefly summarizes three models: the Heckscher-Ohlin trade model, the factor-proportions analysis model, and the area-analysis model. Across all three models we make two important assumptions. First, we assume that current factor income is a major determinant of people's economic well-being. Second, we assume that U.S. citizens think that current immigrant inflows increase the relative supply of less-skilled workers. As will be seen below, although this assumption about the skill-mix effects of immigrants is not explicitly stated in the NES question about immigration preferences, this assumption clearly reflects the facts about U.S. immigration in recent decades. Borjas, Freeman, and Katz (1997) report that "on average, immigrants have fewer years of schooling than natives-a difference that has grown over the past two decades, as the mean years of schooling of the immigration population increased less rapidly than the mean years of schooling of natives. As a result, the immigrant contribution to the supply of skills has become increasingly concentrated in the lower educational categories" (p. 6). We assume that NES respondents are aware of these facts.5 Given these two assumptions, we think that the economic determinants of an individual's immigration-policy preferences depend on how an immigration-induced shift in the U.S. relative endowment towards less-skilled workers affects that individual's factor income. To maintain focus on equilibrium wage determination, in all models we assume that wages are sufficiently flexible to ensure full employment. This allows us to abstract from unemployment, both equilibrium and frictional, although unemployment is considered in our empirical work. To maintain focus on different skill groups, in all models we assume just two factors of production: skilled labor and unskilled labor. This keeps our analysis as simple as possible.6 A. The Heckscher-Ohlin Model The Heckscher-Ohlin (HO) trade model usually makes two key assumptions. First, there is one national labor market for each factor. Thanks to sufficient mobility of natives (and immigrants upon arrival), there are no geographically segmented "local" labor markets. The second key assumption is there are more tradable products (that is, sectors) than primary factors of production, with products differentiated by their factor intensities. Multiple products are essential for establishing many fundamental trade-theory results, such as comparative advantage. With these assumptions, in equilibrium a country chooses (via the decentralized optimization of firms) the output mix that maximizes national income subject to the constraints of world product prices, national factor supplies, and national technology. This output mix consists of both which products actually get produced as well as the quantities of production. In turn, this output mix helps determine the country's national factor prices. The general intuition is that the technology parameters and world price for each produced sector help determine national wages. In the standard case wherein the country makes at least as many products as the number of primary factors, equilibiium wages are a function of just the world prices and technology parameters of the produced sectors. These wages do not depend on the plices and technology of the nonproduced sectors. They also do not depend directly on the level of endowments (only 4For example, in the recent research on the rising U.S. skill premium, the two most commonly used measures of the skill premium have been the relative wage between college graduates and high-school graduates and the relative wage between nonproduction workers and production workers (in manufacturing only). See Katz and Murphy (1992) or Lawrence and Slaughter (1993), for example. Berman, Bound, and Griliches (1994) document for the United States that employment trends for this jobclassification measure track quite closely the employmentrends measured by the white-collar/blue-collar job classification, which in turn closely reflects the college/high-school classification. 5 This skills gap between immigrants and natives does not address other interesting facts about the distribution of skills among immigrants. For example, Borjas et al. (1997) show that the skill distribution of IJ.S. immigration has been somewhat bimodal at both the high- and low-skill ends of the distribution. 6 In the political-economy literature, some researchers analyze the theory of economic deteiminants of immnigration-policy preferences. Benhabib (1996) considers a one-good model in which natives have different endowments of capital. Kessler (1998) focuses on how trade and immigration affect native factor returns in standard trade models. Bilal, Grether, and de Melo (1998) consider the case of a three-factor, two-household, two-country world. This content downloaded from 202.120.14.193 on Mon, 15 Feb 2016 10:04:26 UTC All use subject to JSTOR Terms and Conditions

136 THE REVIEW OF ECONOMICS AND STATISTICS FIGURE 1.--LABOR MARKET EQUILIBRIUM:THE HECKSCHER-OHLIN MODEL of two products is made on each elastic part;accordingly, different relative wages prevail on each elastic part.On the RS RS' RSo downward-sloping portions,the country makes only one (WsNWu) product.Output-mix changes are not possible along these portions,and so immigrants must price themselves into employment by changing wages.Point Eo designates the (Wg/Wu)" initial labor-market equilibrium,with relative labor supply RS.and relative wages (w,/w)..Two immigration shocks are shown.The sufficiently small immigration shock shifts Eo RS to RS'.Relative wages do not change,as immigrants (Ws/Wu)o RD trigger Rybczynski output-mix effects with no product-price changes.The sufficiently large shock shifts RS to RS",and the country now produces a new set of products.As a result, the unskilled wage falls relative to the skilled wage (to (Qs/Qu) (w/w)");with fixed produce prices,this relative-wage Skilled labor is subscripted"s"and unskilled labor"n".The RS schedule is national relative supply, decline will be a real-wage decline as well.7 and the RD schedule is national relative demand. The HO model has different predictions about the link between skills and immigration-policy preferences.If indi- indirectly through the endowments'role in selecting the viduals think FPI holds,then there should be no link from product mix). skills to preferences.In this case,people evaluate immigra- Immigration's wage effects depend on the initial product tion based on other considerations.If individuals think that mix,on the size of the immigration shock,and on whether immigration triggers both output-mix and wage effects then the country is large or small (that is,on whether its product unskilled (skilled)workers nationwide should prefer poli- mix does or does not have any influence on world product cies that lower(raise)immigration inflows. prices).Consider the standard case in which the initial output mix is sufficiently diversified so that wages depend on just world prices and technology. B.The Factor-Proportions Analysis Model In this case,with sufficiently small shocks,the country Like the HO model,this model also assumes a national absorbs immigrants by changing its output mix as predicted labor market.The fundamental difference between the two by the Rybczynski theorem:the same products are pro- is that this model assumes a single aggregate output sector. duced,but output tends to increase (decrease)in the non- Under this assumption,there can be no output-mix changes skill-intensive (skill-intensive)sectors.Whether wages to help absorb immigrants.Accordingly,any immigration change depends on whether the country is big or small:if inflow affects national wages by the same logic described the country is small,world prices do not change,and thus above.Lower relative wages for unskilled workers induce there are no wage effects.Leamer and Levinsohn(1995) firms to hire relatively more of these workers.The greater call this insensitivity of national wages to changes in na- the immigrant inflow,the greater the resultant wage tional factor supplies the factor price insensitivity (FPI) changes.In the labor literature,studies using this framework theorem.If the country is large,wages do change:the include Borjas et al.(1996,1997),and these studies calcu- relative price of non skill-intensive products declines,which late immigration-induced shifts in national factor propor- tends to lower(raise)wages for unskilled (skilled)workers. tions and then infer the resulting national wage changes. With sufficiently large immigration shocks,national Figure 2 displays the national labor market for the factor- wages do change.Large-enough shocks induce the country proportions analysis world.Here,the relative labor demand to make a different set of products,which entails a different schedule slopes downward everywhere,with no portions set of world prices and technology parameters and thus where FPI holds.Initial relative labor supply is again given different wages.This absorption of large shocks via changes in both output mix and wages holds whether the country is 7 Three comments are necessary on figure 1.First,the relative-supply big or small:in either case,wage inequality rises.In the schedule is vertical under the assumption that all workers are sufficiently literature on U.S.immigration,Hanson and Slaughter willing to work that they price themselves into employment regardless of (2001)find immigration-related changes of output mix the going relative wage.Second,along the national demand schedule the country's output mix progresses according to sector factor intensities.The among U.S.states. likely output mixes are as follows.Along the leftmost branch of RD,the Figure 1 displays the national labor market for the case of country makes only the most non-skill-intensive product.Along the first a small HO country with three products.The distinguishing flat,it makes this product and the"middle"intensity product,switching to only the middle product along the middle downward-sloping branch.The feature is the shape of relative labor demand.It has two country picks up the most skill-intensive product as well along the second perfectly elastic portions,each of which corresponds to a flat;finally,along the rightmost branch,it makes only the skill-intensive range of endowments for which FPI holds.The national product.Third,underlying the downward-sloping portions of RD is the assumption of flexible production technologies with factor substitutability. output mix varies along the demand schedule.A different set With Leontief technology,these portions would be vertical. This content downloaded from 202.120.14.193 on Mon,15 Feb 2016 10:04:26 UTC All use subject to JSTOR Terms and Conditions

136 THE REVIEW OF ECONOMICS AND STATISTICS FIGURE 1.-LABOR MARKET EQUIBRIUM: THE HECKSCHER-OHLIN MODEL (Ws/Wu) RS" RS' RSo (WS/WU)' Eo (Ws/Wu)O RD (Qs/Qu) Skilled labor is subscripted "s" atid unskilled labor "u". The RS schedule is nationial relative supply, and the RD schedule is national relative demand. indirectly through the endowments' role in selecting the product mix). Immigration's wage effects depend on the initial product mix, on the size of the immigration shock, and on whether the country is large or small (that is, on whether its product mix does or does not have any influence on world product prices). Consider the standard case in which the initial output mix is sufficiently diversified so that wages depend on just world prices and technology. In this case, with sufficiently small shocks, the countly absorbs immigrants by changing its output mix as predicted by the Rybczynski theorem: the same products are produced, but output tends to increase (decrease) in the nonskill-intensive (sk:ill-intensive) sectors. Whether wages change depends on whether the country is big or small: if the country is small, world prices do not change, and thus there are no wage effects. Leamer and Levinsohn (1995) call this insensitivity of national wages to changes in national factor supplies the factor price insensitivity (FPI) theorem. If the country is large, wages do change: the relative price of non skill-intensive products declines, which tends to lower (raise) wages for unskilled (skilled) workers. With sufficiently large immigration shocks, national wages do change. Large-enough shocks induce the country to make a different set of products, which entails a different set of world prices and technology parameters and thus different wages. This absorption of large shocks via changes in both output mix and wages holds whether the country is big or small: in either case, wage inequality rises. In the literature on U.S. immigration, Hanson and Slaughter (2001) find immigration-related changes of output mix among U.S. states. Figure 1 displays the national labor market for the case of a small HO country with three products. The distinguishing feature is the shape of relative labor demand. It has two perfectly elastic portions, each of which corresponds to a range of endowments for which FPI holds. The national output mix varies along the demand schedule. A different set of two products is made on each elastic part; accordingly, different relative wages prevail on each elastic part. On the downward-sloping portions, the country makes only one product. Output-mix changes are not possible along these portions, and so immigrants must price themselves into employment by changing wages. Point Eo designates the initial labor-market equilibrium, with relative labor supply RS,, and relative wages (w/lwu),. Two immigration shocks are shown. The sufficiently small immigration shock shifts RS, to RS'. Relative wages do not change, as immigrants trigger Rybczynski output-mix effects with no product-price changes. The sufficiently large shock shifts RS0 to RS', and the country now produces a new set of products. As a result, the unskilled wage falls relative to the skilled wage (to (w5/wj)"); with fixed produce prices, this relative-wage decline will be a real-wage decline as well.7 The HO model has different predictions about the link between skills and immigration-policy preferences. If individuals think FPI holds, then there should be no link from skills to preferences. In this case, people evaluate immigration based on other considerations. If individuals think that immigration triggers both output-mix and wage effects then unskilled (skilled) workers nationwide should prefer policies that lower (raise) immigration inflows. B. The Factor-Proportions Analysis Model Like the HO model, this model also assumes a national labor market. The fundamental difference between the two is that this model assumes a single aggregate output sector. Under this assumption, there can be no output-mix changes to help absorb immigrants. Accordingly, any immigration inflow affects national wages by the same logic described above. Lower relative wages for unskilled workers induce firms to hire relatively more of these workers. The greater the immigrant inflow, the greater the resultant wage changes. In the labor literature, studies using this framework include Borjas et al. (1996, 1997), and these studies calculate immigration-induced shifts in national factor proportions and then infer the resulting national wage changes. Figure 2 displays the national labor market for the factorproportions analysis world. Here, the relative labor demand schedule slopes downward everywhere, with no portions where FPI holds. Initial relative labor supply is again given 7 Three comments are necessary on figure 1. First, the relative-supply schedule is vertical under the assumption that all workers are sufficiently willing to work that they price themselves into employment regardless of the going relative wage. Second, along the national demand schedule the country's output mix progresses according to sector factor intensities. The likely output mixes are as follows. Along the leftmost branch of RD, the country makes only the most non-skill-intensive product. Along the first flat, it makes this product and the "middle" intensity product, switching to only the middle product along the middle downward-sloping branch. The country picks up the most skill-intensive product as well along the second flat; finally, along the rightmost branch, it makes only the skill-intensive product. Third, underlying the downward-sloping portions of RD is the assumption of flexible production technologies with factor substitutability. With Leontief technology, these portions would be vertical. This content downloaded from 202.120.14.193 on Mon, 15 Feb 2016 10:04:26 UTC All use subject to JSTOR Terms and Conditions

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