Immigration, Search, and Redistribution: A Quantitative Assessment of Native Welfare

Source: Michele Battisti, Gabriel Felbermayr, Giovanni Peri, Panu Poutvaara, NBER Working Paper No. 20131, May 2014
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From the abstract:
We study the effects of immigration on native welfare in a general equilibrium model featuring two skill types, search frictions, wage bargaining, and a redistributive welfare state. Our quantitative analysis suggests that, in all 20 countries studied, immigration attenuates the effects of search frictions. These gains tend to outweigh the welfare costs of redistribution. Immigration has increased native welfare in almost all countries. Both high-skilled and low-skilled natives benefit in two thirds of countries, contrary to what models without search frictions predict. Median total gains from migration are 1.19% and 1.00% for high and low skilled natives, respectively.
Evidence that a stingy welfare state helps America absorb immigrants
Source: Economist, July 12, 2014
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Unlike in some European countries, it is extremely hard for an able-bodied immigrant to live off the state. A law passed in 1996 explicitly bars most immigrants, even those with legal status, from receiving almost any federal benefits. That is one reason why America absorbs immigrants better than many other rich countries, according to a new study by Giovanni Peri of the University of California, Davis, and Michele Battisti, Gabriel Felbermayr and Panu Poutvaara, all from Germany’s Ifo Institute. These economists sought to measure the effect of immigration on the native-born in 20 rich countries, taking into account differences in skills between immigrants and natives, imperfect labour markets and the size of the welfare state in each country. Their results offer ammunition for fans of more open borders. In 19 out of 20 countries, the authors calculated that shutting the doors entirely to foreign workers would make the native-born worse off. (Never mind what it would do to the immigrants themselves, who benefit far more than anyone else from being allowed to cross borders to find work.) The study also suggests that most countries could handle more immigration than they currently allow. In America, a one-percentage point increase in the proportion of immigrants in the population made the native-born 0.05% better off….