1

Introduction

James P. Smith

While America remains a nation of immigrants, its two-century-old debate about the wisdom of immigration continues unabated. Many people have expressed concerns about the effects of immigration on the economic prospects of the native born, on the rate at which our population is growing, on fiscal balances at all levels of government, and on the ability of immigrants to integrate into the social fabric of the nation.

Responding to these renewed concerns, Congress created the bipartisan U.S. Commission on Immigration Reform to recommend changes in immigration policy. In 1995 the Commission asked the National Research Council (NRC) to convene an expert panel to assess the demographic, economic, and fiscal consequences of immigration. This 12-member panel of demographers, economists, and sociologists was asked to address three key questions of the effect of immigration on

  • the future size and composition of the U.S. population,

  • the U.S. economy and its workers, and

  • the fiscal balances of federal, state, and local governments.

In answering these broad questions, the NRC panel—which I chaired—faced some complex theoretical and empirical issues. Where the existing literature was found to be deficient, the panel decided to commission a series of background papers to break some important new conceptual or empirical ground. These papers were presented and discussed at a conference held in September 1996 in Washington, DC. The topics addressed at that conference included the labor



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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration 1 Introduction James P. Smith While America remains a nation of immigrants, its two-century-old debate about the wisdom of immigration continues unabated. Many people have expressed concerns about the effects of immigration on the economic prospects of the native born, on the rate at which our population is growing, on fiscal balances at all levels of government, and on the ability of immigrants to integrate into the social fabric of the nation. Responding to these renewed concerns, Congress created the bipartisan U.S. Commission on Immigration Reform to recommend changes in immigration policy. In 1995 the Commission asked the National Research Council (NRC) to convene an expert panel to assess the demographic, economic, and fiscal consequences of immigration. This 12-member panel of demographers, economists, and sociologists was asked to address three key questions of the effect of immigration on the future size and composition of the U.S. population, the U.S. economy and its workers, and the fiscal balances of federal, state, and local governments. In answering these broad questions, the NRC panel—which I chaired—faced some complex theoretical and empirical issues. Where the existing literature was found to be deficient, the panel decided to commission a series of background papers to break some important new conceptual or empirical ground. These papers were presented and discussed at a conference held in September 1996 in Washington, DC. The topics addressed at that conference included the labor

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration market role of female immigrants (Funkhouser and Trejo), a historical perspective on immigration (Carter and Sutch), a theoretical framework for addressing fiscal impacts of immigration (MaCurdy, Nechyba, and Bhattacharya), the association of immigration with criminal activity (Hagan and Palloni), and the theoretical labor market impact of international immigration and trade (Trefler). Many of the findings of these papers influenced the panel's final report, which was published in October 1997.1 Revised versions of these conference papers are included in this volume. In addition to these commissioned papers, the panel also decided to initiate some original research of its own. For its work on the fiscal impact of immigration, we relied on an ongoing study of New Jersey being conducted by one of the panel members (Garvey and Espenshade) and started our own case study of California (Clune). The final results from both case studies are also part of this volume. In addition to these annual budget estimates for two key immigrant states, the panel conducted a study of the national longitudinal effects of immigration (Lee and Miller). A part of that research project is included in this volume. Finally, the panel heard a series of presentations from an ongoing study of the effects of immigration on internal migration (Frey and Liaw). Internal migration is a central issue that arises in evaluating labor market impacts of immigration. These essays served as important background for the NRC panel's deliberations and our final report. In addition, I believe that they stand on their own as scientific contributions on a critical policy issue not only in the United States but throughout most of the world. Because immigration touches sensitive issues and provokes strong emotional reactions, such dispassionate scientific research is all the more valuable. THE FISCAL EFFECTS OF IMMIGRATION Nowhere did our panel find the existing literature more lacking than on the fiscal effects of immigration. Although significant gaps remained, there were long and rich traditions of scholarship on the other two main questions—the economic and demographic impacts of immigration. Not so for the fiscal impacts. Instead, only a handful of existing empirical studies were available. Many of these represented not science but advocacy from both sides of the immigration debate. These studies often offered an incomplete accounting of either the full list of taxpayer costs and benefits by ignoring some programs and taxes while including others. More important, the conceptual foundation of this research was rarely explicitly stated, offering opportunities to tilt the research toward the desired result. 1   See The New Americans: Economic Demographic, and Fiscal Effects of Immigration , James P. Smith and Barry Edmonston (editors), National Academy Press, 1997.

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration From the panel's viewpoint, however, the most serious problem was that existing fiscal impact studies did not even appear to be addressing the key policy-relevant question—what is the taxpayer cost or benefit to native-born Americans of letting an additional immigrant into this country? Our first priority then was to obtain a coherent conceptual framework in which to understand the issues involving the cost to native-born taxpayers of expanding or contracting the flow of immigrants. The chapter ''An Economic Framework for Assessing the Fiscal Impacts of Immigration," by Thomas MaCurdy, Thomas Nechyba, and Jay Bhattacharya, provides such a framework. The authors posit a minimum set of factors that must be explicitly included in the framework. One of their most important admonitions is that fiscal impact studies must be multi-period. One reason is that both taxes and expenditures are extremely sensitive to age. If an immigrant arrives at an age at which his or her taxes are temporarily high and receipt of government benefits is temporarily low, the immigrant will look like a bonus to taxpayers. However, this could all be negated in the next period if expenditures rise and taxes fall. One critical distinction in the government sector involves the separation of spending into three categories—public goods, interest on debt, and all others. In the extreme, immigrants do not increase spending on the first two categories but they do on the third. Fiscal impact studies should also be comprehensive in their treatment of expenditures and taxes. Compared with the native born, immigrant households are relatively heavy users of some government services, such as schools and income-conditioned transfer programs, and relatively light users of other government services, such as Social Security and Medicare. A corollary of this comprehensiveness requirement is that all sectors of government—federal, state, and local—should be included when analyzing fiscal impacts. Some programs—such as Social Security and Medicare—are concentrated at one level of government (federal) whereas other programs—e.g., schools—are the primary responsibility of other levels of government (state and local). Fiscal impact studies must be explicit in their assumptions about who ends up paying taxes (tax incidence) and about the cost of providing government services (marginal versus average cost). A common mistake is to assume that those who end up paying a tax are the same people from whom the tax is collected. One enduring salient fact about immigration into the United States involves geographic concentration. Immigrants have always moved to relatively few places, settling where they have family, friends, or fellow countrymen. Most immigrants still live in a handful of states and in less than a dozen cities. This geographic concentration means that any state or local fiscal effects of immigration (through taxes and government expenditures) may also be concentrated in a few states. With this in mind, our panel relied on fiscal impact studies in two of the important immigrant states—New Jersey and California. The New Jersey study is summarized in "Fiscal Impacts of Immigrant and Native Households: A

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration New Jersey Case Study" by Deborah L. Garvey and Thomas J. Espenshade. The California study is outlined in Michael S. Clune's contribution "The Fiscal Impacts of Immigrants: A California Case Study." One reason why undertaking fiscal impact studies in two immigrant states turned out to be so fortuitous is that there exists a great deal of heterogeneity among the major immigrant states. Some dimensions of that heterogeneity is illustrated in Table 1-1, which highlights some key demographic and economic differences. Although they are both classified as "immigrant" states, one-fourth of all Californian households are headed by immigrants, compared with about one in seven in New Jersey. The ethnic composition of immigrants is also vastly different. The dominant ethnic ancestries in New Jersey are Europeans and Canadians, whereas Latin Americans, particularly those from Mexico, are a majority of all foreign-born Californians. Similarly, compared with foreign-born households residing in New Jersey, immigrant-headed households in California have much lower incomes and many more children. These differences say a lot about what the eventual taxpayer impact will be. In their chapter, Garvey and Espenshade take a "bottom-up" approach to net fiscal impacts. Largely using governmental administrative data on program costs and tax collections, a "top-down" approach simply allocates prorated shares of spending or taxes to each household. One limitation of this approach is that it can not speak to the reasons for variation across households. By building up the estimates from the household level, we are able to understand which household-level attributes are responsible for the differences in net fiscal impacts that emerge. Estimates from Garvey and Espenshade are derived from micro-level data for New Jersey obtained from the 1990 decennial census. The census provides a wealth of information on the demographic and economic characteristics of the residents. These data were supplemented with state-level data on actual program TABLE 1-1 Profile of the Two Major Immigrant States   New Jersey California % foreign born 14 25 % of immigrants who are European-Canadian 47 12 Latin American 28 56 Asian 20 25   Native Born Immigrant Native Born Immigrant Mean Household Income $61,966 $58,372 $50,518 $37,878 # of children .63 .81 .64 1.37 % on AFDC 3 3 5 10 SOURCE: The New Americans: Economic, Demographic, and Fiscal Effects of Immigration, James P. Smith and Barry Edmonston (editors), National Academy Press, 1997.

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration expenditures. Garvey and Espenshade report that in general immigrant households were more costly than native households. On both the expenditure and the tax side, however, this discrepancy was small compared with the differences that existed among immigrants. European households received relatively fewer state expenditures, whereas Asian and especially Latin-American immigrant households received state benefits well in excess of the foreign-born average. Michael Clune examines the federal, state, and local fiscal impacts of immigrant households in California for FY 1995. Household-level data were obtained from the 1995 Current Population Survey (CPS) so that receipt and amount of government services can be divided into 25 categories and taxes into 13 separate categories. Supplemental data sources are used for services (police, fire, prisons, etc.) not included in the CPS files, and expenditure totals are scaled to match administrative records. Households were classified by their nativity, age, and ethnicity. As was true for Garvey and Espenshade, explicit incidence assumptions were made for all taxes. One of the more difficult issues facing fiscal impact studies comes from recognizing that resident households are not the only sector either paying taxes or receiving benefits. The two most important examples are tourists (who pay sales taxes) and the corporate sector (business taxes). During their stay, tourists gain by their use of roads, police, and fire. The corporate sector also gains through these provisions. There is little hard evidence on the relation of these benefits to taxes so that some simplifying assumption must be made. Clune assumes that on net they are a wash, so that the household sector also obtains benefits equal to the taxes they pay. Immigrant and native-born households in California differ on both the tax and government expenditure side. Across all sectors of government, however, total costs of the benefits obtained by immigrant and native-born households were actually quite similar. For example, in California, native-born households received $22,021, whereas immigrant-headed households were given $25,943 in all government benefits in FY 1995. This similarity in total government benefits hides considerable diversity in individual categories. As a general rule, those programs in which immigrants receive fewer benefits than native-born households are predominately at the federal level (e.g., Social Security and Medicare), whereas programs in which immigrants receive proportionately more benefits are at the state and local level (e.g., education). The same diversity exists for within-immigrant comparisons. Although Hispanic immigrants are heavy users of public education, Asian immigrants have much higher take-up rates for Supplemental Security Income. These program-by-program differences in take-up rates among immigrants and between immigrants and the native born is a strong argument that government benefits must be measured in a comprehensive way. The differences between immigrant and native-born households are much larger on the tax side. Clune reports that immigrant-headed households pay 69 percent as much in taxes as do native-born households. The net result is that

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration immigrant households in California receive considerably more in government services than they pay in taxes. That difference is made up by native-born households paying more in taxes than they obtain in benefits. This "fiscal burden" is particularly high among older immigrant households and among Hispanics is particularly high. There is much confusion about what annual fiscal impact studies such as those in New Jersey and California actually measure. For immigrant-headed households, these studies measure the difference between the costs of all government services received minus the value of all taxes paid during a particular year. In the case of both New Jersey and California, immigrant-headed households receive more in government benefits than they pay in taxes. Because state and local government budgets must balance on an annual basis, this deficit among immigrant-headed households requires that there is a corresponding surplus among native-born households. That is, native-born households must be paying more in taxes than they are receiving in government benefits. The best way of thinking about these annual fiscal impact studies is that they measure the annual net transfer at that unit of government from native-born households to immigrant households so as to balance the books. For reasons explained below, they do not directly measure the net fiscal impact of adding another immigrant. Table 1-2 provides comparable summary measures of these annual fiscal impact studies for these two states. In both states, immigrant-headed households receive on average net transfers from the government sector. These transfers are considerably smaller in New Jersey, largely because immigrant households there are economically better off and have fewer children (and thus less need for schools). These net transfers to immigrant households must be paid by native-born households in those states. This "fiscal burden" is $229 per native-born New Jersey household and $1,174 per native-born California household. The much larger tax burden in California stems from the larger net transfer to immigrant households in that state as well as the larger fraction of households that are headed by an immigrant. Ronald D. Lee and Timothy W. Miller's chapter, "The Current Fiscal Impact of Immigrants and Their Descendants: Beyond the Immigrant Household," continues their innovative work on estimating the fiscal impacts of immigrants. It begins by defining a number of conceptual ways in which immigrant fiscal impacts can be calculated. In contrast to annual budget estimates, the first method, TABLE 1-2 Average Government Benefits Minus Taxes Paid Immigrant-Headed Households Native-Born-Headed Households New Jersey California New Jersey California 1,484 3,463 -229 -1,174 SOURCE: The New Americans: Economic, Demographic, and Fiscal Effects of Immigration, James P. Smith and Barry Edmonston (editors). National Academy Press, 1997.

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration the "longitudinal formulation," addresses the policy-relevant question of what the taxpayer costs are of adding or subtracting another immigrant. To put it simply, the longitudinal formulation calculates all current and future taxes and all current and future government spending attributable to a new immigrant and his or her descendants. This approach forces the analyst to make explicit assumptions about the future course of many uncertain events. To illustrate with just one example, some assumption has to be made about the timing and magnitude of the resolution of the federal budget deficit when the baby boom generation retires. Because there is no way of avoiding making some assumptions and the inherent uncertainties cannot be dismissed, simulations under alternative assumption scenarios are recommended. The other approaches that Lee and Miller analyze are all variants of cross-sectional annual budget computations. For a given year, they all ask some counterfactual questions—what if I took away one immigrant ("immigrant only"), one immigrant-headed household, including any native-born children in that household ("immigrant household"), and one immigrant household and any living descendants of this household, including native-born children who head households ("concurrent descendants")? The immigrant-only computation ignores all costs (especially schooling) and taxes associated with native-born children who are living in the immigrant's household. Such costs would certainly seem a consequence of immigration. The immigrant household concept includes these costs and all others attributable to native-born second-generation children as long as they remain in the immigrant household. However, it ignores all costs and especially all taxes paid by the second generation when they form households of their own. These taxes are also the consequence of immigration. To remedy that problem, the descendent generation approach adds all government benefits received and taxes paid by the second and third generation as long as the first-generation immigrant from whom they descended is still alive. These three approaches can all be computed from annual cross-sectional experiments that are meant in part to account for some aspect of the bias inherent in the cross-sectional annual calculation. Although the authors still favor the longitudinal formulation, they argue that, among the cross-sectional annual budget estimates, the concurrent descendants approach is probably the least biased among the cross-sectional alternatives. The basic bottom line of the concurrent descendant formulation is that immigrants are a net taxpayer benefit to native-born households. This net benefit takes place exclusively at the federal level and not at the state level. Consequently, residents of some immigrant-intensive states (such as California) experience higher taxes due to immigration. Lee and Miller also provide an interesting comparison among the three annual budget approaches. They demonstrate that the most frequently used methodology—immigrant households—is the only one that produces a negative immigrant fiscal impact.

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration LABOR MARKET STUDIES Much of the recent research on immigration has been unabashedly empirical. Daniel Trefler's chapter, "Immigrants and Natives in General Equilibrium Trade Models," sketches the theoretical implications of immigration on national welfare, wages, and trade flows. A strength of Trelfer's treatment is that it illustrates the strong parallels that exist between international immigration and international trade. For example, unskilled labor in other countries can affect wages in the United States either by migrating here or by producing goods that are imported to this country. It should be no surprise, then, that the pro and con arguments about the North American Free Trade Agreement mimic so closely those arguments advanced in the immigration debate. A basic implication of trade between nations is the prediction that prices of inputs used in production (including labor) should converge internationally. The "factor price equalization" puzzle is that, in spite of greatly expanding trade, no such convergence seems to have taken place. In some new research, Trefler attempts to test whether some wage convergence exists if workers across different countries are "standardized" by their industry of employment (hopefully capturing some unobservables connected with productivity) or proxies for their skill or human capital. His empirical results indicate that industry controls may well matter. If fixed employment weights are used, within-industry variances in wages declined noticeably between 1964 and 1991. However, controls for human capital differences across countries (e.g., education) do little to explain the lack of wage convergence across countries over time. This may not be surprising in light of Juhn, Murphy, and Pierce's (1993) finding that the bulk of rising wage inequality in the United States over time took place within age-education cells. 2 If skill differentiation within these cells is still large, our ability to fully standardize across countries may be quite limited. The final question addressed by Trefler concerns the extent to which international trade has contributed to the declining incomes of less skilled workers in the United States. Immigration often receives the primary blame for rising wage inequality, but there are other plausible culprits. In addition to immigration, the other prominent candidates include skill-biased technological change and declining capital prices. Trefler argues that the conventional view downgrades the role of international trade, because trade is not important enough as it represents only 20 percent of the American work force. This assessment may be premature. For example, Trefler found that, relative to the domestic United States work force, the amount of labor with no or little education involved in imports to the United States has grown rapidly. This "effective" increase in the supply of low-skilled 2   Chinhui Juhn, Kevin M. Murphy, and Brooks Pierce, "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, Vol. 101, May 1993, pp. 410–442.

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration labor is so large that it must have played some role in the declining wages of the less skilled. Virtually all existing empirical research on the labor market effects on immigration has dealt with men. Whether the question concerned life-cycle or generational assimilation of the immigrants themselves or the impacts of immigrants on native-born workers, with very few exceptions, only male immigrants and male native-born workers have been studied. Because the numbers of male and female immigrants into the United States are roughly the same, this is a strange situation indeed. To begin to retrieve some balance, our panel asked Edward Funkhouser and Stephen J. Trejo to conduct a parallel analysis for immigrant women. Their chapter, "Labor Market Outcomes of Female Immigrants in the United States," does just that. Using micro data from the 1980 and 1990 U.S. decennial censuses, these researchers examine employment and wage patterns for immigrant women. In the first generation, most immigrants arrive with, live near, and marry people from their own background. Consequently, the broad trends in the attributes of female immigrants should closely parallel those of male immigrants. For example, similar to their male counterparts, female immigrants are less educated than native-born American women, a gap that has been growing over time. Funkhouser and Trejo also examine the question of economic assimilation, an issue that has attracted a considerable amount of research interest for male immigrants. One special factor that must be considered when addressing these questions for women is that their comparison group —native-born American women—has also been undergoing significant structural labor market changes in recent decades. Labor force participation rates have increased dramatically among women in the past three decades and female wages have risen steadily, even relative to those of men. Therefore, immigrant women are being compared with a moving target—native-born American women—whose own labor market position is steadily improving. Given the rapid rise in employment rates among native-born women, it is not surprising that the employment gap (compared with the native born) of new cohorts of female immigrants has been steadily rising. However, after an initial period of adjustment in the United States, Funkhouser and Trejo report that this employment gap diminishes significantly. The big unknown in these patterns concerns the employment rates of immigrant women before they came to America. Without knowing that crucial piece of information, we do not know whether the event of immigration to the United States lowered or raised the probability of their employment. A very similar pattern exists with wages—widening wage gaps as new cohorts arrive and a diminution of those wage gaps with native-born women over time. These wage patterns closely mirror those found by numerous authors for men. The major exception to finding a significant amount of wage assimilation involves both Mexican men and Mexican women. Unlike the case for men, the

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration declining relative position of female immigrants over time appears to have little to do with shifts in national origin. Instead, they are largely attributable to such human capital variables as education and English language ability. HISTORIAL, DEMOGRAPHIC, AND SOCIAL CONSEQUENCES Immigration to the United States is nothing new. Although many industrial countries today are experiencing immigration flows that exceed those into the United States, international immigration reaches far deeper into our history. This historical experience provides an abundance of data about how well or poorly immigrants have done and what their impact has been on native-born Americans. Susan B. Carter and Richard Sutch's chapter, "The Economic and Demographic Consequences of Immigration to the United States: Quantitative Historical Perspectives," provides a comprehensive summary and interpretation of that evidence. Seen through a historical lens, there are many striking similarities and differences between today's immigrants and their predecessors. Although the absolute number of current immigrants rivals the peak levels at the beginning of the twentieth century, expressed relative to the size of the existing U.S. population, current immigration is far more modest. While immigration continues to attract the young, immigration at the beginning of this century was disproportionately male. In contrast, current immigration flows are roughly equal between men and women, a reflection of the important role family reunification plays in the current U.S. immigration preference system. Although strong conclusions must be tempered by the limitations of the data, the skills of immigrants at the beginning of the century appear to be in the middle of those of native-born Americans. The historical evidence is also supportive of life-cycle and generational assimilation of immigrants. A far more difficult question is what role immigration played in the rapid economic growth of the American economy in the last half of the nineteenth century and the first half of the twentieth century. Although Carter and Sutch do not claim to definitely settle this question, they perform a useful service by clarifying and, where possible, quantifying the possible mechanisms through which immigration can alter economic growth. Among other things, these mechanisms include differential savings behavior, participation in inventive activity, and the exploitation of economies of scale. One issue that has dominated the current immigration debate far more than its historical predecessors involves the fiscal effects of immigration. There are probably two reasons why that is so. First, the size of government at all levels is much higher today than it was during other periods of sustained immigration. Second, especially at the federal level, the impacts of earlier waves of immigration were probably quite positive. A big contribution of Carter and Sutch is their identification of the importance of pensions for Civil War veterans in the federal

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration budget. All immigrants who arrived after this war paid into this system but would never qualify for benefits. Given this program and the public goods nature of some federal benefits, it is difficult to see how immigrants could end up as a net taxpayer burden at the federal level. Much less historical evidence exists on taxpayer effects at the state and local levels, especially in those places where immigrants lived. As Carter and Sutch point out, and as remains true today, the answer probably lies primarily in education. Although immigrants were young and had more children, two mitigating factors were that school attendance rates for immigrant children were lower and immigrants were heavy users of private and parochial schools. Additional research on this issue deserves high priority. The fear that immigrants contribute to high levels of crime is a recurrent theme in American history. In spite of the prominence of this issue, measuring the effect of immigration on crime is mired in a statistical maze. A limitation of existing crime statistics is that immigrant status of the perpetrator or victim is not known. A second more generic limitation is that statistics on crime and criminal acts can be two quite different phenomena. Many crimes are not reported, and, if reported, those who commit them are often not apprehended, convicted, or imprisoned. Data on characteristics of the prison population may be highly selective relative to the attributes of those who commit crimes. John Hagan and Alberto Palloni take up these issues in their chapter, "Immigration and Crime in the United States." They point out that the recent fourth wave of increased immigration coincided with a dramatic increase in violent crime rates, increasing public perceptions that immigration and crime are closely linked. But the biases inherent in immigration statistics and the strong selectivity of the process at all stages makes an inference of causation extremely problematic. Working on data from El Paso and San Diego, they are able to show that prison statistics that seem very negative about immigrants could easily reflect lower rates of participation of immigrants in criminal activity. Until we obtain better methods of collecting data at all stages of criminal activity, strong conclusions about immigration and crime are unwarranted. Immigrants are extremely concentrated geographically, with about three in every four living in only six states. This concentration raises the possibility that fiscal impacts of immigrants could vary considerably across states and localities. Similarly, labor market effects of immigration could also be more pronounced in those places where immigrants live. The direct increases in labor supply attributable to immigration, especially for unskilled labor, are much higher in immigrant-intensive areas than in the nation as a whole. The expectation of larger economic impacts in those local areas with many immigrants rest on strong assumptions about both the demand and the supply sides of the labor market. First, the elasticity of demand for labor must be similar at the local and national level. This is very unlikely to be true. Demand curves tend to be more elastic the better are the available substitutes. The availability of

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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration substitutes for unskilled labor in Los Angeles, for example, is inherently much larger than for unskilled labor in the United States. Unskilled labor in all other labor markets constitutes to some degree a substitute for similar workers in Los Angeles. The implication is that the demand curve for unskilled labor must be much more elastic than the demand curve for unskilled labor defined at the national level. With very elastic demand curves at the local level, wages cannot fall very much as a consequence of the arrival of immigrants. There are also supply-side adjustments that may mitigate any strong local labor market wage changes. The key issue is whether immigration affects patterns of net migration of native-born Americans across geographic boundaries. If low-skilled immigrants into California simply increase out-migration flows from California of domestic low-skilled workers or reduce the number of similarly skilled in-migrants into California, the size of the "supply" effects induced by immigration is considerably muted. Similarly, any wage effects caused by immigration will not be limited to California but will be dispersed across the country. This question of the internal migration reactions to immigration is the subject of William H. Frey and Kao-Lee Liaw's chapter, "The Impact of Recent Immigration on Population Redistribution Within the United States." Frey and Liaw demonstrate that immigrants continue to locate in the same relatively few places. For example, just ten metropolitan areas accounted for two-thirds of all immigrant growth. In contrast, domestic migrants are far more eclectic in their choices of where to live. In recent years, domestic migrants have tended to relocate in places other than those attracting immigrants. Moreover, there exists considerable out-migration from high-immigration states, especially among less-skilled natives. For example, between 1990 and 1995, net immigration into Los Angeles was 792,712, whereas net internal migration was -1,095,455. During these years, internal migrants were attracted instead to the economically booming areas of the Sun Belt and the South. Although the primary motivation for these internal migrants was the "pull" of the attractive economic circumstances in booming areas, the question Frey and Liaw pose is to what extent immigration also influenced these internal flows. This possibility is suggested by the fact that the out-migration from immigration-intensive areas was also concentrated among less-skilled native-born residents. Because it is difficult to control for all other confounding factors, causation is a very tricky business. In particular, demand shocks vary considerably across areas in very complex ways. With that important caveat in mind, Frey and Liaw conclude that immigration did induce out-migration of native-born workers. For people with a high school education or less, Frey and Liaw estimate that California would lose 51 net internal migrants for every 100 similarly skilled international migrants who arrived during the last five years.