The Impact of Immigration: Why Do Studies Reach Such Different Results?

Christian Dustmann and Uta Schönberg (University College London, UK) and Jan Stuhler (Universidad Carlos III de Madrid, Spain) Dustmann, Schönberg and Stuhler also at Centre for Research and Analysis of Migration (CReAM) at UCL) published in Journal of Economic Perspectives Volume 30 Number 4 (Fall 2016)

Abstract

We classify the empirical literature on the wage impact of immigration into three groups, where studies in the first two groups estimate different relative effects, and studies in the third group estimate the total effect of immigration on wages.

We interpret the estimates obtained from the different approaches through the lens of the canonical model to demonstrate that they are not comparable. We then relax two key assumptions in this literature, allowing for inelastic and heterogeneous labor supply elasticities of natives and the "downgrading" of immigrants.

"Downgrading" occurs when the position of immigrants in the labor market is systematically lower than the position of natives with the same observed education and experience levels. Downgrading means that immigrants receive lower returns to the same measured skills than natives when these skills are acquired in their country of origin.

We show that heterogeneous labor supply elasticities, if ignored, may complicate the interpretation of wage estimates, and particularly the interpretation of relative wage effects. Moreover, downgrading may lead to biased estimates in those approaches that estimate relative effects of immigration, but not in approaches that estimate total effects.

We conclude that empirical models that estimate total effects not only answer important policy questions, but are also more robust to alternative assumptions than models that estimate relative effects.

JEL Classification: I26 J15 J22 J24 J31 J61

Full text (PDF)

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UK chief executives: paid for performance?

an article (CEPCP373) by Brian Bell and John Van Reenen published in CentrePiece - The Magazine for Economic Performance (May 2012)

Does it matter whether you work for a successful company? And if so, does it matter who you are?

To answer these questions we construct a unique panel dataset covering the pay of all CEOs, senior managers and a fully representative sample of workers for a large group of publicly-listed companies covering just under 90% of the market capitalization of the UK stock market.

We show that senior management appear to have pay that is strongly associated with various measures of firm performance (such as shareholder returns and quasi-rents), while workers’ pay is only weakly associated with such measures. A 10% increase in firm value is associated with an increase of 3% in CEO pay but only 0.2% in average workers’ pay.

Falls in firm performance are also followed by CEO pay cuts and significantly more CEO firings. This is essentially a result of the responsiveness of flexible pay to performance and only senior executives have a large enough share of pay in bonuses to generate a sizeable overall effect on pay. External control matters for pay – firms with lower levels of institutional ownership have smaller pay-performance elasticities for CEOs and do not cut their pay when performance is poor.

Full article (PDF 1pp)

This article summarises Firm Performance and Wages: Evidence from Across the Corporate Hierarchy (PDF 48pp) by Brian Bell and John Van Reenen, Centre for Economic Performance Discussion Paper No. 1088, May 2012

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