New textbook on the economics of immigration

Economics of ImmigrationThe Economics of Immigration, by IZA Research Fellows Cynthia Bansak (St. Lawrence University), Nicole B. Simpson (Colgate University) and Madeline Zavodny (Agnes Scott College), was just published by Routledge.

Since this topic is high on the IZA agenda, we wanted to know more and asked the authors:

Who should read your book?

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Bansak | Simpson | Zavodny

Our textbook is geared towards undergraduate students who have taken an introductory economics course. This is the first textbook to comprehensively cover the economics of immigration at the undergraduate level, and it is suitable both for economics students and for students studying migration in other disciplines, such as sociology and politics. The book is international in scope, with examples from all around the globe.

You obviously put a lot of work into it. What was your motivation?

We wanted to provide students with the tools needed to examine the economic impact of immigration and immigration policies. Our goal is to help students develop an understanding of why and how people migrate across borders, and to show them how to analyze the economic causes and effects of immigration. To this end, students need to understand the decision to migrate, the impact of immigration on markets and government budgets, and the consequences of immigration policies in a global context.

Tell us more about the topics covered…

Key topics include the effect of immigration on labor markets, housing markets, international trade, tax revenues, human capital accumulation, and government fiscal balances. But the book also considers the impact of immigration on what firms choose to produce, and even on the ethnic diversity of restaurants and on financial markets, as well as the theory and evidence on immigrants’ economic assimilation.

We have included a comparative study of immigration policies in a number of immigrant-receiving and sending countries. Finally, the book explores immigration topics that directly affect developing countries, such as remittances, brain drain, human trafficking, and rural-urban internal migration. The idea is to equip students with the tools needed to understand and contribute to policy debates on this controversial topic.

Did you also draw on IZA research?

Absolutely. In fact, we cite more than 30 IZA articles and working papers in the textbook. There has been an explosion of research on the topic of immigration in the last two decades, much of which has been facilitated by IZA, and we have made a concerted effort to place recent findings at the center of our discussions in the book.

Through its Migration Program Area, IZA focuses research on the many dimensions of international and internal migration. In books, chapters, journal articles and discussion papers, IZA researchers examine adjustment among the migrants and their descendants in the destination country, the effects of immigration on both origin and destination countries, and public policies that affect migration. This book discusses the work of many IZA researchers on this topic and makes their findings accessible and relevant to undergraduates.

Do you provide any online material?

Yes, having timely online resources is an important aspect of our textbook as we recognize how much immigration patterns and policies are topics of heated debate and appear regularly in the news. The textbook is accompanied with a companion website with resources for students and instructors and a blog that connects students and instructors to recent events and debates related to immigration.

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For more information on the book go to the Routledge page.

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Home births lead to higher infant mortality: Dutch mothers in poorer areas at risk

home birthThe safety of home births for low-risk women is a hotly debated topic in the Western world. In this context, the Netherlands stands out as one of the few developed countries with a health care system geared toward home births, with one-third of all low-risk deliveries taking place at home. This makes it one of the best settings to study the safety of home births. A new study finds that encouraging home births may come at the cost of higher infant mortality, at least for mothers living in poorer areas.

In their paper, N. Meltem Daysal (University of Southern Denmark and IZA), Mircea Trandafir (University of Southern Denmark and IZA) and Reyn van Ewijk (VU University Amsterdam and University of Mainz) examine 356,412 low-risk Dutch women who delivered between 2000 and 2008 and who were allowed to choose between a home and a hospital birth.

The study shows that home births lead to higher infant mortality among the poorer half of Dutch women. The researchers suggest that the infant mortality rate may be lower in hospitals because of the availability of advanced medical treatments (such as neonatal intensive care units). In the richer half of the Dutch population, on the other hand, home births are as safe for the child as hospital births. The researchers therefore emphasize that the results cannot be generalized to all Dutch women.

Careful assessment of risks due to home and hospital birth

One of the major challenges when investigating the effect of home births is that even among low-risk women, those who give birth at home or in a hospital may have different risk factors, with riskier deliveries usually taking place in the hospital. Therefore, babies born in a hospital often have more health problems than babies born at home and simple comparisons of these two groups are misleading.

In the present study, the researchers came up with an innovative solution to circumvent this problem. They noticed that some women gave birth at home or in a hospital depending on how far they lived from the nearest obstetric ward. The researchers then compared two groups of low-risk women who were identical, except that the women in one group had a higher probability of delivering in a hospital only because they lived closer to a hospital.

This study demonstrates that home births can lead to higher infant mortality for certain women, even in a country where the health care system is geared toward home births. In the context of the Netherlands, these women are those who live in the poorer half of the country and whose decision to deliver in a hospital or at home is affected by how far they live from the nearest hospital. The authors emphasize that no conclusion can be drawn for other groups.

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“When the going gets tough, the tough major in STEM fields”

collegemajorThe consequences of economic fluctuations are large and long-lasting, and can have an especially strong influence on investment choices. A new study by Erica Blom, Brian C. Cadena, and Benjamin J. Keys provides new insights into how personal exposure to the business cycle affects the choice of college major, a key investment in human capital.

The authors use data from more than 50 cohorts of U.S. college graduates in the American Community Survey (ACS) to estimate how responsive college students are in their choice of major. The results show that, when unemployment is high, students choose majors that are higher-paid, more math-heavy and challenging, suggesting that students consider college as an “investment” more than as “consumption” when times are bad.

Much of these changes in major choices can be attributed to differences in particular majors’ labor market prospects, as some majors are hurt more in recessions than others. However, the authors also show other meaningful changes in the distribution of majors. Notably, women are more responsive than men, and women move away from traditionally female-dominated majors like sociology and education during recessions, and towards math-intensive majors (like business, engineering, etc.). The findings suggest that the economic environment changes how students select majors, possibly by encouraging them to consider a broader range of possible degree fields.

In the area of STEM education, the authors identify a latent supply of college students with sufficient ability to complete STEM fields. A rise in the unemployment rate encourages more students to pursue STEM majors, which implies that a substantial fraction of each cohort has sufficient preparation for STEM fields, and suggests room for potential policy intervention.

Finally, while an extensive literature has documented significant costs to graduating in a recession, the authors note that the impact of graduating in a recession would be even more negative if students were unable to respond by picking different majors. By leaving fields that are hurt most during recessions and entering more “recession-proof” fields like engineering and nursing, students are able to partially offset the costs of graduating in a recession. The authors estimate that, without this compensatory behavior, the damaging effects of graduating in a recession would be roughly 10 percent larger.

Read the whole paper (IZA DP No. 9167):

Read also an article about this paper in Slate magazine:

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Inter-ethnic interaction shapes attitudes towards minorities

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Scott Carrell at IZA

Hostile attitudes of majority members towards ethnic, racial or social minorities are of major concern for policymakers and researchers alike. In his talk in the IZA Research Seminar, Scott E. Carrell (University of California, Davis) presented compelling evidence for the malleability of such attitudes: Attitudes are not fixed, but can be affected through social inter-group interaction.

We took the opportunity to talk to him about the attitudes towards minorities and options for public policy.

Economically speaking, what’s so bad about hostile attitudes towards minorities?

Carrell: Clearly, from a social perspective, hostile attitudes towards minorities are not optimal for those individuals being negatively affected. From an economist’s point of view, discrimination affects economic efficiency. For instance, when discriminatory firms fail to hire productive minority workers, the firm and economy produces less than it should. Similarly, minorities who face a discriminatory labor market will under-invest in skills (e.g., education) that would make them more productive.

Your results sound rather optimistic: Attitudes are malleable. What kind of interventions do you recommend?

Carrell: It is difficult to say what kind of specific interventions will work outside of the context of our study. However, our findings do suggest that creating positive interactions between groups will positively affect racial attitudes towards minorities.

What can policymakers take away from your study with regard to ethnic diversity and segregation?

Carrell: From a policy perspective, our results suggest that education policy makers should create racially heterogeneous schools, classrooms and work environments.

You can access the full study by Scott E. Carrell, Mark Hoekstra and James E. West as an NBER working paper.

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IZA Prize laureate Jan Svejnar: No, billionaires don’t drive economic growth!

billionaireIn an op-ed published in The Guardian, Jan Svejnar (Columbia University and IZA) points out that the myth of billionaires boosting the economy is untrue – particularly when they amassed their wealth from political connections. Svejnar’s joint research with Sutirtha Bagchi (Villanova University) analyzes data on billionaires published by Forbes magazine and finds that a high concentration of wealth stifles growth:

[…] Controlling for other relevant factors, such as the country’s level of income and education, we demonstrate that countries could grow their economies faster if there were less money controlled by the uber-rich. This implies that economies could be more efficient if more money were allocated to people other than those at the top of the income and wealth pyramid. […]

Svejnar distinguishes between two types of billionaires – those who would not have made it without political connections (i.e. political cronies), and those who became billionaires because of their ingenuity, ability to innovate and willingness to take risks (i.e. the politically unconnected). While the effect of politically unconnected billionaire wealth on the overall economy is indistinguishable from zero, “crony” billionaire wealth has a strongly negative effect on growth.

Read the complete article (The Guardian, July 15, 2015)

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Jan Svejnar was awarded the 2015 IZA Prize in Labor Economics for his major contributions to comparative economics in general and the economics of transition in particular. The award ceremony was held during the annual IZA/World Bank Conference on Employment and Development in Bonn, June 4, 2015.

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IZA Director Klaus F. Zimmermann awarding the 2015 IZA Prize to Jan Svejnar

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A big fish in a small pond: How rank affects students’ educational decisions

students_high schoolThe characteristics of potential classmates are among the decisive factors for parents when choosing a school for their child. It is commonly believed that children learn and achieve more when surrounded by high-ability classmates. In their new discussion paper, IZA researchers Benjamin Elsner and Ingo Isphording explore a channel that runs counter to the positive impact of high-ability peers: a student’s ordinal rank in her peer group. Smart students who have a low relative ability compared to their peer group – small fish in a big pond – may erroneously conclude that they have a low absolute ability and, thus, under-invest in their human capital.

Consider the following thought experiment: Jack and Jim have the same absolute ability, but a different rank in their respective high school cohort. Jack is among the students with the lowest ability in his cohort, while Jim is among the brightest students in his cohort. In other words, Jim is a big fish in a small pond. Is Jim more likely than Jack to finish high school, attend college, and complete a 4-year college degree?

To answer this question, the authors set up a quasi-experiment. Students are ranked according to their relative cognitive skills in their high-school cohort. Given that within the same school some cohorts have brighter students than others, two students with the same level of absolute ability will end up in a different rank in different cohorts. Comparing equally able but differently ranked students across cohorts within the same school allows isolating the effect of the individual rank.

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Figure 1

Figure I illustrates the basic idea: Two students of same cognitive ability abil enter school in two different cohorts, where students are ranked according to this ability. With ability abil, the student in entry cohort 1994 will be ranked among the upper third of his grade. Contrary, as the entry cohort of 1995 has a higher average ability, a similar student will only be ranked among the medium third.

The central finding of the study is that a student’s ordinal rank in a high school cohort has a strong impact on educational outcomes later in life. The difference between the 10th- and the 20th-best student in a cohort of 100 students increases the probability of high-school completion by half a percentage point, and increases both the probabilities of college attendance and 4-year-degree completion by one percentage point.

What is driving this effect of rank on educational attainment? Further results indicate that highly-ranked students perceive themselves as more intelligent, are more optimistic, and have higher expectations to go to college when they are young. Further, they also feel (and potentially are) better supported by their teachers.

The paper shows that social comparisons affect the decision to invest in further education, and suggests that students who are smart in absolute terms but have a low rank in their cohort – small fish in a big pond – deserve special attention in the education system.

Read the whole paper (IZA DP No. 9121):

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Socio-economic background shapes children’s personality

kidsIn many countries, people find it hard to climb up the economic ladder. According to a recent IZA paper, one of the reasons for social immobility is that parents’ education and income are important predictors of children’s personality traits. Wealthy and educated families have more resources to invest in forming personality traits that improve academic achievement and are valued in the labor market. These traits include time and risk preferences, as well as altruism and IQ.

The study by Thomas Deckers, Armin Falk, Fabian Kosse and Hannah Schildberg-Hörisch analyzed a sample of 732 children aged 7 to 10. Interviews and experiments showed that children from a disadvantaged background are more risk-seeking, more impatient, less altruistic, and have a lower IQ – a combination that tends to impede both academic achievement and labor market success.

Searching for potential reasons why socio-economic status affects children’s personality, the study finds that parents’ education and income shape their parenting style, family structure and “quality time” spent with their offspring. In addition, parents with a higher socio-economic status are on average older and more mature when giving birth.

Since personality is shaped during childhood and remains relatively stable over the life course, the findings underscore that providing high-quality childcare to children from a disadvantaged socio-economic background is an important instrument to achieve higher social mobility.

Download the complete study (IZA DP No. 8977):

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