The moral hazard of life-saving innovations: Naloxone access, opioid abuse, and crime

By Jennifer Doleac and Anita Mukherjee

doleac-mukherjeeThe United States is grappling with an epidemic of opioid abuse and mortality. The U.S. Surgeon General recently called for everyone to carry naloxone — a drug that can save someone’s life if administered during an overdose. This call echoed similar advice by public health officials at the state and local levels. Over the past decade, states have gradually increased legal access to naloxone, which had previously required a prescription to obtain. The thinking is that if naloxone is in everyone’s medicine cabinet, then those suffering from opioid addiction will be more likely to survive an overdose. Surviving the overdose then allows them the opportunity to get treatment for their addiction.

We worried that increasing access to naloxone may do more than just increase the chances of surviving an overdose. When an activity becomes less risky, people are more likely to engage in it. (Economists call this moral hazard.) For instance, researchers have found that people became more likely to engage in risky sex after HIV became more treatable. It could be that when an opioid overdose is more easily treatable by naloxone, people are more likely to engage in risky opioid use. The goal of our recent study is to quantify this effect. We feel that we have achieved that goal. But we also generated an unintended side effect of a tremendous degree of outrage and opposition to our hypothesis and our results. We will first describe our results, and then discuss the controversy that followed their release.

To measure the effects of broad naloxone access, we looked at the repercussions of state laws that expanded access to naloxone. In their most generous form, these laws established a standing order that allowed anyone to walk into a pharmacy and purchase naloxone without a prescription; they also allowed community organizations to distribute naloxone widely. We measure the effects of these naloxone access laws on opioid-related ER visits, opioid-related crime, and opioid-related mortality.

We find that, on average across the country, broadening access to naloxone led to more opioid-related ER visits and opioid-related crime, with no net reduction in opioid-related mortality. When we look specifically at the Midwest, the region hardest hit by the opioid crisis, we find that broadening naloxone access led to a 14% increase in opioid-related mortality. Our interpretation of this finding is that people are using opioids more often, and in more potent forms (e.g. fentanyl) when they have naloxone as a safety net.

Figure 1 plots the effects of broadening naloxone access on opioid-related ER visits and opioid-related mortality in the Midwest. As these graphs show, effects are flat and near-zero before the law change. This is comforting — if the trend started before the laws went into effect, this would suggest that it is not due to the laws themselves, but instead that the laws are in response to rising opioid abuse. At the effective date of the law, opioid-related ER visits and opioid-related mortality start to rise relative to states that didn’t have naloxone access laws go into effect on that date. The combination of no trend before the effective date and a trend after the effective date means that naloxone access laws are causing an increase in opioid abuse.

Figure 1 (from figures 6 & 7 in the paper)izadp11489-fig

The differences in effects across regions provide an opportunity to investigate what policies may reduce the unintended costs of naloxone access. We find suggestive evidence that greater availability of drug treatment may be important. That is, broadening naloxone access increases mortality more in places where less drug treatment is available. This makes sense if we think that the primary goal of naloxone is to give individuals a chance to get treatment for their addiction — if there is no treatment available, then perhaps it’s unsurprising if naloxone does more harm than good. This association between drug treatment availability and the effect of naloxone access laws suggests that investing in more drug treatment could help mitigate the unintended costs of broadening naloxone access.

The controversy

You can always count on economists like us to bring bad news to the policy conversation. But many policies don’t work as intended, and even effective policies involve tradeoffs. Knowing how deeply personal the opioid crisis is for many of us, we expected some pushback when we released the current paper — after all, many harm reduction efforts center on the widespread distribution of naloxone, and research documenting unintended effects would surely be unwelcome. But we also believe that our research findings contribute important information to discussions about how to address the opioid crisis. After presenting the paper at several conferences and seminars, and getting feedback from a variety of colleagues, we were confident that the results were ready to be shared more widely.

The debate around our paper was more heated than we expected. When we  released the working paper in March, it was met with outrage from many people, primarily non-economists. We think that part of the negative reaction was caused by confusion over the term “moral hazard,” which is an economics term that (ironically) implies no moral judgment. But other pushback related to cross-disciplinary differences in theories about human behavior as well as empirical methods.

Some argued that moral hazard could not possibly operate in this context. Our view, shaped by theory and prior empirical research, is that such effects are plausible; we wanted to allow the data to tell us whether moral hazard was operating in this context rather than assume it. We began this project open to the possibility that moral hazard does not matter here, and we remain open to that possibility. But our analysis of the evidence leads us to believe that moral hazard is, in fact, present.

Others questioned our ethics as researchers (particularly in releasing a working paper before peer review, a common practice in economics) and our moral compasses as human beings. Our inboxes remain full of messages from people suggesting we’ve confused correlation with causation (in fact, identifying the causal effect was the key goal of this study), and even some instructing us on how to structure a research paper (as if we’re not experienced academics at major research universities).

Yet others wrung their hands about whether evidence of unintended consequences would lead policymakers to end access to life-saving medication, and suggested we should never have written a paper that could be easily “weaponized” by opponents of their preferred policy. We agree that academics have a responsibility to facilitate accurate interpretations of their research; we’ve tried to do that. But we don’t agree that academics should quash research results that don’t fit the narrative of one advocacy group or another. In subsequent conversations with policymakers and practitioners, we’ve been gratified that they recognize that even worthwhile policies involve costs as well as benefits. In our experience, decision-makers are thinking responsibly about what to do next, neither ignoring our evidence nor rashly calling for naloxone bans. Perhaps our critics should give them more credit.

Not all the reaction was negative, however. Many fellow academics took the time to read our paper and offer encouragement. Other people – including nurses, doctors, and others on the front lines of fighting the opioid epidemic – thanked us for doing this study and engaging in these uncomfortable conversations. Even those who questioned some of our findings denounced the personal attacks we received.

The reason economists disseminate working papers prior to peer review and publication is to have lots of smart people engage with the research, and we got plenty of that. The ensuing conversations — at conferences, on Twitter, in blog posts, and over email — helped us sharpen our thinking and come up with testable hypotheses related to concerns that were raised. Our study is better for it.

For instance, several people pointed out that, while we control for a variety of other opioid-related policies, our analysis did not control for state-level Medicaid expansions; these might have independently increased or decreased opioid abuse. We now show that controlling for Medicaid expansions has no impact on our results (and if anything, makes them stronger). Some questioned whether the effective dates of the laws we use are accurate. We reviewed the relevant legislation, clarified our definitions, and noted that in five states one could make a reasonable case that we should have used earlier dates (due to pilot policies at the county level, or related legislation that broadening naloxone access to at-risk populations). We show that when we use those alternate dates, the results are nearly identical to before.

Others wondered whether naloxone access laws are a good treatment variable in the first place — perhaps they did not have any meaningful effect on naloxone distribution. We emphasized that our study identifies an intent to treat effect: that is, we’re measuring the impact of the laws, which intended to increase access to naloxone, rather than the impact of naloxone itself. Our estimates will be biased toward zero if the laws had no effect on naloxone access — so the fact that we’re finding effects suggests the laws are indeed having an impact. Local data on naloxone distribution are typically unavailable, but we added some anecdotal evidence that the laws increased naloxone distribution in at least some places. Finally, discussions about the best way to present graphical evidence pushed us to switch from residual plots to coefficient plots. The graphs now show the effects of the access laws more clearly.

These new analyses, along with our previous robustness checks and placebo tests, make us confident that our study identifies the causal impact of naloxone access laws. We believe we have documented that broadening naloxone access increases opioid abuse. Our policy recommendations are (1) to consider these moral hazard effects when making naloxone more easily available, and (2) to implement policies that can help mitigate any unintended costs. For instance, invest more resources in drug treatment, and find ways to encourage those who have overdosed to get help. There won’t be a quick fix to this epidemic, but we hope that a better understanding of the effects of naloxone access will lead to better and more effective policies, and ultimately save lives.

Download the paper (IZA DP No. 11489):

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Is dependency on disability insurance benefits transmitted from parents to children?

disability-insuranceDisability benefits provide an essential safety net for many people of working age whose health prevents them from engaging in paid work. But many countries are increasingly concerned about the fiscal sustainability of high and growing disability insurance (DI) dependency rates. One of the reasons is that disability benefits may themselves contribute to low participation and employment rates among people with disability. There is also a perception that few people flow off disability benefits until either death or state pension age is reached.

An important question in this context that policymakers and academics have been trying to answer for decades is whether DI dependency is transmitted from a parent to their children. A simple inspection of the raw data displays a clear pattern that children whose parents were benefit recipients are also more likely to receive a benefit later in life. However, it is not clear whether these children become benefit recipients because their parents were, or because children and parents simply share some characteristics that make them more likely to claim a DI benefit. If the former is true, parental participation in social assistance programs could severely impact a child’s future economic situation and opportunities.

In a new IZA Discussion Paper, Gordon B. Dahl (University of California San Diego & IZA) and Anne C. Gielen (Erasmus University Rotterdam & IZA) investigate this by studying a reform in Dutch DI that dates back to the mid-1990s. Following this reform all DI recipients under the age of 45 were re-assessed under stricter eligibility criteria, leading to lower DI benefits and to increased exit from DI (see Figure 1, Panel A). For those aged 45 and above, a re-examination took place but according to the old – and more generous – criteria. This sharp differential treatment in re-examinations can be exploited to learn how the reform affected the children of these individuals.

Panel A & B

Effects of the Dutch DI reform on parents and children

The findings show that more than 20 years after the reform, reduced parental DI dependency led to a lower DI dependency among children. Both the probability that a child is on DI as well as the benefits received from DI are substantially lower for those children whose parent’s DI use was reduced due to the reform (see Figure 1, Panel B). In addition, there are positive effects on future labor market outcomes for these children, with a higher employment rate and a higher level of labor market earnings. Consistent with an anticipated future with less reliance on DI, children of parents exposed to the reform invest in additional schooling while young.

All in all, these results illustrate a strong link going from parental social assistance participation to a child’s dependence on social assistance benefits. These intergenerational effects have important implications for fiscal policy. Ignoring any parent-to-child spillover effects understates the long-run cost savings of the Dutch DI reform by as much as 40% in the long run. Hence, when developing social policies it would be a mistake for governments to only consider current participants in a program, without accounting for the long-run effects within families.

Download the paper (IZA DP No. 11334):

See also an earlier IZA Newsroom article on family welfare cultures in Norway.

Further reading:

  • IZA DP No. 11186 by Melanie K. Jones and Duncan McVicar: The Dynamics of Disability and Benefit Receipt in Britain
    Disability onset increases receipt of disability insurance, a wider measure of sickness and disability benefits, and receipt of non-sickness benefits by six, eight and six percentage points, respectively, in the first year. Disability exit has an almost symmetrical impact on receipt of disability insurance and on wider sickness benefits in the first year, contrary to the perception of disability benefits being an absorbing state.
  • IZA DP No. 11410 by Silvia Garcia Mandico, Pilar Garcia-Gomez, Anne C. Gielen, and Owen O’Donnell: Earnings responses to disability benefit cuts
    Using the Dutch DI reform that affected recipients aged 30-44, the paper finds that reassessment of entitlement under more stringent rules reduced benefits by around 20 percent, on average, and reduced dependency on the program by 14.4 percentage points. These cuts produced a 6.7 percentage points increase in employment and a 8.5 point increase in the probability of working and not claiming DI.
  • IZA DP No. 11409 by Tomi Kyyrä and Tuuli Paukkeri: Using a Kinked Policy Rule to Estimate the Effect of Experience Rating on Disability Inflow
    Unlike in most other countries, in Finland employers’ disability insurance premiums are partially experience rated. The paper shows that experience rating has reduced the disability inflow among men under age 50. For other groups the authors find no significant effects.
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The impact of self-selection on performance

kids-runningOur behavior is strongly influenced by comparisons with others. These “others” are not usually assigned to us, but we choose who we interact and compare ourselves with. Or, as economists put it, individuals self-select into certain environments and into specific peer groups within given environments. However, little is known about the consequences of these self-determined choices.

In a recent discussion paper, Lukas Kiessling, IZA Resident Research Affiliate Jonas Radbruch and Sebastian Schaube (all University of Bonn) study how different peer assignment rules – self-selection or random assignment of peers – affect individual performance, and how self-selection itself alters interactions between peers.

The research team conducted a field experiment with over 600 students (aged 12 to 16) in physical education classes of German secondary schools. The students took part in two running tasks (“suicide” runs) – first alone, then with a peer. After the first run they filled out a survey that elicited preferences for peers, personal characteristics, and the social network within each class. Across treatments the researchers exogenously varied the peer assignment in the second run using three different matching rules.

In a first treatment, the authors implemented a random matching of pairs. This was contrasted with two matching rules using the elicited preferences to implement self-selected peers. The specific setup of their experiment allowed for the implementation of two notions of self-selection, based on either the identity or the relative ability of one’s classmates:

  • Conducting the experiment in classroom environments makes it possible for students to state preferences for known peers (name-based preferences).
  • A running task yields direct measures of performance than can be used to select peers based on their relative ability in the first run (performance-based preferences).

dp11365-fig1The results show that the two peer-assignment mechanisms with self-selected peers improve average performance by 1.27–1.67 percentage points or .14–.15SD relative to randomly assigned peers.

A natural explanation would be that students interact with different peers and react differently to them, which mediates the effects. While self-selection indeed changes the peer composition in a way that students interact predominantly with friends (name-based) or students with a similar ability (performance-based), this cannot explain the observed improvements.

Rather, when accounting for these changes in the peer composition, the effects remain constant or even become more pronounced. Combined with additional evidence on how students perceive the task in the different conditions, these findings provide evidence that the opportunity to self-select peers has a direct effect on performance. The authors argue that the process of self-selection seems to provide an additional motivation to students leading to performance improvements.

While the impact of a peer and the resulting quantitative effect might be specific to the setting analyzed in their study, the underlying mechanisms are valid in more general settings. The results show that the direct effects of self-selecting peers may be even more important than those induced by exogenous group assignment. Additionally, these effects take place even within exogenously formed groups.

Download the complete paper (IZA DP No. 11365):

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How China’s rise has challenged the benign view of free trade

trade-portThe costs and benefits of free trade are one of the most contentious topics in economic policy. Economists often argue in policy discussions that trade is Pareto improving (i.e., at least one party wins without any other party losing) and that free trade has the potential to raise living standards in all trading countries.

The China Shock – denoting China’s rapid market integration in the 1990s and its accession to the World Trade Organization in 2001 – shows that what applies to a country in aggregate need not apply to all citizens within a country. Workers displaced by trade cannot change jobs costlessly. By reshaping skill demands, trade integration is likely to be permanently harmful to some workers and permanently beneficial to others, challenging the benign view of the effect of trade integration on labor markets.

In a new IZA World of Labor article, IZA Research Fellow David Autor (MIT) shows how China’s rapid rise, while enormously positive for world welfare, has created identifiable losers in trade-impacted industries and the labor markets in which they are located.

US labor market not as flexible as thought

Autor refers to one study that looks at the effect of exposure to increases in Chinese import competition across Commuting Zones (CZs) in the US over the period 1990 to 2007. The study finds that CZs that were more exposed to import competition from China experienced substantially greater reductions in manufacturing employment.

Contrary to the established understanding of US labor markets as fluid and flexible, over the course of a decade, trade-induced manufacturing declines in CZs were not offset by sectoral reallocation or labor mobility. Furthermore, workers in trade-exposed CZs experience larger reductions in average weekly wages and these impacts are concentrated among workers in the bottom four wage deciles.

Policymakers need to mitigate losses caused by free trade

These results do not support the traditional assumption of the trade literature that local employment effects of sectoral demand shocks are short-lived, and, moreover, do not differentially reduce employment rates in directly impacted CZs relative to the national labor market. On the contrary, the evidence is unambiguous that workers, firms, and local communities that are directly in the path of rapidly advancing international competition suffer substantially, and policymakers need to address this.

Autor suggests a number of policy measures that could help to mitigate the negative impact on affected workers. These include modernized trade adjustment assistance programs, wage insurance mechanisms, and wage subsidies.


David Autor

“Trade integration offers profound gains for all nations. Reaping them is a worthy goal for policy. Yet an appreciation for the concentrated costs trade adjustment imposes on a subset of citizens should caution policymakers to proceed toward that goal with due care.”

Read the full article:

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Searching on campus: Marriage market effects of the student gender composition

weddingThe growing success of online dating platforms seems to indicate that finding your partner in the “real” world becomes harder. But still, there are such offline opportunities: At universities, for example, people with lined-up interests as well as similar age and education interact each day.

Given that women’s attainment in higher education has substantially increased over the past decades, universities may have become even more important as a marriage market for the high-skilled. A recent discussion paper by IZA researcher Nico Pestel analyzes how resulting changes in gender composition among university students by field of study have affected the marriage market success of university-educated individuals in Germany.

University teaching as well as students’ social environment in Germany is traditionally very much segmented by fields of study. For example, a female university student enrolled in a field characterized by a predominantly male student body (e.g. Engineering) encounters male students substantially more often than a student in a predominantly female field (e.g. Humanities).

Accordingly, the probability of a woman meeting a potential opposite-sex partner is significantly higher in Engineering than in Humanities, making within-field marriages more likely. At the same time, students whose gender is relatively abundant within their field of study – men in Engineering and women in Humanities – are consequently more likely to meet a potential partner outside their field of study or outside the university environment.

The analysis is based on administrative information on the gender composition of students enrolled in (West) German universities broken down by 41 detailed fields of study over the period from 1977 to 2011 combined with data from the German Microcensus from 2003 to 2011. This allows to exploit substantial variation in student sex ratios experienced at the time of education over time and within field of study.

Women in female-dominated fields less likely to get married

The results confirm that a higher female share of students negatively affects marriage market opportunities for women. Female graduates more often remain single or live in a cohabiting couple and are less often married when women represent a larger share of students in the respective field of study. For men, the exact opposite holds. A higher share of males in the field is associated with a higher probability of being married.

Moreover, the student sex ratio significantly affects the composition of couples with respect to educational levels and field of study. For women, a higher share of the own gender among fellow students decreases the probability of having a partner holding a degree in the exact same field.

However, the findings indicate distinct gender differences for the alternative outcomes of having a partner holding a degree from a different field or having a lower level of formal education. When men are more abundant in the field, male graduates are more likely to “marry down” with respect to educational status, while women are more likely to be in a homogamous relationship when the female share is high.

Overall, these findings imply that changes in the gender composition of students may have implications for the socio-demographic composition of societies since we may expect increases in assortative mating of couples when the formation of same-field relationships is enhanced in male-dominated fields.

This may have longer-run impacts on income inequality and intergenerational mobility. At the same time, further increases in the female share of students in fields already dominated by women may increase the number of university-educated women remaining single (longer), which may in turn have negative implications for fertility among high-skilled women.

Download the paper (IZA DP No. 11175):

Read the German summary here.

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Civility and trust in social media

onlinecivilityTrust is a fundamental asset for economic development. Social media have been credited with the potential of reinvigorating trust by offering new opportunities for social and political participation. This view has been recently challenged by the rising phenomenon of online incivility, which has made the environment of social networking sites (SNS) increasingly hostile to users.

Online incivility is a manner of harassing behavior that can range from aggressive commenting in threads, incensed discussion and rude critiques, to outrageous claims, hate speech, and more severe forms of harassment such as purposeful embarrassment and physical threats. Pew Research Center (PRC) reports that the majority of Americans have been targeted, or have witnessed others being targeted, with online incivility. The descriptive evidence available so far indicates that social media users perceive incivility as the norm of online interaction.

Given the penetration of social media and the importance of trust in the economic activity, the role of SNS-mediated social interaction is also a relevant topic for economic research. What are the consequences of online incivility and civility on social media users’ trust in others? Does incivility weaken the positive potential of social media?

Experiment in a Facebook setting

To answer these questions, a research team consisting of Angelo Antoci, Laura Bonelli, Fabio Paglieri, Tommaso Reggiani, and Fabio Sabatini conducted a novel experiment in a Facebook setting to study how the effect of social media on trust varies depending on the civility or incivility of online interaction. The study is now available as IZA Discussion Paper No. 11290.

The authors compared the trust and trustworthiness of three samples of participants randomly involved in two kinds of Facebook-mediated interaction. One group was exposed to four, authentic, threads of uncivil discussion. Another group was exposed to the same threads in which uncivil discussions have been replaced with polite interactions by experimenters.

The third group was used as a control condition: participants were exposed to the same thematics used in the other treatments, but in the form of short news excerpts and without any kind of social interaction. To assess trust and trustworthiness, the researchers then made the experiment participants play a trust game.

They found that participants exposed to civil Facebook interaction are significantly more trusting. In contrast, when the use of Facebook is accompanied by the experience of online incivility, no significant changes occur in users’ behavior.

The results of the experiment indicate that when the tone of discussions deviates from the “uncivil status quo” and is accompanied by civil interaction, it significantly raises participants’ trust with respect to both the uncivil treatment and the control condition, whereas it has no effect on trustworthiness. In contrast, if Facebook use is associated with the experience of online incivility in line with the status quo, no significant change in participants’ trust and trustworthiness with respect to the control condition can be observed.

Incivility as the norm of online interaction

This study provides the first experimental evidence of a positive effect of online civility on social trust. While exposure to civil online interaction induced a significant increase in people’s trust, the opposite condition, i.e. online incivility, seemed to be considered “business as usual” and thus did not produce any effect on trust, with respect to the control treatment.

This lack of effect of online incivility is striking, whether it is interpreted as a form of expectation matching (incivility is what people routinely expect online, thus being exposed to it does not change their expectations on others’ behaviors) or as a sort of immunization effect (people are used to such a high level of online incivility that the experimental manipulation failed to elicit a response): in either case, incivility seems to be perceived as the norm of online interaction, rather than the exception.

This is a rather depressing finding, but also one in full accordance with the survey data and the anecdotal evidence available so far. What is much less depressing, and indeed encouraging, is the positive effect on trust of even a brief exposure to online civility: contrary to intuition, according to which a quarrel is much more salient than a polite discussion, a simple lack of aggression in expressing a difference of opinions online acts as a powerful determinant of higher levels of trust towards other people.

Echo chambers and the polarization of public opinion

SNS are facing increasing criticism and scrutiny, since recent analyses of key political events (such as the 2016 US presidential election and the Brexit referendum) have suggested a link between the extreme polarization of public opinion and the relatively small number of platforms that monopolize online discourse – most notably, Facebook and Twitter.

Public discussions on such platforms have also been shown to create and maintain so called “echo chambers”, thus leading to increased polarization and partisanship. Therefore the authors are not entirely surprised to find confirmation, in their results, of a rather bleak outlook on public discourse on SNS, where uncivil debate seems to be considered as normal.

However, the striking result is that even minimal exposure to the opposite trend, i.e. civil online interaction, has a significant effect on social trust. This suggests that what is at stake in moderating online discussion is not simply the prevention of negative phenomena (hate speech, cyberbullying, digital harassment, etc.), but also the achievement of significant social benefits, most notably a measurable increase in social capital that can, in turn, positively affect economic development.

Promoting civil discussion on online platforms

The take-home message for policy makers is rather straightforward: instead of only focusing on fighting against noxious online behavior, we should also (and perhaps mostly) create the preconditions to promote civil discussion on online platforms. Obviously, this goal cannot be effectively pursued via strict regulations, but rather needs to be fostered by carefully designing (or tweaking) the platforms themselves, bringing a wide variety of competencies to bear on such a task: most notably, psychological insight on users’ attitudes and profiles, interaction design principles from ergonomics, nudging strategies and incentives planning from economics.

Download the paper (IZA DP No. 11290):

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‘Dreamers’ could give US economy – and even American workers – a boost

By Amy Hsin (City University of New York)

Earlier this month, hopes were high that a bipartisan deal could be reached to resolve the fate of the “Dreamers,” the millions of undocumented youth who were brought to the U.S. as children.

Those hopes all but vanished on Jan. 11 as President Donald Trump aligned himself with hard-line anti-immigration advocates within the GOP and struck down bipartisan attempts to reach a resolution.

File 20180119 80203 1iuvh1m.jpg?ixlib=rb 1.1 Demonstrators chant slogans during an immigration rally in support of DACA.
AP Photo/Jose Luis Magana

In the final hours before the recent government shutdown, many Democrats were insisting that any short-term funding agreement must include a resolution for Dreamers.

One of the arguments advanced by those who oppose giving them citizenship is that doing so would hurt native-born workers and be a drain on the U.S. economy. My own research shows the exact opposite is true.

Lives in limbo

All in all, about 3.6 million immigrants living in the U.S. entered the country as children. Without options for legal residency, their lives hang in the balance.

To address this problem, the Obama administration created the Deferred Action for Childhood Arrivals program in 2012. DACA gave almost 800,000 of them temporary legal work permits and reprieve from deportation. Although his successor terminated the program in September, this month a federal court halted that process, allowing current recipients the ability to renew their status.

Any cause for celebration, however, was short-lived as the Department of Justice immediately responded by asking the Supreme Court to overturn the ruling. The Supreme Court has not yet announced a decision. In the meantime, the future of DACA recipients remains uncertain.

Today, the best hope for a permanent fix for the Dreamers rests on bipartisan efforts to enact the 2017 DREAM Act – for Development, Relief and Education for Alien Minors – which would extend pathways to citizenship to undocumented youth who entered the United States as children, graduated from high school and have no criminal record. A version of the act was first introduced in 2001.

The debate surrounding the DREAM Act is often framed around two seemingly irreconcilable views.

On one side, immigration activists advocate for legalization based on pleas to our common humanity. These Dreamers, after all, were raised and educated in the United States. They are American in every sense but legally.

On the other, critics contend that legalization will come at a cost to U.S.-born workers, and their well-being should be prioritized.

Many immigrant advocates consider the DREAM Act the best hope for a permanent fix. AP Photo/Lynne Sladky

Impact of Dreamer citizenship on wages

My research with economists Ryan Edwards and Francesc Ortega estimated the economic impact of the 2017 DREAM Act if it were to become law. About 2.1 million of the undocumented youths would likely be eligible to become citizens based on its age and educational requirements.

Our research showed that immigrants given permanent legal work permits under the DREAM Act would not compete with low-skilled U.S.-born workers because only those with at least a high school degree are eligible for legalization. The act also encourages college attendance by making it one of the conditions for attaining legal residency.

We also found that the act would have no significant effect on the wages of U.S.-born workers regardless of education level because Dreamers make up such a small fraction of the labor force. U.S.-born college graduates and high school dropouts would experience no change in wages. Those with some college may experience small declines of at most 0.2 percent a year, while high school graduates would actually experience wage increases of a similar magnitude.

For the legalized immigrants, however, the benefits would be substantial. For example, legalized immigrants with some college education would see wages increase by about 15 percent, driven by expansions in employment opportunities due to legalization and by the educational gains that the DREAM Act encourages.

President Trump’s termination of DACA has put the lives of Dreamers like Faride Cuevas, second from right, in limbo.

Broader economic benefits

The DREAM Act also promotes overall economic growth by increasing the productivity of legalized workers and expanding the tax base.

Lacking legal work options, Dreamers tend to be overqualified for the jobs they hold. My ongoing work with sociologist Holly Reed shows that the undocumented youth who make it to college are more motivated and academically prepared compared with their U.S.-born peers. This is at least in part because they had to overcome greater odds to attend college.

We find that they are also more likely than their native-born peers to graduate college with a degree. Yet despite being highly motivated and accomplished, undocumented college graduates are employed in jobs that are not commensurate with their education level, according to sociologist Esther Cho. With legal work options, they will be able to find jobs that match their skills and qualifications, making them more productive.

Legalization also improves the mental health of immigrants by removing the social stigma of being labeled a criminal and the looming threat of arrest and deportation.

From an economic standpoint, healthier and happier workers also make for a more productive workforce.

Overall, we estimate that the increases in productivity under the DREAM Act would raise the United States GDP by US$15.2 billion and significantly increase tax revenue.

Democratic Sen. Dick Durbin and Republican Sen. Lindsey Graham have been leading recent efforts to pass bipartisan immigration reform. AP Photo/Manuel Balce Ceneta

Everyone can win

The U.S. continues to grapple with how to incorporate the general population of nearly 11 million undocumented immigrants living in the country.

The inability of the Trump administration and lawmakers from both parties to find common ground is emblematic of just how deeply divided Americans are between those who want to send most of them home and others who favor a path toward citizenship for many if not most of them.

While there appears to be no resolution in sight for the general population of 11 million undocumented immigrants living in the United States, common bipartisan ground can be found on the issue of Dreamers. A recent survey found that 86 percent of Americans support granting them amnesty.

The DREAM Act offers an opportunity to enact a permanent resolution for a group widely supported by the public. What is more, our research shows a policy that affirms our common humanity also increases economic growth without hurting U.S.-born workers.

The ConversationThis is a win-win for everyone, whether you care about social justice or worry about U.S. workers.


Editor’s note: Amy Hsin (Queens College, City University of New York) co-authored The Economic Effects of Providing Legal Status to DREAMers (IZA Discussion Paper No. 11281) with Francesc Ortega (Queens College CUNY and IZA) and Ryan Edwards (UC Berkeley). This article was originally published on The Conversation. The reference to the government shutdown has been updated as the original article appeared before the shutdown.

For more research on the topic, see also the IZA World of Labor article:
Legalizing undocumented immigrants

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