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IZA – Institute of Labor Economics

The well-being costs of immigration in Europe

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Despite prevailing media narratives, a new IZA discussion paper by Kelsey J. O’Connor of STATEC Research indicates that the significant increase in immigration to Europe between 1990 and 2019 has not negatively impacted the average well-being of either destination or sending countries. In fact, when considering the substantial gains experienced by immigrants themselves, the overall impact shifts from a net cost to a net benefit.

The study, which analyzed data from 37 European countries over nearly four decades, found that Europe saw an influx of 32 million immigrants between 1990 and 2019. Much of this movement was from East to West, with the Western Bloc experiencing net immigration of approximately 30 million people, while the Eastern Bloc saw a net emigration of about 12 million. The majority of immigrants typically originated from within Europe, with exceptions noted in Northern Europe (Denmark, Finland, Norway, Sweden) and to some extent Southern Europe (Italy, Spain, Portugal, Greece). In Central and Eastern European countries, less than 20 percent of immigrants were from outside Europe on average.

Immigration significantly shaped population dynamics. Eastern Bloc countries collectively experienced a population decline of over 24 million during the period, exceeding the current population of the Netherlands. Conversely, Southern Europe’s population grew by nearly 13 million, with immigrants accounting for 11 million of that increase.

Life satisfaction as a measure of overall well-being

To assess the broader impacts of migration, O’Connor employed a comprehensive subjective measure of well-being: life satisfaction. This approach captures both the economic and non-economic effects of immigration. The rigorous regression analysis revealed no discernible impact of the immigrant share of the population on destination countries’ life satisfaction.  Furthermore, there was no reliable negative impact of the emigrant share on sending countries’ life satisfaction; if anything, a positive effect was observed, likely due to remittances sent home by those who moved away.

While no aggregate well-being costs were found for either destination or sending countries, immigrants themselves experienced considerable benefits. The study found that new immigrants likely experienced a lasting increase of 0.4 points on a 1-to-10 life satisfaction scale on average. This is a substantial gain, comparable to the negative effect of becoming unemployed, and is valued at approximately 30,000 euros for a period of five years, with benefits increasing over longer durations. Unsurprisingly, people tend to migrate from countries with lower life satisfaction to those with higher levels. Importantly, the life satisfaction of immigrants tends to converge with that of natives over time.

The research draws upon data from reputable sources including the United Nations Population Division, the World Bank, and the European Values Study. While acknowledging that effects could vary across subpopulations, the author emphasizes that the aggregate null effects on local populations suggest any potential negative impacts could be offset by redistributing benefits gained elsewhere.

Diversity can enrich non-market experiences

O’Connor highlights a key strength of this study: unlike much previous research that focused on narrower outcomes, this analysis captures all factors individuals deem relevant to their overall lives. This includes considerations such as job competition, fiscal solvency, social cohesion, safety, and the availability of less expensive and more diverse goods and services. The author also notes that diversity can enrich non-market experiences that are otherwise difficult to quantify.

In conclusion, O’Connor advocates for the liberalization of immigration policy, based on the findings that immigration yields substantial benefits to immigrants without imposing aggregate well-being costs on destination or sending countries.

Brexit’s hidden cost: Higher patient mortality in NHS hospitals

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Brexit has claimed an unexpected victim: patient care in England’s National Health Service (NHS) hospitals. According to a new IZA discussion paper by Henrique Castro-Pires, Kai Fischer, Marco Mello, and Giuseppe Moscelli, hospitals previously reliant on European Union nurses experienced significant declines in care quality following Brexit, leading to approximately 4,454 additional deaths and 8,777 extra unplanned readmissions across England.

The study employs a difference-in-differences approach, comparing hospitals with varying levels of pre-Brexit dependence on EU nurses. This methodology isolates Brexit’s specific impact from other potential factors affecting healthcare quality.

The researchers estimate that Brexit’s immigration restrictions resulted in roughly 1,485 additional patient deaths annually. This alarming increase in mortality appears directly linked to staffing changes forced by the sudden reduction in EU nurse recruitment.

Hospitals responded to the nurse shortage by hiring less-skilled replacements, the authors note. Evidence for this skills downgrade appears in the lower pay grades assigned to new nursing hires in the post-Brexit period.

The research team developed a theoretical framework predicting that Brexit would force hospitals previously dependent on EU nurses to lower their hiring standards, subsequently reducing care quality. This effect would occur regardless of whether overall nurse numbers were maintained.

Importantly, the negative impact varied based on pre-Brexit staffing patterns. Hospitals with higher reliance on EU nurses before the referendum experienced more severe quality declines than those less dependent on European staff.

The researchers took extensive measures to ensure their findings weren’t influenced by confounding variables, controlling for pre-Brexit changes in hospital finances, patient volumes, bed occupancy, and workforce composition.

While nursing was particularly affected, the study suggests higher-paying medical positions faced less severe consequences, as the relative wage advantage of UK employment continued to attract qualified candidates even after Brexit.

This research carries profound policy implications, highlighting how immigration restrictions can severely impact essential services like healthcare. As countries worldwide debate immigration policies, this cautionary tale demonstrates how limiting skilled worker mobility can produce unintended—and potentially deadly—consequences.

How community networks shape elections after a crisis

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When a natural disaster strikes before an election, it can alter political preferences in profound and often unexpected ways. A new IZA discussion paper by Giovanni Gualtieri, Marcella Nicolini, Fabio Sabatini, and Marco Ventura examines the electoral consequences of the 2009 L’Aquila earthquake, which devastated central Italy just two months before the European Parliament elections. While previous research has shown that incumbent governments often benefit electorally from disaster response, this study highlights a crucial yet overlooked factor: the role of social capital in shaping voter behavior.

Using a unique dataset that combines high-resolution seismic intensity data, electoral results, and indicators of local civic engagement, the authors find that the earthquake significantly influenced voting patterns—but in a highly heterogeneous way. The national government, led by the center-right coalition of Silvio Berlusconi, gained electoral support in the most affected areas, while local administrators saw no such benefit. However, the extent of this electoral boost depended heavily on pre-existing levels of social capital within communities.

How social capital shields communities from political manipulation

The study reveals that where social capital was low—meaning fewer civic associations—and citizens relied entirely on government institutions for aid, the Berlusconi government successfully capitalized on the disaster response, securing a clear electoral advantage.

Conversely, in municipalities with stronger social capital, where local organizations were active in coordinating relief efforts, the electoral effect of the earthquake was negligible. This suggests that when citizens can rely on their own communities for support, they are less likely to reward the government for disaster relief efforts, as they do not perceive state assistance as their only safety net.

This is a crucial insight, as it challenges the common assumption that voters react uniformly to post-disaster aid. Instead, the effect of government response is mediated by social structures: in fragmented communities, political leaders can leverage crises to consolidate electoral support, while in well-connected societies, this mechanism fails to operate in the same way.

A temporary boost, followed by disillusionment

Interestingly, this effect was short-lived. In subsequent elections, support for Berlusconi’s coalition dropped sharply in the very municipalities where it had initially surged—particularly those with low levels of social capital. This suggests a “post-disaster disillusionment effect”: in the short term, voters may be swayed by high-visibility government interventions, but if the long-term recovery process fails to meet expectations, electoral gains can quickly turn into losses. In essence, promises of swift reconstruction
may generate immediate political rewards, but failing to deliver on those promises erodes trust in the long run.

Policy implications: Rethinking disaster response and governance

These findings have important policy implications for governments and international institutions dealing with disaster response and recovery. First, they highlight the importance of investing in social capital before disasters strike. Stronger community networks reduce dependence on government aid, making disaster response more resilient and less prone to political opportunism.

Second, policymakers should recognize that while high-profile emergency interventions may yield short-term political gains, long-term recovery efforts are crucial in maintaining public trust. Governments that fail to sustain reconstruction efforts risk facing a severe electoral backlash once the initial wave of support fades.

Finally, the study’s results suggest that political leaders may have incentives to focus on immediate relief efforts at the expense of long-term resilience strategies. Understanding how voters respond to disasters can help design policies that prioritize sustainable recovery over short-term political gains, ensuring that crisis management serves public welfare rather than electoral interests.

How do future elites view inequality?

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The United States stands as the most unequal country in the OECD, despite most Americans expressing a preference for more equal wealth distribution. This presents a puzzle: if most citizens want greater equality, why does inequality persist and even grow?

Theories from political science offer one compelling explanation. While the average voter might prefer more redistribution of wealth, those who exert disproportionate influence on policy—business and economic elites—may hold dramatically different views.

For this explanation to hold water, economic elites would need to be more tolerant of inequalities than typical citizens. However, researching the preferences of economic elites has proven challenging, as they are often difficult to reach using standard surveys. In a new IZA discussion paper, Marcel Preuss, Germán Reyes, Jason Somerville, and Joy Wu address this gap by studying the redistributive preferences of tomorrow’s economic leaders—MBA students from an elite Ivy League program.

Finding 1: Future business leaders accept greater inequality

Using an experimental design where impartial spectators (MBA students) choose how to allocate earnings between pairs of workers, the researchers found that MBA students implement substantially more unequal distributions than the average American.

When worker earnings were randomly assigned, MBA students implemented distributions with a Gini coefficient (a common measure of inequality where 0 represents perfect equality and 1 represents maximum inequality) of 0.43, which is notably higher than the 0.36 Gini observed in previous work using representative US samples.

To put this magnitude in perspective, the gap between MBA students and average Americans represents about 35% of the inequality gap between Americans and Scandinavians in analogous experiments.

Finding 2: Future elites are highly responsive to efficiency costs

The most dramatic difference between future business leaders and the general population emerged in their sensitivity to efficiency costs. When redistribution comes with efficiency costs—meaning the total available income decreases when earnings are redistributed—MBA students sharply reduce their redistribution efforts.

Introducing even modest efficiency costs increased the Gini coefficient they implemented by 0.20 points. This responsiveness is an order of magnitude larger than what researchers observe in studies of average Americans, who typically show an elasticity close to zero—meaning they continue to redistribute even when it reduces the total economic pie.

This suggests a fundamental difference in values: while the average American prioritizes fairness concerns over efficiency when considering redistribution, future business leaders place much higher weight on maximizing the total economic output, even if it means accepting greater inequality.

Why this matters

These findings illuminate why the United States maintains high levels of inequality despite most citizens expressing preferences for more equal distributions. The individuals who disproportionately influence policy—current and future economic elites—implement more unequal earnings distributions than the average American and place much greater weight on efficiency considerations.

This research has important implications for understanding policy debates around taxation, social programs, and economic inequality. If those with the most influence over economic policy consistently prioritize efficiency over equality, it becomes clearer why policies aimed at reducing inequality face significant hurdles, even when they have popular support.

As wealth concentration continues to increase in many developed economies, understanding these divergent preferences becomes crucial for addressing one of today’s most pressing economic challenges: how to create broadly shared prosperity in a system where decision-makers may fundamentally value different outcomes than the majority of citizens.

Can AI solve the peer review crisis in economics?

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The peer review process in economics suffers from persistent inefficiencies, including a shortage of qualified reviewers and long decision times, often exceeding six months. A new IZA Discussion Paper by Pat Pataranutaporn, Nattavudh Powdthavee, and Pattie Maes examines whether large language models (LLMs) can alleviate these challenges.

To rigorously assess AI’s role, the study conducted a large-scale experiment using 9,030 submissions derived from 30 recently published economics papers. These included research from top-five economics journals, mid-tier and lower-ranked publications, as well as AI-generated papers designed to mimic top-tier research. The researchers systematically varied author attributes—such as institutional affiliation, reputation, and gender—to analyze AI’s decision-making patterns.

Findings show that AI can effectively distinguish between different quality levels, suggesting its potential to reduce editorial workload. However, AI evaluations exhibit systematic biases, favoring submissions from prestigious institutions, well-known economists, and male authors, even when research content is identical. Additionally, AI struggles to differentiate genuine top-tier research from high-quality AI-generated papers, raising concerns about its ability to assess novelty and originality.

The authors advocate for a hybrid peer review model, where AI assists in initial screening but final decisions remain with human reviewers. To ensure fairness, they recommend bias mitigation strategies such as training AI on anonymized data and refining evaluation criteria. The study highlights both the promise and risks of AI in academic publishing, emphasizing the need for careful integration to enhance efficiency without compromising research integrity.

Breaking barriers: Addressing gender and racial disparities in economics

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Women and underrepresented minorities continue to face significant challenges in the field of economics, as highlighted in a recent IZA discussion paper by Karan Singhal and Eva Sierminska, examining systemic barriers and their impact on career progression. Despite some progress, these groups remain disproportionately underrepresented, particularly in senior academic and professional roles.

The research identifies key barriers contributing to these disparities, including implicit and explicit biases, exclusionary workplace cultures, and institutional practices that disadvantage women and minorities. These challenges manifest in hiring processes, networking opportunities, research collaboration, publication pathways, and career advancement, creating a cumulative disadvantage over time.

One of the most pressing issues is the persistence of stereotypes about who “belongs” in economics, discouraging many from entering the field. Additionally, unequal access to mentorship, resources, and fair evaluations further exacerbates the problem. The chapter also discusses how recent developments, such as the COVID-19 pandemic and the #MeToo movement, have intensified these challenges—disproportionately affecting women due to caregiving responsibilities and highlighting workplace harassment and discrimination.

Addressing these disparities is not just a matter of fairness but a necessity for the discipline’s growth and relevance. A more inclusive economics profession fosters diverse perspectives and innovative ideas, leading to a richer understanding of complex societal issues. The chapter highlights various initiatives aimed at promoting inclusivity, such as mentorship programs, research grants, and collective advocacy efforts. Additionally, it emphasizes the importance of leveraging data to track inequalities and inform policy changes.

Sustained commitment from individuals, institutions, and the broader academic community is essential to fostering a more equitable environment. By breaking down these systemic barriers, economics can fully harness the talent and contributions of all its members, driving the discipline forward in a more inclusive and impactful direction.

Ideological bias in immigration research

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In empirical research, it is common for studies on the same topic to produce vastly different results. Take, for example, the debate on minimum wage policies: while many studies conclude that raising the minimum wage reduces the employment of affected workers, others find no or even a positive impact on employment. Similar discrepancies can be found in research on the impact of immigration on the economic opportunities of native workers.

These differences are not purely random but are often driven by the methodological choices researchers make. These include the selection of data, the definition of key variables, and the statistical methods employed. A less visible but equally important factor is the personal stance of researchers on the issue they are studying. Ideological beliefs can subtly influence how studies are designed, analyzed, and interpreted.

71 teams, 158 researchers, 1,253 regression models

A recent IZA Discussion Paper by George J. Borjas and Nate Breznau sheds light on this phenomenon by exploring how researcher ideology shapes empirical findings. The study utilized a unique experimental setup involving 71 research teams and 158 researchers who analyzed the same dataset. Their task was to determine whether immigration influences public attitudes toward welfare programs.

Each team independently decided how to approach the analysis, including how to select data samples, define key variables, and specify statistical models. This led to 1,253 different regression models, each producing distinct results. The findings revealed significant ideological bias: researchers with pro-immigration views reported more positive impacts of immigration on social cohesion, while those with anti-immigration views leaned toward more negative conclusions. These differences were largely driven by methodological choices.

Interestingly, teams with extreme ideological stances—whether pro- or anti-immigration—tended to produce lower-quality models, as evidenced by peer referee scores. Conversely, moderate teams were more likely to adopt higher-quality research designs, producing results that garnered higher peer evaluations.

Policy-relevant research particularly prone to bias

The study also highlights broader challenges in empirical research. Researchers often face time and resource constraints, which may lead them to focus on results that align with their internal narratives rather than thoroughly exploring alternative models. This is particularly relevant in policy-driven research, where researchers who are deeply invested in specific policy outcomes may inadvertently amplify ideological biases.

While the ongoing revolution in Artificial Intelligence (AI) reduces the cost of conducting research, it also introduces new risks of embedding biases in algorithms. However, AI also offers opportunities to identify ideological bias, potentially improving the objectivity and credibility of future research.

Society underestimates men’s support for couple equity

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A new IZA discussion paper by Teodora Boneva, Ana Brás-Monteiro, Marta Golin, and Christopher Rauh challenges assumptions about men’s attitudes toward equitable division of household labor, revealing a significant gap between actual preferences and societal perceptions. Using survey data from 24,000 respondents in six countries (Germany, Italy, Poland, Spain, Sweden, and the U.S.), the researchers found that while most men support equity in household responsibilities, both men and women tend to underestimate how common these views are.

Misperceptions and their impact

The study highlights that, on average, respondents underestimated the share of men who prefer equitable household arrangements by 26 percentage points. These misperceptions were most pronounced in Spain, where 84% of men support household equity, but only 48% of respondents believed this to be the case. Women were more likely than men to misjudge these attitudes, compounding the perception gap.

Informational intervention changes attitudes

The researchers conducted a randomized information experiment to test whether correcting these misperceptions could influence attitudes and behaviors. Participants who were informed about the actual prevalence of equitable preferences among men updated their beliefs, expressed a stronger preference for equity themselves, and demonstrated an increased willingness to pay for achieving equitable arrangements. Men who initially underestimated others’ preferences showed the greatest response to the intervention.

Barriers to equity remain

Despite these encouraging results, structural and social obstacles may limit progress toward equitable household dynamics. These include workplace inflexibility, cultural stigmas around men reducing work hours, and conflicting preferences between partners. The findings suggest that addressing these barriers will be crucial for fostering long-term gender equality.

Broader implications for gender norms

This research underscores the power of correcting societal misperceptions to promote progressive norms and behaviors. As gender roles evolve, future efforts could focus on dismantling workplace and societal constraints that perpetuate inequity and investigating strategies to align household dynamics with modern values.

Improving day care access for disadvantaged families

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Participation in high-quality day care is crucial for both child development and parental employment, particularly for socio-economically disadvantaged families. However, many families struggle to secure spots in such programs, with disadvantaged families facing the greatest barriers to access—a phenomenon referred to as “reverse selection on gains,” whereby those who would benefit most from high-quality day care are the least likely to gain access.

A recent IZA discussion paper by Olivier De Groote and Minyoung Rho analyzes data from a Belgian platform to explore alternative matching systems and policies aimed at addressing these challenges. The study finds that centralized matching systems can significantly improve access for disadvantaged families. Algorithms commonly used in school choice contexts are effective in reducing barriers for late-applying families, improving their acceptance rates.

Affirmative action policies, such as quotas, enhance welfare and enrollment rates for disadvantaged families while substantially lowering their unmatched rates. However, these policies also lead to increased segregation within day care institutions, failing to improve diversity. Moreover, quotas result in a higher unmatched rate for advantaged families.

Expanding capacity is another solution, but it requires substantial government investment. While costly, increasing capacity benefits all families and aligns with parental preferences, making it a valued intervention. In contrast, reforms to day care pricing, such as offering free day care or implementing progressive pricing, have limited impacts. Free day care primarily transfers resources to advantaged families, while progressive pricing, although helpful for disadvantaged families, offers diminishing returns since their current costs are already low.

This study underscores the importance of designing policies that improve access to day care while balancing equity, welfare, and inclusion. Its findings offer practical guidance for creating more equitable and efficient systems.

Caught in the trap: Long-term setbacks for mothers after childbirth

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Small jobs, such as the so-called Minijobs in Germany, appear to be particularly attractive to mothers. About 15 percent of first-time mothers who were in full-time employment before the birth of their child take up a Minijob when they return to the labor market after a child-related break. The workload is usually only a few hours per week, and because Minijobs are publicly subsidized, they are not subject to income tax or social security contributions. The gross income is therefore equal to the net income.

However, compared to regular (even part-time) jobs, Minijobs are often less demanding and provide limited skill development, which means that the work experience they provide may later be considered inferior. Does taking a Minijob after childbirth have long-term negative consequences for mothers’ labor market success?

Persistently larger child penalties

A recent IZA paper by Matthias Collischon, Kamila Cygan-Rehm, and Regina T. Riphahn examines the long-run consequences of subsidized small jobs using the example of German Minijobs. The authors analyze administrative data to compare the long-term “child penalties” of mothers who started out in Minijob employment versus those who returned to unsubsidized (regular) employment after childbirth.

They find persistently larger child penalties for Minijob mothers compared to otherwise employed mothers up to ten years after the first birth. Specifically, mothers who took a Minijob after giving birth are almost 10 percentage points less likely to be in regular (unsubsidized) employment a decade later. In addition, returning to the labor market as a “Minijobber” persistently increases the child penalty in earnings by at least 10 percentage points compared to returning to regular employment.

Lower pension entitlements

The Minijob program is one of the largest labor market programs in Germany, subsidizing employment with earnings below a certain income threshold (currently 538 euros, increasing to 556 euros in 2025). Although intended as a stepping stone to regular employment for the unemployed, Minijobs may trap some individuals in unskilled jobs with low earnings.

The results of the current study suggest that this applies particularly to mothers, who typically reduce their working hours substantially after the birth of a first child. The negative consequences for mothers’ labor market outcomes over the long term translate directly into lower pension entitlements. More broadly, the findings highlight the unintended consequences of public policies that subsidize small jobs.