Friday, May 19, 2006

Notes on immigration 

I decided to try to read more of what the "state of the profession" was on illegal immigration from Mexico after this post Tuesday provoked some negative reaction. I have done research on remittances but not Mexican remittances from the US, so while I know the general literature on immigration and think Alex Tabarrok's letter is in general correct, I have to agree with the commenters who note that the letter did not sufficiently distinguish between legal and illegal immigration. And as I said, the literature on immigration generally is divided on the effect of immigrants on U.S. wages.

One expert in the field, Prof. Gordon Hanson of UC San Diego has an upcoming article in the Journal of Economic Literature. (For non-economists: the JEL is published by the American Economics Association, the national professional organization. Its most frequent use is as an index of scholarlship in the profession, but it also runs articles that often are considered to be statements of where the literature is in a certain field, or to run in depth book reviews of important works. So a publication there carries somewhat of an imprimatur of "received wisdom" and has undergone substantial peer review.) It took me the better part of an evening to read, and all I've done here is pull out some interesting paragraphs, followed with interpretation and commentary from me. If you want to cut to the chase, there are three summary points at the bottom.

On the nature of illegal immigrants:

Immigrants from Mexico, whether legal or illegal, are drawn disproportionately from the middle of the country�s schooling distribution. Over time, illegal migrants appear to have become more likely to be female, to work outside of agriculture, and to settle in the United States on a long-term basis. Largely absent in the literature is analysis of the life-cycle behavior of migrants. Many individuals from Mexico first enter the United States as illegal immigrants and over time gain a legal permanent residence visa through sponsorship by a U.S. family member. One would expect that how a prospective migrant responds to changes in U.S. or Mexico economic conditions, or the extent to which a migrant already in the United States assimilates into U.S. society, would depend on whether the individual expects to obtain a U.S. green card in the future. Family sponsorship in the granting of entry visas may thus create a direct link between receiving-country policies on legal immigration and the incentive for illegal immigration.
Thus the ability of an illegal immigrant to woo a US family into sponsorship is a lure for Mexicans to come to the US. The fellow you hired off a street corner to move your furniture becomes your friend, and asks one day ... You have to wonder then why we have policies that allow a single family's offer of sponsorship to be determinative of whether an immigrant should be granted admission to the US.

On what motivates them to come to the States.
...Attempted illegal immigration appears to be particularly responsive to shocks to the Mexican economy, with surges in apprehensions at the U.S.-Mexico border coming shortly after downturns in Mexico. Yet, given the large magnitude of U.S.-Mexico wage differences and the small apparent cost of crossing the border illegally, the volume of migration flows from Mexico to the United States is surprisingly low. Also, given the high relative return to education in Mexico, it is puzzling that Mexican immigrants exhibit intermediate selection in terms of their observable skills. One would expect less-skilled Mexican immigrants to have the strongest incentive to migrate abroad....
This may be the most surprising part of the study for me, that it is somewhat better educated (not college graduates, but with a fair amount of HS) females that come to the US and work in rather than poorly educated males to work in the fields. There is now data from Mexican sources that give us a better indication of who is coming, though, and it appears that the demographics of illegal immigrants is indeed changing. This makes sense to me, though: If the return to education in America is rising, then those drawn to the US from abroad will increasingly have more education. Though, it should be pointed out, the ratio of earnings of poorly-educated native workers to immigrant workers is higher for lower education levels.

Thoughts on the amnesty/normalization process.
Over the last two decades, the United States has greatly increased the resources it devotes to controlling illegal immigration. The government has, in particular, beefed up enforcement at specific U.S. border cities. While the United States has criminalized the hiring of illegal immigrants, the government devotes few resources to monitoring U.S. worksites for the employment of unauthorized workers. The net effect of changes in enforcement policy (coupled with changes in U.S. and Mexico economic conditions) has been increasing levels of illegal immigration. There is no formal political economy theory of immigration control that would explain why the United States chooses border over interior enforcement. The United States appears to be on the verge of granting an amnesty to at least some of the illegal immigrants residing in the country, which would come two decades after an earlier legalization under the Immigration Reform and Control Act [a/k/a Simpson-Mazzoli --kb]. There is also no formal theory that would explain why a country would choose to enact imperfect and costly enforcement against illegal immigration today and later grant an amnesty to those that entered illegally.
In other words, we have created a system that in essence rewards those who can evade relatively expensive border security measures. Between 1994 and 2001 we increased the number of hours of Border Patrol officers on the line watching for illegal immigrants by a factor of four. Have we reached the point of diminishing returns on border enforcement? Maybe...
The price a migrant pays to a smuggler is higher in years when border enforcement is higher. But the elasticity of coyote prices with respect to enforcement is small, in the range of 0.2 to 0.5. During the sample period, a one-standard-deviation increase in enforcement would have lead to an increase in coyote prices of less than $40; in the mid 1990s average coyote prices were $410. The estimated demand for smuggler services and the individual probability of choosing to migrate to the United States are both quite responsive to changes in coyote prices. However, given the small enforcement elasticity of coyote prices, the observed increase in border enforcement over 1986 to 1998 appeared to reduce the average migration probability among MMP (survey of Mexicans in the border area) respondents by only 10%.
That's a little too economics-ese for some readers, so let me explain by analogy. If you try to stop drug smuggling into the US and pinch a large shipment of, say, cocaine, the price of cocaine should rise. But the size of the rise in cocaine prices depends on the quantity of the other shipments and on the responsiveness of cocaine users to increased prices. If border security was greatly increasing over the period after Simpson-Mazzoli and all we got was a 10% decrease in the flow of illegal immigrants (which would be a reduction of about 20-30k per year), then how much more will the fence do for us? The way to see that is to see whether the price of coyotes rises dramatically after the fences are built. So far, there's not much evidence that other enforcement measures have had much effect. And again, we haven't spent nearly so much on internal enforcement, probably because politically it's unpalatable. Gordon explains further,
The United States has undertaken a massive increase in the resources that it devotes to border enforcement. Yet, the apparent impact of this increase has been modest. While expanded border enforcement has reduced attempted illegal entry at what used to be major crossing points in California and Texas border cities, it appears to have had a small effect on deterring illegal immigration overall (measured either in terms of changes in smuggler prices or the average probability a Mexican national migrates to the United States). One possibility is that there are important non-convexities in enforcement such that it only becomes an effective deterrent to illegal entry at high levels of resource commitment. This is perhaps the implicit argument of those calling for further expansion of U.S. enforcement efforts. Another possibility is that U.S. enforcement strategies are ineffective by design, due to the political economy of immigration control.

For instance, in 2005 the Western Growers Association, a business lobby representing farmers in the western United States, issued a statement complaining that excessive enforcement was preventing farmers in Arizona from hiring sufficient immigrant labor to harvest their winter lettuce crop. In 1998, INS raids of onion fields at harvest time in the state of Georgia prompted the U.S. Attorney General, both Georgia U.S. senators, and three Georgia congressional representatives to criticize the INS for injuring Georgia farmers.
Links infra are mine. One of the reasons the House has an easier time passing immigration control laws is that the areas most affected are either border districts or districts with a high concentration of industries that use immigrant labor (like textiles or farming.) Senators, however, can be lobbied by those groups to the detriment of the rest of their states, since there is the Olsonian problem of having intense benefits to lax internal enforcement and diffuse costs. (Two colleagues and I are presenting a study on this at the Western Economics Association meetings in July in San Diego that gets at some of these questions.) This is one explanation for why the Senate is generating a softer-line immigration bill than the House.

What should we learn from all this? I'd make three points
  1. Contrary to some analyses, we have spent a great deal on increasing border security in the last few years; it has had at best modest effects on inflows of illegal immigrants. This would argue that the increase of personnel through the call-up of National Guard probably will have little effect. And how can we be so sure that a fence will have greater effects? We don't know.
  2. The character of the illegal immigrant has changed over the last forty years to be better educated and more female. These illegal immigrants are able to use the existing program of sponsorship to convert their status from illegal to legal already.
  3. We continue to see little done to deal with internal enforcement, and we therefore may end up with an increasingly disproportionate share of our immigration control resources at the border. This mixture is probably suboptimal. Indeed, there appears to be a case to use the fence as a substitute for border patrol personnel and use it to free those officers up to raid firms and industries that make use of illegal immigrant labor. A combination of business pressure and the diversity/racial warfare crowd prevents this from happening, and there's no sign of a change in thought in Congress on this issue.