Immigration has been a hot-button political issue for many years, but often political decisions that affect immigration policy are not based on the economics of immigration. In his new book, Immigration Economics, George J. Borjas brings together a synthesis of the leading theories, models, and methods used to examine labor flows. He suggests that these sources should be considered when crafting immigration policy, because they can help guide policymakers in areas such as the rate of assimilation they might expect and the impact immigration could have on the wages of native workers.
Borjas focuses on two main themes. The first is that immigration has “distributional consequences.” In other words, some people achieve economic gains through immigration, but others do not. The second is that immigrants are “rational economic agents” who use the resources available to them to achieve financial gain. These two themes, he argues successfully, should be considered during debates over immigration policy because they reveal behavioral patterns in both immigrants and the receiving population. These patterns can help determine whether it is desirable for a country to accept immigrants, decide whether nations should seek out low- or high-skilled workers, and help determine how immigrants will be assimilated into the host society. He further states that migration is the main way to even out inefficiencies within the labor market and ensure that workers are allocated into the jobs in which they will be most effective.
Borjas has organized the book into nine thematic chapters. The first two discuss who immigrates and the rate at which immigrants assimilate. Chapters 3 through 6 discuss demand theory and how it is used to show the impact of immigration on the labor market, tests the empirical literature, and suggests reasons for discrepancies in said literature. Chapters 7 through 9 use economic models and historical contexts to illustrate the net gain from immigration both in the United States and globally.
In this book, Borjas does many things well. Broadly speaking, he does an excellent job combining economic theory with empirical evidence. This combination helps him to prove his point that costs and benefits matter in immigration, especially when making policy concerning immigration. For example, in Chapter 1 he does an excellent job of showing why someone moves, by showing that the person moves when gains from migration exceed the cost. Moreover, skills earned after entry determine the rate of assimilation. In another instance, he proves that in the short run immigration lowers wages for native workers, but in the long run the market adapts and wages regulate. However, in occupations that saw the most immigrant labor, wages tended to remain lower.
In Chapter 6, Borjas makes an interesting point about the availability of low-skilled workers causing firms to postpone making technological advances in terms of machinery to perform the jobs of these low-skilled workers. This observation suggests that technological advances are advantageous to firms only when the cost of low-skilled labor rises because of a smaller supply. Therefore, immigration into specific areas where low-skilled labor is abundant could cause firms to delay technological advancement. Similarly, the resettlement of the company into an area with abundant low-skilled labor could have the same effect. This point could be important in discussions of globalization, as many companies move to locations outside the developed world to exploit low-skilled and low-cost labor. If those same companies could restructure by making technological advances for a lower cost, moving might become less desirable.
Borjas also excels in pointing out the weaknesses in prior scholarship. Most significantly, he notes that changes in econometric models can skew empirical data when studying the impact of immigration on the wages of laborers in receiving countries. In this case, each new generation of scholars developed new models to study the issue. As a result, new models sometimes contradicted previous research. Borjas solves this problem by offering an alternative model. He also suggests that scholars need to use the mean of the log wage, rather than the log of the mean wage as some scholars have done. By making this change, economic studies would be in concert with the standard for studying labor economics.
Where Borjas is slightly weaker, however, is in using theoretical models to show the net gain of immigration in the United States and globally. The models he uses are so restricted that his findings are debatable. He also might have included complementary information on the wages of native workers in his later chapters, as he does in some of the earlier sections. The book’s title is also a bit misleading. It sounds as though the book will be a comprehensive study of immigration economics in all its various permutations, but this is not the case. Borjas limits the study to issues directly linked to the costs and benefits of immigrant participation in the labor market. He also focuses almost exclusively on male workers between the ages of eighteen and sixty-five. The only times women and children are considered are in models that include families of immigrant workers.
Borjas does better when turning to historical models. His examples of research based on Nazi Germany and Soviet Russia are more persuasive than his theoretical models, mostly because he is drawing from concrete data. His reliance on real data also helps in chapter nine, in which he examines census and other records to determine how the children of immigrants fared in terms of wage rates in comparison to the immigrant generation. Borjas finds that the second generation generally does better if its parents were highly skilled workers. However, the ethnic makeup of the neighborhoods these children were raised in likewise made a difference in economic assimilation. Wage rates were lower if they lived in a neighborhood with a higher percentage of ethnic residents. As Borjas states, in wages, as in many other aspects of assimilation, “ethnicity matters.”
Despite its minor weaknesses, the book is well conceived and useful. Overall, this is a handy synthesis of economic theories and methods. When combined with the excellent empirical analysis that Borjas provides, it becomes an essential work for the study of immigration and labor economics. Because the book is technical and requires at least some knowledge of calculus and demographic models and methods, it is best suited for economists, advanced graduate students, academics in the social sciences, and perhaps some policymakers.
