CEPII, Recherche et Expertise sur l'economie mondiale
The Changing Structure of Immigration to the OECD: What Welfare Effects on Member Countries?

Michał Burzyński
Frédéric Docquier
Hillel Rapoport

 Highlights :
  • The skill and origin-mix of immigration to the OECD has evolved over time; especially, the last wave of immigration in the post-crisis period (2010-2015) is different in terms of skill and origin structure from the previous waves.
  • We explore the welfare implication of this changing structure for native OECD citizens in terms of wages, employment, fiscal (i.e., public spending and taxes) and market size effects (i.e., the increased economies of scale and variety in consumption) brought about by immigration.
  • We calibrate a general equilibrium model for 20 selected OECD member states.
  • Results show that the welfare effects of immigration are very heterogeneous across skill groups, countries of destination, and immigration waves; while the last wave of immigration is less skilled and brings about lower benefits overall, the differences across immigration cohorts are small relative to the difference across receiving countries.

 Abstract :
We investigate the welfare implications of two pre-crisis immigration waves (1991–2000 and 2001–2010) and of the post-crisis wave (2011–2015) for OECD native citizens. To do so, we develop a general equilibrium model that accounts for the main channels of transmission of immigration shocks – the employment and wage effects, the fiscal effect, and the market size effect – and for the interactions between them. We parameterize our model for 20 selected OECD member states. We find that the three waves induce positive effects on the real income of natives, however the size of these gains varies considerably across countries and across skill groups. In relative terms, the post-crisis wave induces smaller welfare gains compared to the previous ones. This is due to the changing origin mix of immigrants, which translates into lower levels of human capital and smaller fiscal gains. However, differences across cohorts explain a tiny fraction of the highly persistent, cross-country heterogeneity in the economic benefits from immigration.

 Keywords : Immigration | Welfare | Crisis | Inequality | General Equilibrium

 JEL : c68, f22, j24
CEPII Working Paper
N°2018-09, June 2018

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