Lucchetti, Gabriele
(2024)
Essays on immigration and regional economics.
PhD thesis, University of Nottingham.
Abstract
People have always been on the move, but in recent decades, international migration has reached unprecedented levels. People from all over the world are leaving their homes in search of better lives. Some are fleeing violence or persecution, while others are seeking economic opportunity, family reunification, or simply a new adventure. Whatever their reasons, migrants play an important role in the global economy and society.
The consequences of international migration on the host economy and on migrants themselves are a complex issue and are not yet well understood. On the one hand, immigration can boost the economic growth of receiving countries by filling labor shortages and bringing new ideas and perspectives. On the other hand, immigration can increase competition in the labor market and lower wages for native-born workers. Additionally, poor economic and cultural integration of immigrants can lead to social unrest and divisions.
In this essay, I study the causes and consequences of immigrants’ labor market performance in the host country at a regional and aggregate level. To this extent, I focus on understanding (i) how immigrants’ spatial sorting is related to their labor market performance, and (ii) how the economic condition at arrival affects immigrants’ economic assimilation.
In the first chapter of this essay, titled “Skills, Distortions, and the Labor Market Outcomes of Immigrants across Space”, I study how immigrants’ earnings vary across different geographic areas and how this affects earnings inequality with natives and between cities. I use data from the American Community Survey and document that immigrants from low-income countries are more likely to live and work in big cities, but do not earn a premium for doing so, unlike natives and immigrants from high-income countries. To understand the mechanisms behind these facts, I build a quantitative general equilibrium spatial model that features differences in production technology across cities and heterogeneity in human capital and tastes for cities and occupations among workers. In addition, immigrants are subject to labor market distortions. I calibrate the model to match the observed earnings and shares of immigrants and native workers in two representative cities in the U.S., one big city and one small city. I find that heterogeneity in human capital is quantitatively important to explain the earnings gap between immigrants and natives. I show that removing all sources of heterogeneity between immigrants and natives reduces their earnings gap by 29 percent, at the expense of an increase in the earnings gap between cities by 2.3 percent. I also study the impact on the earnings gap between workers and cities of changes in immigration policy: opening borders to non-college-educated workers increases the earnings gap between immigrants and natives by 2.6 percent but reduces the earnings gap between cities by 0.3 percent.
In the second chapter of this essay, titled “Unlucky Migrants: Scarring Effect of Recessions on the Assimilation of the Foreign Born” coauthored with Alessandro Ruggieri, we study how aggregate labor market conditions affect the intra-generational assimilation of immigrants in the hosting country. Using data from the American Community Survey, we leverage variation in the national unemployment rates in the U.S. at the time of arrival of different cohorts of immigrants to identify short- and long-run effects of recessions on their careers. We document that immigrants who enter the U.S. when the labor market is slack face large and persistent earnings reductions. We find that a 1 p.p. rise in the unemployment rate at the time of migration reduces annual earnings by 4.9 percent on impact and 0.7 percent after 12 years since migration, relative to the average U.S. native. We demonstrate that changes in the employment composition across occupations with different skill contents are the key drivers. We show that were occupational attainment during periods of high unemployment unchanged for immigrants, assimilation in annual earnings would slow down on average by only 3 years, instead of 12. We also quantify the assimilation costs of entering the U.S. labor market when unemployment is high: in this scenario, immigrants lose between 1.7 and 2.4 percent of their lifetime earnings.
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