Labor Market Competition and Individual Preferences over Immigration Policy

Kenneth F. Scheve and Matthew J. Slaughter conducted an analysis of the determinants of individual preferences over immigration policy in the United States. The analysis produced two main empirical results. 1) less-skilled workers are more likely to prefer limiting immigrant inflows into the US, believing that wages decrease because of these inflows. This result is consistent with the Heckscher-Ohlin Model of international trade as well as the factor-proportions analysis labor model. 2) there is no evidence indicating that skills and immigration opinions are more strongly correlated in high-immigration communities. The hypothesized link between immigration policy preferences and skill is mediated by wage, in the sense that current factor income (what wage measures) determines immigration policy preference while being itself determined by skills.  

Economic Models of Immigration Policy Preferences

Three key assumptions are made. 1) Current factor income is a major determinant of people's economic welfare. 2) U.S. citizens think that current immigrant inflows increase the relative supply of less-skilled workers. 3) The only two factors of production are skilled labor and unskilled labor.

The Heckscher-Ohlin Model

Given its national factor endowments and technology, a country chooses to produce an output mix that is subject to constraint by the world terms of trade. The output mix helps determine national wages. How will the national wages change when there is an inflow of immigrants? Well, it depends on the size of the immigrant inflow (large or small). Large inflows are absorbed by the domestic economy only by changing the output mix, such that the output in the unskilled-labor-intensive sector expands and the skilled-labor-intensive sector declines in absolute terms. This prediction is generalized by the Rybczynski theorem. Additionally, wage effects also depends on the size of the country. A small country has no influence on the world demand for goods and hence acts like a price-taker, whereas a large country can affect world prices if it adjusts its output mix. The two binary factors combine to give us four scenarios.

	large country	small country
large immigrant inflow	Output mix adjusts, Wage changes: - unskilled workers’ wages declines, - skilled workers’ wages rises	Output mix adjusts, Wage changes: - unskilled workers’ wages declines, - skilled workers’ wages rises
small immigrant inflow	Output mix adjusts, Wages change: - unskilled workers’ wages declines, - skilled workers’ wages rises	Output mix adjusts, Wages don’t change