Economic immigrants - International migrants motivated by economic gain

Legal immigrants - Immigrants who are allowed to live + work in US

• H1-B provision - Allows high-skilled workers to enter + work in the US for 6 years

• Most sponsored by employers

• Weighed towards family reunification

Illegal immigrants - Immigrants who arrive illegally or enter legally on temporary visas + don’t leave

• The net annual inflow of illegal immigrants has averaged 350,000 per year over the last several years, with a high proportion of the inflow arriving from Mexico, the Caribbean, and Central America

• Some of these illegal immigrants move back and forth across the U.S.-Mexican border

Decision to migrate

• Taking advantage of economic opportunities

  • Human capital - Stock of knowledge, know-how, and skills that enables a person to be productive + earn income

  • Large wage differences

• Escaping oppression in home countries

• Reuniting w/ family

Factors affecting costs + benefits

• Greater distance → Reduces likelihood of migration

  • Beaten paths - Routes taken previously by family, relatives, friends

  • Clustering in cities

• Younger workers more likely to migrate than older workers

Economic effects of immigration

• Backflows - Return migration to home country

• Higher pay + improved standard of living

• Skill transferability - Skills that are transferable between employers in different countries

• Self-selection - Because some migrants choose to move while others with similar skills do not, it is possible that those who move possess greater motivation for personal economic gain and greater willingness to sacrifice current consumption for higher levels of later consumption. If so, these migrants may overcome the problem of imperfect skill transferability and eventually outdo domestic-born workers in wage and salary advancement

• Efficiency gains from migration - The same number of workers—rearranged among countries—produces greater total output and income after migration than before migration

• Brain drain - Emigration of highly educated workers

• Reduced wage income of native-born US workers

Complications + modifications

• Migrants incur explicit + implicit opportunity costs

• Remittances - Money transfer to home country

• Higher rate of return on US capital

• Negative self-selection - Movers are less capable and perhaps less motivated than similarly educated people who have jobs and stay in the origin nation

Illegal immigration debate

• Compensating wage differential - Wage premium to compensate for undesirable work

• Illegal workers increase total # of jobs in labor market

• Reduce wage rates in low-wage labor markets

• Produce goods + services at lower prices

• Negative fiscal impact on local + state gov’t

Optimal immigration

• Should be expanded until MB = MC

• Nation sets level w/ quotas + special provisions