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In this essay, we address three major questions in the economics of immigration: whether immigrants were positively or negatively selected from their sending countries; how immigrants assimilated into the US economy and society; and what effects that immigration may have on the economy, including the effect of immigration on native employment and wages. In each case, we present studies covering the two main eras of US immigration history, the Age of Mass Migration from Europe (1850-1920) and the recent period of renewed mass migration from Asia and Latin America.
Reviewing the historical and contemporary evidence side by side yields a number of insights. First, the nature of migration selection appears to have changed over time. Whereas, in the past, migrant selection patterns were mixed, with some migrants positively and others negatively selected from their home countries on the basis of skill, migrants today are primarily positively selected from source country populations, at least on observable characteristics.3 The rise in income inequality in the US can help explain the increasingly positive selection of immigrants seeking to take advantage of the high returns to skill in the US. But the fact that recent immigrants are not negatively selected – even from destinations that are more unequal than the US, as would be predicted by the classic Roy model of self-selection – may be explained by the growing selectivity of US immigration policy over time, or by rising costs of (often undocumented) entry due to strict immigration restrictions.
Second, both in the past and today, the evidence is not consistent with the common perception of the “American dream,” whereby immigrants arrived penniless and eventually caught up with US natives. Long-term immigrants in both periods have experienced occupational or earnings growth at around the same pace as natives. As a result, immigrants who held lower-paid occupations than natives upon arrival to the US did not catch up with natives over a single generation. The major difference between the past and present is that, circa 1900, typical long-term immigrants held occupations similar to the native born, even upon first arrival, whereas today the average immigrant earns less than natives upon arrival to the US. Smaller earnings gaps in the past are consistent with the fact that immigrants primarily hailed from European countries that, though poorer than the US, were not as dissimilar in development to the US as are sending countries like Mexico and China today.4 However, there was a substantial degree of heterogeneity in immigrants' skills and earnings across sending countries, including some immigrant groups that out-earn natives from the outset. We also argue that, when evaluating the pace of immigrant assimilation, methods matter. Studies based on cross-sectional data, which are less well-suited to studying assimilation than are panel data, often provide an overly-optimistic sense of immigrant convergence.
Third, both then and now, immigrants appear to reduce the wages of some natives, but the evidence does not support the view that, on net, immigrants have negative effects on the US economy. Instead, new arrivals creates winners and losers in the native population and among existing immigrant workers, reducing the wages of low-skilled natives, encouraging some native born to move away from immigrant gateway cities, and spurring capital investment; in the past, these investments took the form of new factories geared toward mass production.
The main goal of this paper is to review the historical evidence on key issues of concern to the economics of immigration today. We explicitly address the set of topics covered in the Borjas' (1994, 2014) reviews of the literature, which include immigrant selection and assimilation and the effect of immigrants on native workers, and we add in each case the insight that comes from comparison with the historical evidence. Our focus is on the labor and applied microeconomics research, rather than on more macroeconomic approaches to this topic. Hatton and Williamson (2005) and Ferrie and Hatton (2014) provide complementary reviews of the role of immigration in global economic history. There are a number of important historical topics that we do not cover here. These include internal migration within the US,5 the involuntary migration of slaves,6 migrations to destinations outside of the US,7 or the effect that out-migration might have on sending countries.8 Furthermore, our coverage of the literature on the modern period is only partial.
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