The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

August 08, 2018

Immigration and Hispanics' Educational Attainment

In a previous macroblog post, Whitney Mancuso and I wrote about the improved labor market outcomes for workers with the least amount of formal education. We attributed this improvement mostly to a combination of a secular decline in the supply of these workers over time and a shift in the composition of the low-skilled workforce toward Hispanic immigrants—a group that has an especially high rate of workforce attachment.

In a related article by colleagues at the St. Louis Fed, Alexander Monge-Naranjo and Juan Ignacio Vizcaino explore how the employment characteristics of the Hispanic population have grown increasingly concentrated in low-skilled occupations over time, and they relate this to the relatively smaller gains in the average educational attainment of the Hispanic population.

The authors ask why the education level of Hispanics has lagged behind other groups and suggest that it could be a consequence of intergenerational persistence; it takes a while for the children of poorly educated immigrants to catch up with the rest of the population. This explanation is likely to play a role, especially when considering why a relatively smaller share of U.S.-born Hispanics go to college. The study also notes differences across gender, showing that Hispanic men are less likely than Hispanic women to continue their education after high school, and although the college rate has been rising for all Hispanics, it is growing faster for women.

I also want to note that a large share of the Hispanic population in the United States are foreign born, and these immigrants have a much lower average level of educational attainment than do U.S.-born Hispanics. This observation is evident in table 1, which is based on data on individuals aged 25-54 (prime age) from the Current Population Survey. For instance, in 2017, 57 percent of the U.S. prime-age Hispanic population was foreign born, and 21 percent of these prime-age foreign born Hispanics had a college degree (associate degree or higher). In contrast, 36 percent of U.S.-born prime-age Hispanics had a degree.

Table 1: Selected Characteristics of the U.S. Prime-age Population (percent)


Foreign born

Completed a college/associate degree









Foreign born

U.S. born

Foreign born

U.S. born






















Source: Current Population Survey, author's calculations

As the St. Louis Fed study concludes, a primary factor distinguishing the Hispanic workforce in the United States is their lower average level of educational attainment. Further distinguishing between foreign and U.S.-born Hispanics shows the role that immigration has played in holding down the average education level since a large fraction of Hispanic immigrants have less education.

The Hispanic/non-Hispanic college completion gap remains large and has not closed over time. However, there has been relative improvement in high school completion, as table 2 shows.

Table 2: Selected Characteristics of the U.S. Prime-age Population (percent)


Foreign born

Completed 12th grade









Foreign born

U.S. born

Foreign born

U.S. born






















Source: Current Population Survey, author's calculations

Since 1997, the share of the prime-age foreign born Hispanic population who have finished 12th grade has increased by 15 percentage points. At the same time, the share of prime-age U.S.-born Hispanics completing high school has increased by 11 percentage points and is now not much lower than for non-Hispanics. While relatively low college attendance remains a major obstacle, greater high school completion is encouraging for Hispanics' future role in the workforce.

August 8, 2018 in Education, Immigration, Labor Markets | Permalink


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December 08, 2010

Questions (and some potential answers) on immigration and remittances

Immigration is a topic that raises many questions from both policymakers and the public, and researchers work to offer perspective. Some questions currently being posed are

  • Does immigration into the United States have a positive impact on native-born employment opportunities?
  • If remittance fees (that is, fees immigrants pay to send money home) are reduced, how much more money do migrants send home?
  • How does sponsorship of family members' immigration into the United States change immigration patterns?

Researchers discussed these questions and more at the Federal Reserve Bank of Atlanta's Americas Center research conference on Remittances and Immigration, held Nov. 5–6, 2010.

Unskilled immigrant labor and offshoring
Some highlights from the research presented at the conference include a paper by University of California, Davis professor Giovanni Peri that was recently profiled in the New York Times. Peri argues that unskilled immigrant labor helps prevent U.S. firms from relocating offshore.

The paper cites evidence indicating that less-educated immigrants are employed in jobs that require more manual and routine-intensive tasks and on average do not compete for jobs in which the bulk of native workers are employed. Those jobs tend to be more cognitive and nonroutine-intensive type of work. In other words, immigrants and low-skilled native workers are not substitutes but complements. In fact, unskilled immigrants compete more with offshore workers. The paper concludes that immigration generates cost-savings for U.S. firms and thus a corresponding increase in productivity, so immigration's aggregate effect on the level of low-skilled native employment in the United States is positive.

This finding is in contrast to research conducted by George Borjas of Harvard University, who also participated in the conference. His work suggests that rather than being complements, immigrants with similar skill levels tend to be substitutes for native workers.

Remittance fees
In 2008, immigrants sent $336 billion to their relatives in developing countries, and in many countries remittances are often greater than private capital flows and official development aid combined. Remittance flows also generate billions of dollars in fees.

Dean Yang, from the University of Michigan, quantifies the impact of money transfer fees on remittances flows. Using a unique field experiment among Salvadoran migrants in the Washington, D.C., area, migrants were randomly assigned discounts on remittance transactions fees. Surprisingly, minor reductions in remittance fees led to large increases in total transfers. For instance, a $1 reduction in transaction costs generated $25 more remitted dollars per person per month. This finding suggests that a reduction in transaction costs can lead to very sizable gains in recipient countries.

Sponsorship of family members
Although countries such as Canada and Australia prioritize the entry of young, skilled foreign workers, the U.S. immigration system strongly emphasizes family reunification, which is a method where naturalized immigrants can sponsor relatives (spouse, children, parents, and siblings) in their immigration to the United States. Sponsoring new immigrants means that migrants not only are a major source of remittances, but they can fundamentally shape the flow of immigration by assisting migration of their relatives.

Until now, researchers had limited data on sponsors' behavior. Using a new immigration survey, Yale University professor Mark Rosenzweig presented research that for the first time explores the role of sponsorship. He shared preliminary results showing that while immigrant children who are less educated tend to receive remittances from their relatives who have immigrated to the United States, children with more schooling are able to take better advantage of the U.S. job market and are the first ones to be sponsored.

Other papers included research aimed at quantifying the effect of female migration on children left behind, the impact of immigrants on the educational attainment on natives, the productivity gains from skilled migration into the United States, and the role of seasonal migration in mitigating famine in Bangladesh. All of the conference papers are available.

By Stephen Kay, senior economist and coordinator of the Atlanta Fed's Americas Center, and Federico Mandelman, research economist and assistant policy adviser, both of the Atlanta Fed's research department

December 8, 2010 in Americas, Employment, Immigration, Labor Markets, Latin America/South America | Permalink


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The remittance fee of those immigrants must be clearly stated to them so that there will be no more problems. This is a hot issue since I am one those immigrants in the world who question the remittance fee,

Posted by: Donald Martin | October 12, 2012 at 03:51 PM

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May 28, 2009

Housing starts, remittances and macroeconomic developments

Recent evidence collected by the Dallas Fed's Pia Orrenius suggests that apprehensions of undocumented workers attempting to cross the U.S.–Mexican border are a good predictor of the overall American job market. Simply put, if one wanted to predict job market conditions in July of a given year, one should examine immigrant apprehensions in January. Orrenius finds that more immigrants attempt to cross the border from Mexico (and more of them are caught doing so) when immigrants believe the U.S. economy would offer more jobs in the near future.

One area of the economy that relied heavily on immigrant labor was housing. The following chart plots monthly U.S. housing starts (lagged five months) and remittances to Mexico. (I use year-over-year growth rates and smooth the noise from very short-run fluctuations by using a three-month moving average in my analysis.) I use remittances as a proxy for migrant Mexican labor.

Figure: Housing Starts and Remittances to Mexico

Note: Remittances in U.S. dollars. Housing starts indicate new, privately owned housing units.
Source: Bank of Mexico (remittances), Haver Analytics (housing starts)

The correlation between the two data series is strikingly high. For instance, the plunge in housing starts that began in early 2006 was followed by a sizable drop in remittances growth five months later. Of course, the results are not unexpected as the construction industry heavily employs immigrant labor.

Also, it is well known that immigrants send remittances to their country of origin on a regular basis. Some estimates indicate that the remittances sent by immigrants from developing economies back home reached $305 billion in 2008. (As an aside, keep in mind that because of unrecorded immigration flows through formal and informal channels, the actual numbers are likely to be significantly larger.) Remittances are particularly important for smaller Latin American countries. In 2007, for instance, recorded remittances represented more than 10 percent of the gross domestic product in several Latin American countries, including Honduras (25 percent), Guyana (24 percent), El Salvador (16 percent), and the Dominican Republic (13 percent), among others.

What is especially remarkable from a macroeconomic perspective is the volatility of these capital flows. During the housing boom, remittances to Mexico were growing at 20–25 percent annual rates (see the chart). With the onset of the global economic crisis, however, remittances have been declining, falling by almost 10 percent early this year. For smaller emerging economies, the volatility in remittance flows becomes a significant extra source of instability.

Migrant workers enter the country in response to upturns in domestic labor demand, and that upturn results in higher remittances both because of the increased number of immigrants but also because the existing stock of immigrant workers is earning more. Conversely, a downturn in labor demand should be reflected in lower remittance flows because of out-migration as workers return home and because of lower earnings among the remaining stock of migrants. But what happens when some of those workers have entered the country illegally?

In a study published in 1997, Belinda Reyes found that about two-thirds of the undocumented immigrants returned to Mexico within three years upon arrival. In a recent paper I wrote with Andrei Zlate, we explore the implications of changes to enforcement policies for the U.S./Mexican border on undocumented labor and remittances. We find that increased border enforcement during the last decade has broken the typical pattern of flows of undocumented workers. Basically, while increased enforcement makes it harder/more expensive to enter the country, it also reduces the incentive for those already in the country to leave. Why? Because of the high cost/risk associated with reentering the United States in the future.

In a recent paper, Carolina Rodriguez-Zamora adds support to our claims. She finds that as the U.S. Department of Homeland Security increases the amount of resources spent policing the border undocumented immigrants tend to stay longer.

Increased enforcement protects the existing stock of undocumented immigrants from additional competition, and this development can put upward pressure on wages when U.S. labor demand is high. When labor demand is low, rather than returning home, these individuals could remain in local labor markets, placing additional downward pressure on wages.

By Federico Mandelman, research economist and assistant policy adviser at the Atlanta Fed

May 28, 2009 in Immigration | Permalink


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Your last conclusion should be enlightening. Free markets for wages make it more competitive lowering costs. Barriers to entry increase wages. Might make some people switch sides on an immigration debate!

Posted by: Jeff | June 03, 2009 at 08:10 AM

This chart has a big help,its very useful because of this they easy known that immigrants send remittances to their country of origin on a regular basis,nice subject to explore.


Posted by: remittance philippines | August 25, 2009 at 01:46 AM

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April 30, 2009

The undocumented and business survival in the United States

Based on the severe economic contraction during the past six months, it is obvious why the topic of the economy receives so much attention as the economy directly weighs on the lives of citizens and businesses here and throughout the world. But the weight of the economy can have indirect effects as well, including potentially shifting attention from other policy issues.

For instance, a recent Bloomberg News article describes how economic troubles may affect potential immigration reform legislation.

"The long campaign to overhaul U.S. immigration laws may be derailed for yet another year—this time by the deteriorating economy."

The immigration debate is multifaceted, complex, and, at times, contentious. There are myriad issues to consider when entering into the immigration reform discussion, many of which are best left to the political process to decide. But, as the Bloomberg article describes, there is an important economic component to the immigration discussion. Economists can make a modest contribution to the debate by supplying unbiased research that touches on various aspects of the immigration question.

In that spirit, I offer up the results of research I've done with my colleagues, Julie Hotchkiss of the Federal Reserve Bank of Atlanta and David Brown of Heriot-Watt University in Edinburgh. Our research looks into the potential impact of undocumented workers on firm survival and is based on confidential information from the state of Georgia, which between 2000 and 2008 experienced the fastest growth in the number of undocumented immigrants in the United States, according to the Department of Homeland Security.

In this research, we find that firms employing undocumented workers enjoy a competitive advantage over firms that do not employ undocumented workers. We also observe that firms engage in herding behavior, i.e., firms will employ undocumented workers if their competitors do. The herding behavior is a natural consequence of competitive pressure: Rival firms' undocumented workforce lowers a firms' survival probability, while a firm's own undocumented workforce strongly enhances that firm's survival prospects.

Our analysis suggests that cost savings enjoyed by firms employing undocumented workers is a result of paying these workers wages that are less than what is paid to comparable documented workers. Because the advantage of hiring undocumented workers is cost-related, herding behavior and competitive effects are weaker if firms have the option to shift labor-intensive production out of state or abroad.

Our findings have several implications relevant to the policy discussion. The most straightforward prediction would be that if immigration reform is successful in forcing firms to pay undocumented workers market wages, the competitive advantage of hiring these workers may disappear. As a consequence, the demand for undocumented workers might well dissipate.

In addition, reform efforts that reduced the supply of undocumented workers (e.g., through tougher border and worksite enforcement) would raise firms' production costs, which may have an impact on prices if firms pass through these additional costs to consumers. However, this last point is not a direct implication of our analysis.

One word of caution about this study: Our results are based on the payroll reports of employers. This study does not have information on the activities of undocumented workers that are not recorded on firms' official wage records.

There are, of course, many other aspects of immigration policy to be considered, and we are loath to characterize the results of our research as supporting any particular approach or conclusion. But we do hope it sheds some light on a debate that already has its fair share of heat.

By Myriam Quispe-Agnoli, research economist and assistant policy adviser at the Atlanta Fed

April 30, 2009 in Immigration | Permalink


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And why won't businesses, seeing the advantage of the undocumented as you report here, replace the now documented with new undocumented workers at their earliest convenience?

Second, I know of many businesses that pay under the table to avoid taxes. If the IRS can't find these businesses, why are businesses paying the undocumented under the table suddenly going to find them when these workers are documented?

This is why the enforcement side must be perfected first. Only then can we consider creating a GIGANTIC inducement to more illegal entry.

Posted by: djt | May 01, 2009 at 02:14 PM

As my favorite talk show host Thom Hartmann always says:

"We DON't have an illegal immigration problem, we have an ILLEGAL EMPLOYER PROBLEM."

Start prosecuting the EMPLOYERS and the "illegal" immigrant problem will take care of itself.

Posted by: aaronbav | May 01, 2009 at 02:39 PM

In other words, if another contractor uses undocumented cash labor without paying workers' comp, FICA or other payroll deductions, I'll be forced: a) raise my prices; b) make less profit; or c) hire undocumented cash labor myself. If I don't do one of those things, I'll be out of business.

I'm sorry, but ten years ago most reasonably observant Americans figured this out without an economist's "analysis". We also figured THIS out: the undocumented receiving $10 an hour can send $2 per hour home to support his family. The documented, who is earning $8.50 to compete with the undocumented (because his documentation requires the employer to pay workers' comp, FICA and unemployment insurance), will never be able to support a family on that wage. His family lives here, in a dollar economy.

So the cheat gets a living wage while the legal worker barely gets by. The honest employer is driven out of business while the illegal employer is rewarded.

But wait! There's more! If you complain about this situation, you're labeled a racist or a xenophobe, not a concerned American. And if you're that struggling documented worker who can't support a family on $8.50 an hour, you're derided as not willing to do the "hard work" that immigrants are willing to do.

Bottom line: pay our documented workers enough to support their families and they'll do any work you ask them to do. Enforce laws against hiring illegal workers (very easy to do with social security numbers) and the legal firms will survive. All it takes is political will.

Posted by: Jeffrey Goodrich | May 01, 2009 at 07:21 PM

'As my favorite talk show host Thom Hartmann always says:

"We DON't have an illegal immigration problem, we have an ILLEGAL EMPLOYER PROBLEM."

Start prosecuting the EMPLOYERS and the "illegal" immigrant problem will take care of itself.
nonsense...hartmanns been bashing those of us who want border laws enforced since 'last hours of ancient sunlight'
the problem goes way beyond employers...
do you think drug dealers/ prison guards union/ teachers union want u.s. population to level off?
hartmanns full of it

Posted by: kevin joseph | May 04, 2009 at 07:27 PM

from what i heard on several radio shows 5 MILLION illegals got low income home mortgages thru hud


Posted by: kevin joseph | May 04, 2009 at 07:42 PM

This is a bogus argument. Increased immigration is a sign of a booming economy. The construction business and low level service business was going gangbusters during the greater part of the 2000-2008 timeline. This means that there was a need for undocumented immigrants which flooded this country. This is simple market economics. If you don't like it, swim to Cuba and find out how it works. There was demand for labor and labor came. Who do you think built all the crappy homes in the Atlanta suburbs? Who staffed all the new McDonalds and malls that opened in the exurbs? The illegals. We Americans decided we wanted to spend rather than work hard for a living and now we are complaining about immigrants. Get a grip you all. Business is going to do what it has to in order to increase profits. That's the American way and that's why we are the most powerful country in the world.

Posted by: Michael | May 06, 2009 at 12:21 AM

The analysis and results are, indeed, quite obvious (as noted by JG at 7:21p, 5/1. That may not detract from their usefulness in the debate over immigration reform, however.

Posted by: don | May 12, 2009 at 10:01 PM

1) "Need" and "some people want" are two different things.

2) How come real wages have gone down in professions where illegals mostly work.

3) Doesn't #2 indicate there is no "need" and that it's merely rich people playing the labor arbitrage game.

4) Shouldn't we be importing marketers, lawyers and doctors based on "need"?

5) Can't a modest, legal only, non lawyer hassle, non employer holds the visa system be implemented?

Posted by: joe schomoe | May 14, 2009 at 09:18 AM

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May 07, 2007

On Cake, And Eating It Too

In case, you haven't been paying attention to the French elections, the Guardian Unlimited has the index-card version of new president Nicolas Sarkozy's policy agenda.  The "European model" is out...

"'It will never be possible to stress enough the evil that the 35-hour week has done to our country. How can we retain this mad idea that by working less, we will produce more wealth and create jobs?"

... and tax cuts are in:

"We've got the highest taxes in Europe. France's problem is we're paying too much tax."

The cause for Turkish membership in EU wasn't much helped ...

"I want an integrated Europe, in other words, a Europe that has borders ... Turkey is in Asia Minor."

... and immigration control is front and center:

"Who can't see that there's a clear link between the uncontrolled immigration of 30 or 40 years and the social explosion on our housing estates?"

The immigration issue is a complicated one, and I have no business commenting a sovereign nation's assessment of how to best deal with the social consequences of open borders.  But this story, from the Wall Street Journal (page A2 in the print edition), provides an interesting juxtaposition:

The quality of life for some 80 million graying baby boomers in the U.S. may depend in large part on the fortunes of another high-profile demographic group: millions of mostly Hispanic immigrants and their children.

With a major part of the nation's population entering its retirement years and birth rates falling domestically, the shortfall in the work force will be filled by immigrants and their offspring, experts say. How that group fares economically in the years ahead could have a big impact on everything from the kind of medical services baby boomers receive to the prices they can get for their homes.

The article does not make a French connection, but one is not hard to conjure up.  A few years back, a Rand Corporation study had this to say:

The history of French population change is atypical; secular fertility decline began one century before the rest of the West. As a consequence, France had the oldest population in the world over the entire period of 1850–1950. The baby boom after the Second World War created a temporary increase in the number of births, but thereafter the fertility decline resumed. With current below-replacement fertility and increased life expectancy, population ageing is expected to reach new heights...

Family policies in France are a complicated mix, as the Rand article makes clear, and recent efforts at promoting fertility among native French citizens appear to have met with some success.  But this bottom line judgment, from the UN, remains relevant:

In most developed countries, the decline in fertility and the increase in longevity has raised three concerns for the future: the decrease in the supply of labor, the socioeconomic implications of population aging, and the long term prospect of population decline and demise...

On the medium run, the next ten years or so, the labor market is the main focus of concern. The reference system comprises here the set of supply and demand variables that determine the employment equilibrium. The impact of fertility and mortality changes is for that purpose at this time horizon very limited. Conversely, international migration could play a decisive role, as well as other socioeconomic variables.

For the long run, - from 2020 to the population projections horizon 2040-2050- structural imbalances of the age distributions are things to worry about.

The Financial Times reports:

Economists had predicted that investors would greet Mr Sarkozy’s election with enthusiasm, in anticipation of tax cuts, labour reform and debt-reduction measures.

In the long run, that last goal will require that immigration reforms be chosen wisely.

May 7, 2007 in Europe, Immigration | Permalink


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"Who can't see that there's a clear link between the uncontrolled immigration of 30 or 40 years and the social explosion on our housing estates?

Very funny. So, which part of France was Sarkozy's father from?

Posted by: ajay | May 08, 2007 at 06:19 AM

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April 13, 2006

What (Some) Economists Have To Say About The Economic Effects Of Immigration

The "some economists" refers to those interviewed in the latest survey by the Wall Street Journal:

Nearly 80% of economists who responded to questions about immigration in the latest WSJ.com forecasting survey said they believe undocumented workers have an impact on the bottom rung of the wage ladder. Twenty percent believe the impact is significant, while 59% characterize the effect as slight. The remaining 22% said there is no impact...

About half of the economists said the presence of illegal immigrant workers has slightly reduced the overall rate of inflation in the economy, while 8% said the inflation rate has been reduced significantly. But 41% said they believe undocumented workers have had no impact at all on inflation.

Okay, let me try this again.  To the extent that wage costs exert pressure on the pace of consumer- or output-price increases, it is wage growth in excess of productivity growth that matters.  If the wages of any particular subset of workers are lower because their productivity is lower, there are absolutely no consequences at all on prices or their growth rates.

In fact, the low productivity explanation for low wages seem to be exactly what most of the survey respondents have in mind:

On balance, nearly all of the economists – 44 of the 46 who answered the question – believe that illegal immigration has been beneficial to the economy. Most believe the benefits to business of being able to fill jobs at wages many American workers won't accept outweigh the costs.

I could be wrong, but I'm guessing that the opinions of most of those surveyed are based more on gut feeling than research.  If it's research you are looking for, try out Alan Krueger's suggestions (and tip your along the way in the direction of Brad DeLong).

April 13, 2006 in Immigration | Permalink


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» US immigration debate: "Card is well ahead of Borjas on points" from New Economist
Like many other econobloggers, I have been following US political debates over immigration with some interest. But what about the underlying economics? Has immigration been a net gain or loss for the US economy? Brad DeLong has posted a useful review o... [Read More]

Tracked on Apr 17, 2006 4:45:00 PM


“To the extent that wage costs exert pressure on the pace of consumer- or output-price increases, it is wage growth in excess of productivity growth that matters. If the wages of any particular subset of workers are lower because their productivity is lower, there are absolutely no consequences at all on prices or their growth rates.”

This of course is the cost-push fallacy of inflation. Cost-push fallacies of inflation attribute the cause of inflation to a whole host of reasons: rising energy prices, rising health care costs, increases in wage costs, monopolies, and on and on. Cost-push fallacies have existed for hundreds of years and have been criticized by economists such as Ricardo, Wicksell, Fisher, and Cassell. The price level is not determined by cost-push but by changes in the velocity augmented money supply per real output. P = MV/Q. No attempted was made to explain how wage-costs affected money, velocity, or real output.

Read this economic blog at your own risk. It could be damaging to one’s rational thinking. Note well: Alan Krueger’s paper also contains poor economic reasoning.

Posted by: tom | April 13, 2006 at 11:33 PM

Is having "cheap labor" for business a good thing?

Because we have cheap labor do we invest less and hold down our over-all living standards?

Would we be better off with more expensive labor that would lead to more investment and higher productivity?

I do not know the answer to these question, but I suspect that having an ample supply of "cheap labor" is a negative for most of us.

Posted by: spencer | April 14, 2006 at 09:25 AM

tom -- The relationship between unit labor costs and prices is an implication of the standard New Kenynesian or New Classical Synthesis framework. You may not like that framework, but I would note three things: (1) It is, by a long shot, the dominant paradigm of moden macroeconomics; (2) It is not necessarily inconsistent with the notion that inflation is ultimately a monetary phenomenon; (3)Monetarists are really just Keynesians who choose a different point (or points) of emphasis. A very nice primer on the New Keynesian framework can be found here: http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2004/goodfriend.pdf

Also, if you have specific objections to Kreuger's comments, I would be glad to engage them (and even accept them if yourargument is a goode one). But its a little hard to evaluate the simple assertion that his reasoning is poor.

spencer - My answer is a simple one. If the labor that comes and goes is market-driven, the outcome is probably the right one. I realize, of course, that there are lots of distortions that can drive a wedge between market outcomes and "the best" outcomes, but I'm convinced a supply of competitvely cheap labor is one of those cases.

Posted by: Dave Altig | April 16, 2006 at 08:37 AM

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April 04, 2006

Immigration and Time Inconsistency

Kevin Hassett explains:

Right now in the Senate, the two major [immigration] plans being debated are from Majority Leader Bill Frist and Judiciary Committee Chairman Arlen Specter. Frist's bill focuses primarily on border protection, and has been characterized as an "enforcement only'' proposal. Specter's proposal borrows from a bill that Senators John McCain and Ted Kennedy introduced last year. It includes provisions for temporary guest worker visas and for legalizing the status of currently undocumented individuals...

The Frist bill and an immigration measure passed by the House of Representatives in December provide for stiff enforcement measures, including felony charges for smuggling illegal aliens into the U.S.         

Such a policy falls into a logic trap that is well known to economists. It lacks what they call "time consistency.''  We feel sympathy for the folks already here, but don't want to allow more illegal immigrants in. Yet as we work out a solution that may take years to become effective, if it ever does, there will arrive a whole new population of illegal immigrants who we will feel sympathy towards.         

If we are willing to grant amnesty for immigrants today, we will be willing to grant amnesty again five years later. History appears to bear this out. Some are comparing Specter's proposal to a 1986 bill, signed by Ronald Reagan, that offered amnesty to millions of illegal immigrants, and did little to stem the inflow of more of them....

... Accordingly, there really should be only two immigration policies to choose between. We can round up all of the illegal residents today and ship them home, crack down hard at the borders, and promise to do both again and again forever.         

Or, we can find a way to ease the path toward citizenship for current residents, establish generous rules for entry into the U.S., and be willing to load anyone who doesn't follow those rules into a bus and ship them home.         

The Frist approach resembles neither. The Specter approach resembles the latter, and is the far better policy.

Although I strongly prefer an approach that leads to legal work status, I'm not sure why a policy that strictly shuts down the borders is necessarily time inconsistent unless you begin with the presumption that border enforcement is not possible.  But in that case, it would seem that the Frist-McCain-Kennedy plans run into exactly the same sort of problem. If the borders remain porous, and guest worker programs too conservative, illegal entry will occur, and the problem that Hassett emphasizes rises up again. (See, for example, the heart-tugging picture, and accompanying tale, posted at Econbrowser.)

I'm not willing to concede that sufficient border enforcement is impossible, combined with a guest-worker/immigration policy that keeps the cost of legal entry low (bY ensuring that quotas are sufficient to demand, for example).  But the point is well taken: We should probably be leery of any policy that does not confront the very human impulse to behave in a time-inconsistent fashion.

Bonus: Hassett also discusses the research on the "diversity gains" of immigration, covered last week at Angry Bear

April 4, 2006 in Immigration | Permalink


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» Immigration from Immigration
An immigrant is someone who intends to reside permanently, and not a casual visitor or traveler.Since the reorganization three years... [Read More]

Tracked on Apr 11, 2006 9:30:04 AM

» Immigration from Immigration
An immigrant is someone who intends to reside permanently, and not a casual visitor or traveler.Since the reorganization thr... [Read More]

Tracked on Apr 12, 2006 1:45:06 PM


I really think we need an economic solution if we are to make real progress on this issue. We create far too many jobs unattractive to native workers and too attractive to illegals and this creates the same draw as drug consumption does on illegal trafficking. Doubling the minimum wage and enforcing it would help considerably by reducing demand for illegals.

Posted by: Lord | April 04, 2006 at 01:19 PM

So the two time-consistent policies are these:

We're going to be hard on illegal immigrants today, and hard on them tomorrow. There will be no amnesty or any other program to make their lives easier once they get into the U.S. When we discover them, we will deport them. We will crack down on employers and we will monitor the borders.


We're going to be easy on illegal immigrants today and easy tomorrow. We will provide a path for them to become U.S. citizens, and this path will be open to future illegal immigrants. People who manage to get here illegally will be as free to go onto this path as people who have been here illegally for some time. Illegal immigrants will not be deported but will be encouraged to become legal. Employment of illegal immigrants will be encouraged, as long as the immigrants are heading towards legal-immigrant status.

Posted by: Hal | April 06, 2006 at 02:42 PM

You dumb asses Americans are so full of crap we came here stole this country from Native Americans and now think we have the right to tell people not to come into this country horse shit...if you are to lazy to take a job then let someone who will do it take it!!!

Posted by: Marcia | December 06, 2006 at 05:57 PM

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