The impact of immigration on the labour market outcomes of New Zealanders

Economic Impacts of Immigration Working Paper Series

David C Maré
Motu Economic and Public Policy Research
Email: dave.mare@motu.org.nz

Steven Stillman
Motu Economic and Public Policy Research
Email: stillman@motu.org.nz

We thank Melanie Morten and Yun Liang for exceptional research assistance and Jacques Poot, Deborah Cobb-Clark, George Borjas, Rob Hodgson, participants at the An International Perspective on Immigration and Immigration Policy Conference and a seminar audience at University of Auckland for comments on the paper. We also thank James Newell for providing us with data and assistance in creating local labour market boundaries.

Disclaimer: Access to the data used in this study was provided by Statistics New Zealand under conditions designed to give effect to the security and confidentiality provisions of the Statistics Act 1975. All non-regression results using Census data are subject to base three rounding in accordance with Statistics New Zealand's release policy for census data. Funding for this project was primarily provided by the Royal Society of New Zealand Marsden Fund grant 05-MEP-002. Additional funding has been provided by the Department of Labour Immigration Service to whom we are grateful. Any views expressed are the sole responsibility of the authors and do not purport to represent those of the Department of Labour, Motu or Statistics New Zealand.

ISBN: 978-0-478-33362-6
April 2009

© 2009 Motu Economic and Public Policy Research Trust. All rights reserved. No portion of this paper may be reproduced without permission of the authors. Motu Working Papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review or editorial treatment.

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ABSTRACT

This paper uses data from the 1996, 2001 and 2006 New Zealand Census to examine how the supply of immigrants in particular skill-groups affects the employment and wages of the New Zealand-born and of earlier migrants. We first estimate simple Constant Elasticity of Substitution (CES) production functions that allow for substitutability between workers from different skill-groups, but assume that, within skill-groups, migrants are perfect substitutes for non-migrants. We next estimate hierarchical CES production functions that allow for substitutability between immigrant and non-immigrant workers within skill-groups, but constrain the patterns of wage impacts on different factors in response to changing factor shares, and that natives and migrants are not substitutable across skill-groups. Then, we extend the previous literature by estimating a Generalised Leontief production function that allows for a less restrictive relationship between changes in factors shares and changes in wages within a particular level of the production function and for substitution and complementarity between immigrant and non-immigrant workers both between and across skill-groups. Regardless of the model being estimated, we find little evidence that immigrants negatively affect either the wages or employment opportunities of the average New Zealand-born worker. However, we find some evidence that increases in the number of high-skilled recent migrants have small negative impacts on the wages of high-skilled New Zealand-born workers, which are offset by small positive impacts on the wages of medium-skilled New Zealanders.

JEL classifications: J61, R23

Keywords: Immigration, Wage Impacts, New Zealand, Labour Market Areas

List of Figures

List of Tables

1. Introduction

2. Data and Sample Characteristics

2.1 Data sources and variable definitions

2.2 Sample characteristics

2.3 Defining skill-groups

2.4 Labour market outcomes

3. Descriptive Evidence

4. Production Function Estimates