UC Davis Econ in the News

(The link from prominent blog type…)

Brad DeLong puts these words in Prof. Peri’s mouth:

If I had Giovanni Peri here at hand, I think that he would say that increased immigration is very good for new migrants, good for savers worldwide, good for native-born workers, good for previous immigrants who have substantially assimilated–social knowledge, English proficiency, et cetera–and probably bad for previous immigrants who have no assimilated. And he would also say that the model goes haywire and is untrustworthy when the number of non-assimilated immigrants is small, and that that going haywire is where the very large income losses for previous migrants is coming from.

And, of course, the thing to object to in the turn this entire debate has taken has been the failure to focus evenly on the consequences for all stakeholders in global migration–look at what happens to everyone, not just one particular group that is convenient for your current political position.

But I will ask him.

From what I can tell, Peri paper shows that because native born workers and immigrant workers are compliments (i.e. working together they produce more than the sum of their individual production), immigrants can help or at least not harm native workers. He hasn’t said anything about “savers worldwide” or “immigrants who have substantially assimilated.” His innovation was to think of workers as compliments not substitutes and he says nothing about the welfare effects of “all stakeholders in global migration.” I’m not sure were Brad is getting all this, but its not Peri’s paper.

Peri has shown complementarities existed. He didn’t identify the source of that complementarity. Maybe the industries immigrants moved into during the period of Peri’s study (1990-2004), like construction, were especially amenable to this happy division of labor. There was a housing boom, if I recall. Maybe the conditions that produced Peri’s counterintuitive result no longer hold. We keep hearing the housing bust is just around the corner.

Or maybe all the complementarities are “used up.” Industries have found all the ways, given the current stock of native born, to split jobs between natives and immigrants to exploit the division of labor.

I’m not trying to take away from the Professor’s paper and politically his results support my position on immigration. Its just not clear to me how Brad DeLong is reading so much into Peri’s paper.

DeLong’s post really makes me angry (its not the first time and by now I should be used to it, but still). Its fine for journalists or lay folk to misrepresent empirical results, everybody knows science reporting sucks. This is different. DeLong is an economist at a prestigious institution. Why is he treating Peri’s results like they’re simply arguments in a political discourse? Would he want me to claim his paper on despots and growth is an argument for the Iraq War? I doubt it.

Are we doing science here or are we just giving ammunition to political causes?

7 thoughts on “UC Davis Econ in the News”

  1. “(1990 – 2004)…” “There was a housing boom, if I recall.”

    How do economists isolate large scale events to specific causes? My (dim) reading of the “immigrants + natives = ultra mega woot labor” idea is that the price of labor for a given value of quality should fall. Business with mixed labor then outcompetes competition on the price of labor, consumers see lower prices, businesses do more business, everyone’s happy.

    But house prices also went way up during that period, faster than inflation (I think).

  2. On the flip side, stuff like this seems interesting. Maybe it’s that the price of labor would be prohibitively high without illegals.

    Also – there’s something distasteful about the “You’re guilty because you flinched” approach that the article mainly covers.

  3. “the price of labor for a given … quality should fall,” this is true if natives and immigrants are “substitutes” (as in, an immigrant could just stand in, or substitute, for a native worker). Prof. Peri tested the idea that they are instead “complements.” His results suggest they are compliments and the ‘quality’ brought to the equation from an immigrant doesn’t compete with the ‘quality’ a native worker brings.

    Yeah, the police’s tactics seem shady to me, too.

    But on the economics, I don’t think labor costs would be prohibitively high without immigrants, I think the construction industry is less productive without the immigrants. You can tell a story about construction work in which immigrants improve overall productivity because they allow natives to specialize in more high-skill tasks, like coordinating workers or explaining things to customers. Meanwhile, the immigrants are specializing in hammering nails and stuff that doesn’t take English skills, etc.

  4. How does increased productivity get reflected in the market, though? I spend $X on an all-native construction crew and receive product of quality Y. I spend $X on a hybrid crew and receive product of quality Y’. If Y’ > Y, I’ve received more quality for my spending dollar, so the effective price of Y is lower (it’s probably not so simple on an actual building contract, but whatever).

    I should clarify that a better Y’ doesn’t necessarily mean that the tangible quality of the finished product is better. Maybe Y’ is represented as a job of equal quality finished in less time, which might translate to reduced rental fees or contractors’ fees.

  5. Economic growth.

    Its true that the quality adjusted price of construction may go down, but you have to consider all the other multitude of effects in the economy (we nerds call these things “general equilibrium” effects). For example, you’re more wealthy; you can buy more stuff (including houses). So after it gets a chance to work its way through the economy, this productivity bump may increase the demand for construction, increasing its price, etc, etc, etc.

  6. The more obvious answer is that supply increases, the price of homes decline and marginal home buyers (*ahem* Todd and Brooke *ahem*) now find it affordable to buy a house.

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