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Metropolitan
Economic Performance A CEPR
conference on ‘Metropolitan Economic Performance’ was held in
Lisbon, Portugal, on 29/31 October 1998. The conference, hosted by the
Management Department of Universidade Nova de Lisboa, was organized by Pedro Telhado Pereira (Universidade Nova de Lisboa) and Klaus
Zimmermann (IZA, Universität Bonn, and CEPR). The 21 papers
presented covered several issues related to metropolitan economic
performance, including crime, drugs and racism. Nevertheless, other
topics were also addressed, including the social and economic exclusion
of women, young people, the unemployed and immigrants. Return migration
and the relative performance of migrants was also the subject of a
number of the conference papers. The first two
papers were presented under the heading of ‘Transformation and the
Cities’. Ira Gang (Rutgers
University) presented ‘The Political Economy of Russian City
Growth’, co-authored by Robert
Stuart (Rutgers University). Drawing on recently available data, the
authors investigated the patterns of population growth in medium and
large Russian cities in the 1970s and 1980s, focusing on the role that
might have been played by the controls peculiar to the administrative
command economy. These controls included formal administrative
restrictions (‘sticks’), variables directly controlled by the state
(‘carrots’) and other forces less directly controlled by the state
(‘economic variables’). The authors’ main conclusion was that,
even when other state and economic variables were included in the model
specification, direct controls mattered, while restrictions on expansion
did not. These results were robust with respect to different
specifications, including several types of ‘carrots’ and ‘economic
variables’. Other results obtained underlined the importance of broad
regional differences, and the poor explanatory power of economic
variables in explaining population shifts. Francis Kramarz
(CRESS-INSEE, CNRS Paris, and CEPR) suggested that since rents might
have influenced immigration behaviour they should also be accounted for
in the regressions. Pedro Telhado Pereira criticized the underlying
assumption of price homogeneity, which might not have had a relevant
influence on migration patterns. Roxane
Silberman (LASMAS/CNRS, Paris) questioned the reliability of the
migration data, given that some of the flows might have been illegal. Rumiana Stoilova
(Academy of Sciences, Sofia) presented ‘The City: Lights and Shadows
of the Post-Totalitarian Transformation’, which adopted a sociological
approach to the changes taking place in Bulgarian cities in general, and
in Sofia in particular, since the early 1990s. Stoilova argued that the
move from totalitarianism to a parliamentary democracy had destroyed not
only the previous regime’s artificial social structures, but also the
solidarity nourished by public resistance against socialism.
Consequently, success and degradation were now simultaneously apparent,
contributing to the disintegration and atomisation of post-totalitarian
Bulgarian society. A further example of this was that, at a city level,
the previous regime’s ‘equality in poverty’ had been replaced by
the stratification of city districts. Crime rates
in the cities had risen, because of increasing urban poverty, the lack
of efficient authorities and the inherent nature of urban environments.
Statistics reflected the crime-related shortcomings of urban reforms:
apart from rising crime rates, fewer crimes were being reported, fewer
criminals convicted, there was growing delinquency among children, and
higher complicity among underaged persons. Ethnic problems with Gypsy,
Turkish and Romanian groups had also become more serious, contributing
further to the process of disintegration. Most conflicts occurred
between Gypsies and native Bulgarians. There were, nevertheless, some
positive aspects to city life: mostly, these had to do with better job
opportunities, when compared to the countryside. But entrepreneurship,
reflected in the growing numbers of new small businesses, was also more
pervasive in the cities. Ira Gang
enquired about the prevalence of crime within the different ethnic
groups. Jeff Frank (Royal Holloway College, London) and Peder
Pederson (Aarhus Universitet) suggested the need for further
research on income inequalities across ethnic groups and the
contribution of reform to those inequalities. The
succeeding two papers addressed different aspects of social exclusion.
In ‘Unemployment and Crime: New Answers to an Old Question’, Kerry
Papps and Rainer Winklemann (University of Canterbury, New Zealand, and CEPR)
– who presented the paper – argued that establishing whether or not
there was a causal link from crime to unemployment was a task with
relevant policy implications. If such a link existed, it should be taken
into account when performing cost-benefit analyses of policies with the
potential to reduce unemployment. Analysing panel data for New
Zealand’s 16 regions, the authors regressed crime rates on
unemployment for the period 1984–96. A pooled regression had indicated
a significantly positive elasticity of crime rates with respect to
unemployment rates, but a graphical analysis of the variables across
time suggested that the preliminary model had been misspecified and that
its results were not valid. The authors then estimated a two-way
fixed-effects model, the results of which showed no evidence of a link
between unemployment and crime. Since period effects were found to be
significant when accounting for crime rates, they adopted a
random-region, fixed time-effects model, which produced similar results,
except in the two categories of drugs and other anti-social offences,
and abuse-of-property offences. An
augmented model used to investigate the role of two other variables –
the clearance rate and income per capita – showed that the former
variable had an ambiguous impact overall, but with positive or negative
effects for specific crime categories. The ambiguity of this result was
tentatively explained by delays in the formation of beliefs and by the
endogeneity of the clearance-rate variable. The coefficient of income,
however, was unambiguously negative, suggesting that the effect of an
increase in legal income-earning opportunities outweighed that of
increased illegal opportunities. Finally, to overcome problems of
endogeneity and lagged perceptions, the authors considered the previous
year’s clearance rate, which provided more evidence for a negative
effect of the deterrence rate. Their conclusions were thus that
unemployment could not explain changes in the overall crime rate, and
that policy-makers may have more success in fighting crime by attempting
to manipulate the deterrence rate and the average household income, than
by dealing with unemployment. Jan van Ours
(CentER, Tilburg University, and CEPR), argued that the authors should
not completely dismiss an unemployment effect on overall crime since the
similarity of patterns across regions decreased the power of the
regressions. Francis Kramarz considered that different regressions
should be run for each region. Jeff Frank suggested using either lagged
values of unemployment or long-term unemployment instead of overall
unemployment. ‘The Effect
of Neighbourhood Characteristics on the Labour Supply of Welfare
Recipients’, was written by Gerard
van den Berg (Free University Amsterdam, Tinbergen Institute, and
CEPR), Bas van der Klaaw
(Free University Amsterdam, Tinbergen Institute) and Jan
van Ours (CentER, Tilburg University, and CEPR), and was presented
by van Ours. Their paper investigated the individual transition rate
from welfare to work using 1994–6 data on Rotterdam and focusing on
whether the individual’s neighbourhood was a relevant variable.
Assuming that demand-side conditions were not relevant at the
neighbourhood level (since commuting costs were low), the authors
concentrated on supply-side differences. They also concentrated on
‘welfare recipients’, namely those aged 18 years and older, who were
legally allowed to stay in the Netherlands, had no other income but had
an obligation to search for a job. Their data identified three different
subsamples of recipients: Dutch job-losers, non-Dutch job-losers and
Dutch school-leavers. Three neighbourhood effects were considered: local
labour-market effects (when each neighbourhood acted independently of
the others); spillover effects (when individuals adopted the behaviour
of their neighbours); and selection effects (when individuals chose a
neighbourhood with similar job-search patterns to their own). The
estimation results, based on a mixed proportional hazard model,
indicated that the overall individual transition rate decreased as the
duration of welfare collection increased. Furthermore, neighbourhood
effects on the overall unemployment rate were relevant for the Dutch
recipients (both job-losers and school-leavers), but did not matter for
the non-Dutch job-losers. This phenomenon was particularly acute for
younger Dutch welfare recipients. Martin
Klinthäll (Lunds Universitet) and Rainer Winklemann suggested that
administrative neighbourhood divisions might be somewhat arbitrary, thus
weakening the results. Andrea
Ichino (European University Institute, IGIER, Università Bocconi,
Milano, and CEPR) stressed the importance of controlling for the length
of time during which immigrants have lived in a particular neighbourhood. The session
on ‘Return Migration’ was opened by Martin
Klinthäll (Lunds Universitet) with ‘Patterns of Return Migration
from Sweden 1970–93’. In a wider project, the author had been
analysing the economic impact of immigration and the associated problems
of social integration and exclusion. This paper paid particular
attention to a comparison of the patterns of return migration to Germany
and Greece, with the specific aim of testing the savings-target
hypothesis, according to which immigrants see themselves as temporary
migrants, planning to return to their home country when they have
accomplished some savings target. The hazard of return migration,
therefore, is expected to depend positively on age, income, unemployment
in the host country, absence of children and being single. Conversely,
it is supposed to depend negatively on unemployment in the home country,
with an ambiguous effect from changing relative wages. Klinthäll
drew on data from the Swedish Longitudinal Immigrant database, which
accounts for several occurrences in immigrants’ lives (although it
might suffer from an under-registration problem). His sample included
only men, aged between 16 and 65, born in either Germany or Greece, who
had immigrated to Sweden after 1967. The hazard of return migration was
estimated via the Cox proportional hazards model. Some of the results
clashed with the model’s predictions: for example, the older age
groups did not show a significantly higher risk of return migration than
younger cohorts. The author estimated different models for German and
Greek immigrants, but again the savings-target hypothesis could not be
confirmed, although for different reasons for each nationality. While
income induced a U-shaped risk of return for German men, it had a
negative effect for Greek men. With regard to age, the Greek group
conformed to the hypothesis under scrutiny, while the German return risk
decreased with age. A suggested explanation for the Greek immigrants’
results pointed to the possibility of some ‘exclusion effect’,
whereby successful immigrants, who obtained a high income, did not wish
to return, while those who got stuck with a low income preferred to
return to Greece. Thomas Bauer
(IZA, Universität Bonn, and CEPR) suggested excluding underaged people
from the regressions, since these might be the children of those
immigrants who take the return decision. Most people in the younger
cohorts did not return on account of their own economic status, thus
distorting the results. than the
resident population. This pattern was unsurprising, since the proportion
of skilled emigrants during the 1980s was higher than that for the
overall population. Another possible contributory factor might have been
the rise in earnings dispersion, which was likely to increase the return
to more educated individuals. A policy-related outcome of these findings
was that concerns about ‘skill shortages’ (and ‘brain drain’)
were less relevant, in that the migration mechanism itself was dealing
with them. The issue of
the return migrants’ wage premium was addressed by analysing answers
to questionnaires sent out to a random sample of 1992 graduates. Some of
these individuals were return migrants, having been abroad for six
months or more since graduation. Estimations performed – without
accounting for self-selection – indicated a significantly positive
wage premium for returnees. The premium was large for men, but was not
statistically significant for women, although the length of time away
was a variable more relevant for women than for men. These results were
understandable given that, on average, men stayed abroad longer than
women. Andrea Ichino
wondered whether some Irish emigrants had received further education
while abroad, thus decreasing the scope for a ‘brain drain’. Francis
Kramarz thought that threshold levels should be accounted for when
estimating the returnees’ wage premium. He also suggested drawing on
the British Labour Force survey for further information on Irish
migrants in the United Kingdom. A second
panel on ‘Social Exclusion’ was opened by Jacques
Silber (Bar-Ilan University, Ramat Gan) who presented ‘On
Inequality in the Quality of Life in Israel: New Immigrants Versus
Old-Timers’, a paper written The authors
used data obtained from a time-survey to build a vector of resources
(including information about households, such as number of cars or TV
sets), a vector of functionings (with information on – say – the
number of recreational activities or the individual’s satisfaction
with her health), and general information on the individual’s
characteristics. The regressions performed indicated that there was no
significant relation between the standard-of-living and the
quality-of-living indices, while the opposite held true for the relation
between the transformation-efficiency index and both the standard- and
the quality-of-living indices. The results also showed that there was
more inequality between the individuals in terms of their standard of
living than in terms of both their quality of life and the efficiency of
their transformation. Francis
Kramarz remarked on the need to control for household size and to
consider the characteristics of products, as reflected in their
different degrees of substitutability. Christian
Dustmann (University College London and CEPR) claimed that some of
the survey questions were ambiguous in the sense that it was difficult
to tell whether a specific answer meant more or less welfare. Andrea
Ichino felt there was a need for more information on the individuals’
characteristics, especially their education, and suggested that some of
the questions be dropped from subsequent analyses Christian Dustmann’s (University College London and CEPR) own paper was entitled ‘Attitudes to Ethnic Minorities, Ethnic Context and Locational Decisions’, and was co-authored by Ian Preston. Their point of departure was that negative attitudes towards minorities may be affected by the ethnic composition of the locality in which individuals live. Although racially intolerant people were unlikely to choose to live in areas with large ethnic populations, the latter were also unlikely to be keen on areas where they might expect to experience racial intolerance. Therefore, empirical results on the impact of ethnic composition on attitudes, which did not account for such phenomena, were likely to be biased downwards. The authors
tested their prediction with 1980s data for England, drawn from the
British Social Attitudes survey. This dataset provided information on a
range of attitudes towards minorities (both directly and indirectly
reported), which was then collapsed into binary indicators. There was
also extensive socio-economic information on respondents, including
education, income, age and labour-market status. The estimation strategy
was based on an instrumental-variables estimator, whereby it was assumed
that individuals were constrained to choose their neighbourhood within
their initial district. The results
of a ‘standard’ estimation indicated, inter
alia, that manual workers tended to have more hostile attitudes,
that being unemployed had positive effects on attitudes, and that
individuals educated beyond age 18 had more favourable attitudes. The
scope of ethnic concentration yielded an (insignificantly) negative
effect on attitudes. The picture changed, however, with a second
estimation that accounted for potential location biases: the effect of
ethnic concentration on attitudes became clearly more negative. Both
results were interpreted by the authors as evidence that high
concentrations of ethnic minorities in England were associated with more
hostile attitudes and that there was a considerable downward bias in
estimations which regressed attitude variables straightforwardly on
ethnic concentration indicators. Rainer
Winklemann pointed out that in a long-term equilibrium location issues
would not matter and thus there would be no such bias. Francis Kramarz
suggested that the estimation should account for the likely relative
ease with which richer individuals could travel and move to a different
district or country. Andrea Ichino proposed that survey non-respondents
should be considered as either anti- or pro-immigrant so as to set lower
and upper boundaries for the results. He also suggested that there
should be some testing for non-linearities in the ethnic concentration
effect, in the sense that there might be a threshold when previously
unimportant concentration levels became relevant and hostility
increased. Martin Klinthäll thought that more weight should be attached
to the public housing variable, since it might constrain those
individuals living in such places not to move, regardless of the ethnic
mix in their ward and their attitudes towards ethnic minorities. The first
paper in a session on ‘Discrimination’ was ‘Estimating Labour
Market Discrimination with Selectivity Corrected Wage Equations:
Methodological Considerations and an Illustration from Israel’,
presented by Shoshana Neuman
(Bar-Ilan University, Ramat Gan, and CEPR) and written with Ronald
Oaxaca. The authors put forward several methods for decomposing wages
when there is sample-selection or selectivity bias, a phenomenon that
might arise at the stage of joining the employed labour force and when a
specific occupation is chosen. Three new terms arise when selectivity is
accounted for in a wage inequality analysis. The first measures the
effects of, say, gender differences in the parameters of the selectivity
equation on the wage differential. The second accounts for the effects
of gender differences in the variables that determine employment in the
area under comparison. And the third term captures the effects of gender
differences in the wage response to the probability of employment in
such an area. The
interpretation of these terms along the lines of discrimination,
endowments or selectivity is somewhat ambiguous, which led the authors
to define four different types of wage decompositions: considering the
first term as discrimination and the following two as endowments;
considering the first and third terms as discrimination and the middle
one as endowments; regarding the first term as discrimination, the
second as an endowments-related measure, and the last as a measure of
selectivity; and deeming all three coefficients as accounting for
selectivity, with the discrimination and endowments components treated
according to the standard Oaxaca approach. The authors
illustrated these different methodologies with an analysis of wage
discrimination among Israeli professionals due to both ethnicity
(Easterners or Westerners) and gender. They drew on census data covering
earnings, human-capital variables, socio-economic attributes and
labour-market characteristics of individuals. First, they estimated
entrance equations (which provided a correction for the selectivity
bias). Second, they estimated Mincer-type wage equations, using one set
for the standard Oaxaca decomposition, and correcting the second for the
selectivity bias (using the Heckman procedure). Overall, gender wage
differentials were found to be larger than ethnic wage differentials.
Among several other results, the authors found that three out of the
five decompositions used indicated the existence of some favouritism
towards Eastern men, although their wages were lower, on average, than
those of Western men. Andrea Ichino questioned the adequacy of the
particular instrumental variable used in the estimation and pointed out
that the results were bound to be very sensitive to such a variable. In ‘Glass
Ceilings or Sticky Floors?’ Alison Booth, Marco Francesconi and the
presenter, Jeff Frank (Royal
Holloway College, London), accounted for the empirical result that women
in Britian are as likely as men to be promoted, but receive lower pay
rises upon promotion. (The British Household Panel Data indicated that,
upon promotion, men received 20.4% pay rises, but women only 9.8%.) The
authors built a three-period model which reproduced this result. Its
underlying features were that firms induced workers to invest in human
capital by committing to a promotion rule and to a minimum
post-promotion wage. Furthermore, firms had the option to match a higher
offer from another firm to a promoted worker. Discrimination was brought
in by assuming that firms regarded women as less productive than men,
although objectively this was not true. Under these circumstances,
whereas the incentive to acquire human capital worked similarly for both
sexes leading to similar promotion rates, discrimination made it less
likely that firms would match outside wage offers to women. Thus women
ended up receiving lower pay rises. The model’s predictions were
tested empirically. The most important result was that the gender gap of
the promotion rate became insignificant when the occupation variable was
accounted for, whether or not proxies for the worker’s effort were
included, thus supporting the theoretical conclusions. Jan van Ours
remarked that the estimation results were bound to be sensitive to the
definition of a ‘promotion’, since a change of occupation might
easily be mistaken for promotion. Francis Kramarz suggested that job
complexity increased as people moved up the hierarchy, which might
explain the empirical results, if men were relatively more numerous in
higher ranks. The third
session on ‘Social Exclusion’ was opened by Adrian
Ziderman (Bar-Ilan University, Ramat Gan), who presented
‘Vocational Education in Israel: Wage Effects of Vocational Education,
Occupation, and the VocEd-Occupation Match’, which was written jointly
with Shoshana Neuman (Bar-Ilan University, Ramat Gan, and CEPR). The aim
of the paper was to verify the authors’ claim (based on an earlier
study of an Israeli sample) that the wage advantage of vocational-school
graduates over others working in related occupations stemmed from work
in occupations related to their vocational studies, or from employment
in a well-paid occupation, and was not the direct result of the training
received (as Hotchkiss had suggested for a US sample). The wage effects
of vocational education (‘VocEd’) were estimated using Hotchkiss’
specification, i.e. including a variable representing vocational-school
attenders currently employed in training-related occupations, among
others. The estimates showed that VocEd alone did not confer higher
earnings on Israeli workers, and that VocEd completers employed in a
training-related occupation did earn more than other groups, even when a
matched-occupation variable was included. The authors
explained the differences between their and Hotchkiss’ results by
pointing to his ‘problematic’ use of the ‘wage of the first job
after leaving high school’ as the dependent variable. In their view,
this led to results that were unduly pessimistic with regard to the
labour-market outcomes of vocational schooling in the United States.
Christian Dustmann stressed that there was a problem of selectivity
relating to those individuals who were matched to the jobs for which
they were trained. Francis Kramarz argued that the authors’ approach
to determining the training-related occupation was not consistent. Peter Jensen (Aarhus Universitet) presented ‘Labour Market Integration of Immigrants in Denmark’, which was a joint work with Peder Pedersen (Aarhus Universitet), M. Rosholm and N. Smith. In enquiring whether immigrants in Denmark were integrated or marginalized in the labour market, the authors considered several specific issues: transitions in the labour market between the states of employment, unemployment and withdrawal from the labour force; the length of time spent on welfare or income-support benefits; differences between first- and second-generation immigrants; differences between immigrants and refugees; and issues of discrimination, lack of qualifications, educational attainment and intergenerational transmission. The period of analysis was 1984–96. A competing-risks model was used for studying the durations of unemployment and welfare benefits, and a decomposition analysis was employed to compare the immigrants with the rest of the Danish population. Several
preliminary results were obtained: (1) the duration of unemployment was
longer for the first than for the second generation of immigrants, and
longer for all immigrants than for native Danes; (2) duration dependence
was negative; (3) immigrants and the Danes were alike in terms of
destinations; (4) the duration of subsequent employment was longer for
Danes than for immigrants, and longer for second than for first
generation immigrants; and (5) education was more important for
immigrants. Christian Dustmann remarked that the decomposition technique
was meaningful only if the characteristics were comparable, which was
not the case with education for natives and immigrants. Francis Kramarz
and Jan van Ours disagreed over whether there was some sort of
unobserved heterogeneity present, and van Ours remarked on the limited
nature of the investigation given that the authors were talking about
reduced form models. Andrea Ichino
(European University Institute, IGIER, Università Bocconi, Milano, and
CEPR) opened the session on ‘Unemployment and Employment’ with a
paper entitled ‘How Painful is Unemployment? Consumption and Job
Losses in Four European Countries’, which was written with Samuel Bentolila (CEMFI, Madrid, and CEPR). The authors analysed the
relationship between unemployment and consumption in Italy, Germany,
Spain and Great Britain with a view to exploring how this relationship
could be affected by different social and institutional frameworks. In
particular, they focused on the role of extended family networks in
unemployment. Their preliminary results indicated first, that
consumption losses associated with unemployment were higher in Germany
than in Italy, and higher in Italy than in Spain; and second, that
Britain was the only country in which unemployment of a male household
head was associated with significant reductions in food expenditures.
The findings supported the hypothesis that extended family networks
provided a fundamental source of insurance against unemployment in
southern Europe. The authors acknowledged, however, that their analysis
suffered from a potentially serious problem of endogeneity of the
unemployment indicators with respect to consumption decisions, and that
this made it very difficult to interpret the observed associations
between unemployment and consumption losses as causal effects. Klaus
Zimmermann questioned whether savings rates behaved differently in
Germany and in Italy, but remarked further that there were some
differences between replacement rates in Germany and Britain. Jan van
Ours said that the relationship between unemployment and consumption
differed in a boom and in a depression. Consequently, differences
between the two countries, especially in terms of the duration of
unemployment, may be ascribable to the business-cycle phase. He also
criticized the authors’ apparent lack of attention to issues
concerning unemployment duration. Francis Kramarz suggested using the
expected duration of unemployment as a control variable. ‘Self-employment
and Windfall Gains in Britain: Evidence from Panel Data’ was presented
by Mark Taylor (Institute for
Social and Economic Research, University of Essex). Taylor set out to
investigate the effects of unanticipated windfall gains on entry to
self-employment, survival in self-employment and – given survival –
the subsequent growth of enterprise income. He developed a framework in
which income and the utility derived from self-employment were dependent
upon tastes, preferences and effort expended in the business. This
allowed individuals with varying preferences and wealth to choose to
devote less time to work in favour of increased leisure, or to
concentrate on areas of their businesses that provided more job
satisfaction at the cost of a smaller financial return. The receipt of a
windfall in this framework could result in falls in self-employment
income, or even transitions out of self-employment. Multivariate
analysis led to the conclusion that the amount and type of payment
received were important predictors of becoming self-employed. Redundancy
payments increased the probability of entering self-employment, but
job-related bonus payments had the opposite effect. This suggested that
losing a job, together with the associated lump-sum compensation
payment, provided a catalyst for self-employment, while individuals in
jobs that rewarded individual performances were less likely to start a
business. The size of the windfall also had significant effects on the
income of the self-employed, suggesting that the growth of enterprises
was constrained by a lack of capital. Clearly, however, receipt of a
payment of a particular magnitude enabled the self-employed to maximize
their utility elsewhere. Jan van Ours
suggested that the age at which a windfall was received might be
relevant for the response. He also recommended that the possibilities of
non-linearities in responses be looked at more carefully. For Christian
Dustmann, the intensity of participation was also related in some way to
the windfall gain. Peder Pedersen
(Aarhus Universitet) opened the extended conference sessions on
‘Performance of Migrants’ by reverting to the issue of return
migration – a question that lay at the very frontier of research on
international migration. Drawing on the results of the recent
publication, ‘Scandinavians without Borders – Skill Migration and
the European Integration Process’, of which he had been editor,
Pedersen referred to the analysis of return migration by nationals of
Norway, Denmark and Sweden who had emigrated in 1981. The high
proportion of Danish returnees – about 65% were back within five years
– indicated that most of the emigration was of a temporary nature.
Norway presented a very similar return rate, but for Sweden the share
was only slightly above 45%. A crucial factor at work was the influence
of skills, since the return rates differed for different education
levels. Although the cumulative return rates were not monotonically
related to the level of education in any of the three national groups
– at least for the whole period from 1981–90 – they were lower for
the lowest educational level, when considering a migration period longer
than five years. Pedersen also
presented the main points of the joint paper ‘Declining Employment
Assimilation of Immigrants in Sweden: Observed or Unobserved
Characteristics?’, written by Pieter
Bevelander (Lund University) and Helena
Skyt Nielsen (Aarhus Universitet and Centre for Labour Market and
Social Research), neither of whom was able to be present. The paper
sought to throw light on the reasons for the big decline in employment
assimilation of immigrants in Sweden between 1970 and 1990 by analysing
the determinants of the probability of full-time employment for
immigrants. Apart from growing differences in formal qualifications
between native Swedes and immigrants, two factors of major potential
relevance here were changes in the composition of the immigrant
population, and a change in the ‘character’ of the Swedish economy.
The former were reflected in a rise in ‘family reunion immigration’
and in flows of refugees from non-European countries from the mid-1970s
onwards, in place of the labour flows from European countries that
previously had characterized immigration into Sweden. At the same time,
the economy had undergone a structural transformation, with working
processes becoming more information- and communication-intense. The
labour-market consequences were an increase in the demand for highly
skilled workers, and a rise in the importance of informal skills, such
as cultural-specific proficiency and language skills. The
authors had estimated a logit model for the probability of obtaining
full-time employment and had decomposed the differences into explained
(differences in qualifications) and unexplained parts. The most striking
finding was that low qualifications, in terms of observed human capital,
did not explain much of the difference between the employment rates of
Swedes and immigrants in 1990. The main part was unexplained. Although
some evidence of discrimination was found, this could not be the only
explanation because for all groups, including the more culturally
similar, there was a significant unexplained component. The
structural-change hypothesis offered an alternative explanation. Roxane
Silberman (LASMAS-Institut du
Longitudinal, CNRS, Paris) presented ‘Educational Attainment and
Unemployment for Immigrants’ Children in France: An Investigation of
the Discrimination Hypothesis’, which was written with Irène
Fournier. Since unemployment, especially structural unemployment, can
lead to problems with integration of immigrants, the authors’
objective was to describe more precisely the rates and determinants of
unemployment for immigrants’ children. Numerous studies had stressed
the increasing role of educational attainment levels as unemployment
grows. Some recent studies pointed to social background as an
explanation for the unfavourable academic achievements of immigrants’
children. The authors therefore employed a classic two-phase model of
status attainment to examine the determinants of educational level and
subsequently used these to explore the labour-market position. Although
there was no specific discriminatory mechanism against immigrants’
children in the educational system, the possibility that nationality
might be a factor underlying inequality in the level of education
attained, as well as in the position regarding unemployment, needed to
be considered. Being a highly synthetic variable, however, national
origin could hide several effects and required careful interpretation.
Silberman also referred to more recent work about the importance of
networks for successful job search. The
main results suggested that the traditional variables of social origin
and parental achievement were important factors explaining the gross
differences observed between native French and immigrants’ children.
In terms of labour-market position, the observed difference between the
level of education of French and immigrant workers was an important
explanatory factor. The results, however, did not support the thesis of
selective and intentional discrimination linked to national origin.
Klaus Zimmermann questioned the alleged effects of networks on firms.
Francis Kramarz suggested the Enquête
Emploi as a possible source of additional information on wages. The
paper entitled ‘Portuguese Migrants in the German Labour Market:
Performance and Self-selection’ was written jointly by Thomas
Bauer (IZA, Universität Bonn, and CEPR), Pedro Pereira (Aarhus Universitet), Michael Vogler and Klaus
Zimmermann (IZA, Universität Bonn, and CEPR), and was presented by
Pedro Pereira. The paper’s results confirmed the effectiveness of the
German guestworker system – an active recruitment policy that began in
the 1950s, but ceased after the first oil shock in 1973 – the purpose
of which had been to meet the excess demand for unskilled blue-collar
workers. Since recruitment of guestworkers was oriented towards the
needs of German firms, the workers had been selected on the basis of
qualifications. A demand for particular types of workers, however,
engenders a self-selecting supply response, with the consequence that
the individuals who decide to migrate might not be those in whom the
receiving country otherwise would be interested. The authors sought to
study this self-selection problem by analysing the characteristics of
Portuguese guestworkers. In addition, the migrants’ performance was
compared not only with the natives’ performance but also with that of
non-migrating Portuguese workers. To this end, matched micro data from
the sending and receiving regions was used. The comparisons revealed that Portuguese guestworkers had a lower level of education than Germans and those who stayed in Portugal. Compared with the Portuguese non-migrants, however, a higher proportion of the migrants had vocational training. Estimates of earnings equations showed that non-migrating Portuguese workers would have received higher wages, if they had migrated to Germany, than those who actually did migrate. The reason for this was that non-migrant Portuguese workers had better characteristics, in the sense that they had higher education levels and that, for each educational level, remuneration in Portugal was higher than in Germany. Conversely, those who did migrate would have earned less than their German counterparts if they had remained in Portugal. Rainer
Winklemann wondered why the returns to education in Germany were so low.
If hours of work were controlled for, might this provide the basis for
explaining the higher Portuguese earnings? Andrea Ichino thought that it
made no sense to control for the returns to education for the three
different occupational statuses considered in the paper. Pedro Pereira
replied that it is known that the returns to education came not only
through wages but also from the occupation. Thomas
Bauer (IZA, Universität Bonn,
and CEPR) presented ‘Occupational Mobility of Ethnic Migrants’, a
joint paper with Klaus Zimmermann
(IZA, Universität Bonn, and CEPR). The authors examined the
determinants of the probability of a post-migration change in
occupational status, and its variability with length of residency in
Germany. Of particular interest was the experience of ethnically German
immigrants, and the possibility of downward mobility in occupational
status. Drawing on the ‘immigration sample’ of the German
Socio-economic Panel, the authors analysed the inflows in 1994–6,
dividing the sample into three sub-groups: two kinds of ethnic Germans
– the Übersiedler (from the
former German Democratic Republic) and the Aussiedler
(from elsewhere in Eastern Europe) – and non-Germans. The
authors’ hypothesis was that the ethnic Germans, having obtained their
human capital in socialist economies, would experience some downward
occupational mobility in the West German market economy. Their rationale
was that there existed a problem of international transferability of
human capital, with higher levels of education likely to be less
transferable, and more educated migrants therefore experienced a larger
downward adjustment in their relative labour-market position. As these
migrants also had stronger incentives to invest in the host country’s
country-specific human capital, however, they could be expected to
regain their former labour-market position more rapidly. Two
different models of occupational mobility were estimated. The first –
a standard binomial probit model – accounted for the possibility that
a change in occupational status occurred after migration; the second –
an ordered probit model – considered several possibilities: the
individual was not working, experienced downward mobility, experienced
no change or moved upwards. The results showed that a representative Übersiedler
had a lower probability of a change in occupational status than a
similar Aussiedler, whose
probability was slightly lower than that for a similar foreigner. The
downward-mobility results showed the same pattern. Overall, the results
confirmed the human capital transferability hypothesis. Interestingly,
although migrants with a university degree regained their original
occupational status after 14 years of residence in Germany, migrants
with only primary-school qualifications needed 28 years. Eric Zwint
(SELAPO, Universität München, and IZA, Universität Bonn) presented
‘Panel Analysis of Wages and Unemployment of Ethnic Germans’. The
aim of this paper was to analyse the earnings and unemployment of ethnic
German immigrants who had moved to Germany shortly before and after the
fall of the Iron Curtain. Zwint noted that there had been a change in
the dominant countries of origin of these Aussiedler
migrants from Poland or Romania to the territories of the former USSR.
Migrants from the former USSR, however, exhibited poor language skills
and had a significantly higher risk of being unemployed. Thus ethnic
German immigrants from Eastern Europe did not seem to have been in an
advantageous position relative to other immigrants – indeed, their
integration into the labour market had proved rather problematical. Francis
Kramarz was critical of the use of a random-effects probit estimation
because, with panel data, there would be a correlation between the mean
of the independent variable and the error term, and a consequent loss of
efficiency. Andrea Ichino, however, took issue with Kramarz’s view. Maria
Baganha (Universidade de Coimbra) enquired whether language might be
a major factor in explaining differences in migration experiences
between Polish and Romanian migrants. Kirk
Scott (Lunds Universitet)
presented ‘Labour Market Entrance and Income Assimilation: An Analysis
of Longitudinal Data from Sweden, 1970–1994’, written jointly with Tommy
Bengtsson (Lunds Universitet). The objective of the paper was to
analyse why post-1970 immigrants to Sweden had assimilated less well
economically into Swedish society than earlier cohorts. The evidence was
that, while controlling for education, age and country of origin,
immigrants increasingly had fared worse in terms of income and
employment. The authors found the explanation in the structural changes
in the Swedish economy, which had led to increasing emphasis on
interpersonal skills as a primary factor in securing employment. They
estimated the effects of structural change on different nationalities
and individual characteristic categories by controlling for the effects
of cyclical changes in labour demand and through the use of the
vacancy/unemployment ratio. The results revealed that the structural
variable ‘relative machine prices’ – which was a measure of demand
for skilled versus unskilled labour – had differing impacts on
different nationalities, at least initially. These impacts supported the
hypothesis that immigrants from countries that are culturally and
historically ‘closer’ to Sweden (e.g. Norwegians) should have less
difficulty than those from a greater distance (e.g. Greeks and Poles).
The findings also showed that higher educational levels lessened the
impact of structural change. Thus the paper concluded that it is not
merely changes in the supply of immigrants, but also changes in the
structural demand for labour, that affect immigrants’ prospects in the
destination country. Rainer
Winklemann suggested undertaking the analysis by industry. Francis
Kramarz supported the idea of industrial decomposition to see whether
prices had changed, and proposed the use of international, instead of
Swedish, prices because these would be less endogenous and more
appropriate given that Sweden is an open economy. The final
paper was ‘The Duration Until First Investment in Post-Migration
Education’ by Dan-Olof Rooth (Lunds Universitet). This study identified the
determinants of the time that elapsed before adult immigrants into
Sweden between 1987 and 1991 were able to receive post-migration
education. Two different measures of duration were used: the time until
first enrolment in a Swedish university, and the time until first
enrolment in a Swedish secondary-primary educational institution. A
distinction was also made between refugee immigrants and others
receiving a permanent visa. |