Transcript Diapositiva 1 - Inter-American Development Bank

Immigration Reform in the United States:
Implications for Latin America
April 18th, 2013
Contents
1. Motivation
2. Immigration Debate in the US
3. Understanding Immigration from LA to US
4. Impact of expected reforms on LA
5. Concluding Remarks
Immigration Reform in the United States: Implications for Latin America
1. Motivation

Most Latin American countries, especially Mexico, are deeply influenced by
policy decisions in the US. Currently one of the most relevant policy issues for
Latin America, immigration, is ranked highly in the US political agenda.

The importance of Hispanic voters brought to the table the immigration
reform, now with a more lenient view of undocumented immigrants.

Such a reform would alter the flows of remittances to migrants’ countries,
and thus, their economies; however, the direction of the impact is unclear.

To understand the possible effects of a reform, it is important to consider the
basic characteristics of immigration, including its size, trends, and the main
incentives that generate it as well as its relationship with remmittances.
Immigration Reform in the United States: Implications for Latin America
3
Contents
1. Motivation
2. Immigration Debate in the US
3. Understanding Immigration from LA to US
4. Impact of expected reforms on LA
5. Concluding Remarks
Immigration Reform in the United States: Implications for Latin America
2. Immigration Debate in the US
Background


The most important legislative reform process relevant to the current
discussion is the Immigration Reform and Control Act (IRCA) of 1986.

It legalized farm workers and others who had been in the US for at least
five years.

It sought to discourage illegal immigration through sanctions for
employers who knowingly hire unauthorized workers.
However, new enforcement strategies have been developed through time
as a reaction towards migration patterns. *

Expenditures and personnel assigned to border enforcement have grown
between four and five fold since 1990.

Worksite arrests exploded and deportations doubled in the 2000s.
*Martin (2012)
Immigration Reform in the United States: Implications for Latin America
5
2. Immigration Debate in the US

The current debate on immigration is centered on two policies, as outlined
in the Bipartisan Framework for Comprehensive Immigration Reform
published by eight senators on January 28 of this year:
Legalization of certain undocumented immigrants
i.
ii.

Proposals include a “tough but fair” process, which would entail paying a
fine and overdue taxes, being subjected to background checks, and a
probationary period during which they must work and pass english and
civics exams in order to be granted a “green card.”

Certain cases, such as immigrants who arrived as children, would be given
special treatment in the legalization process.
Tightening of border enforcement policies


Including more surveillance technology along the border, and more
border patrol personnel.
President Obama has stated his intentions to pass a final, comprehensive bill
by this summer (March 27, 2013).
Immigration Reform in the United States: Implications for Latin America
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Contents
1. Motivation
2. Immigration Debate in the US
3. Understanding Immigration from LA to US
4. Impact of expected reforms on LA
5. Concluding Remarks
Immigration Reform in the United States: Implications for Latin America
2. Understanding Immigration: Current Trends
Immigration to the US has declined after the global crisis. In particular,
immigration of Mexicans has practically halted. Likewise, the
percentage of Mexican households receiving remittances has fallen
consistently.

Latin American Immigrants in
the United States
Census Data
(Thousands)
Latin America (excluding Mexico)
Mexican Immigrants in the
United States
Households in Mexico that
Received Remittances
Current Population Survey Data
(Thousands)
(% of total households)
14,000
6
12,000
12,000
Mexico
5
10,000
4
8,000
11,000
6,000
3
4,000
2
2,000
Source: Calculations by Banco de México with
information obtained from the microdata of
the Current Population Survey of the U.S.
Census Bureau.
1
2010
2009
2008
2007
2006
2005
2004
10,000
2003
2010
2000
1990
1980
1970
1960
0
Source: Calculations by Banco de México with
information obtained from the microdata of the
Current Population Survey of the U.S. Census
Bureau.
0
2007-II 2008-II 2009-I 2010-I 2011-I
Source: Encuesta Nacional de Ocupación y
Empleo (ENOE), INEGI.
Immigration Reform in the United States: Implications for Latin America
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2. Understanding Immigration: Current Trends

Remittances in Latin America and Mexico are significant as a share of
GDP, and as compared to other elements of the Balance of Payments.
Latin American Workers’
Remittances
(Share of GDP and Millions of US Dollars)
3.0
% of Latin American
GDP (excluding
Mexico)
2.5
Millions of dollars
(excluding Mexico)
Mexican Workers’ Remittances
Mexican Workers’ Remittances
(Share of GDP and Millions of US
Dollars)
(As a share of Other Accounts of the Balance
of Payments)
40,000 3.0
35,000
% of Mexican GDP
Millions of dollars
40,000
FDI Inflows
35,000
Mexico
2.5
International Tourism
Receipts
189%
194%
Latin America (excluding Mexico)
30,000
30,000
160%
2.0
2.0
1.5
25,000
25,000
20,000 1.5
20,000
15,000
15,000
1.0
0.5
Source: World Bank.
5,000
85%
81%
35%
26%
23%
Source: Banco de México
2012
2010
2008
2006
2004
2002
2000
0
1998
0.0
1996
2010
2008
2006
2004
2002
2000
1998
1996
0
78%
10,000
5,000
0.0
112%
102%
1.0
10,000
0.5
131%
2009 2010 2011
2009 2010 2011
Source: World Bank
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2. Understanding Immigration: Current Trends



Determinants of migration

The main incentive to migrate is the differential between wages net of
expenses in the two countries considering the expected time spent in the
target country.

The main cost of migrating is the fixed cost of crossing the border.
Lately,

incentives have decreased due to the economic downturn and to an increase
in deportations

costs have increased due to a series of policy actions that have intensified
surveillance and barriers throughout the border.
While policies to strengthen border security have been in place for at
least a decade, the most significant reduction of immigration coincides
with the economic downturn.
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2. Understanding Immigration: Current Trends
Lower economic segments of the population have a larger share of families
receiving remittances. Thus the impact of any change in those reflects more
harshly on the poor.
Wage incentives for migration are much greater for the less educated than for
those with more years of schooling.


Families Receiving Remittances, by Income
Decile1/
Average Hourly Wages of Mexicans in the US
and in Mexico in 2000, by Years of Schooling
(%)
(2010 Dollars; Differentials in Parentheses)
7
14.6
6
5
(200%)
(37%)
US
Mexico
10.6
4
8.2
3
2
1
3.5
0
I
II
III
IV
V
VI
VII
VIII
IX
X
1/ Deciles are computed including both households that receive remittances and those
that do not. Households are ordered by deciles according to their quarterly current
income.
Source: Encuesta Nacional de Ingresos y Gastos de los Hogares 2010, INEGI. Preliminary
population weights computed by INEGI based on the 2010 Census were used.
0-12
>12
Source: Hanson (2006)
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Contents
1. Motivation
2. Immigration Debate in the US
3. Understanding Immigration from LA to US
4. Impact of expected reforms on LA
5. Concluding Remarks
Immigration Reform in the United States: Implications for Latin America
4. Impact on Latin America
The two main discussion subjects on immigration, enforcement and
legalization, have different impacts.
i.
A more lenient approach towards legalization of undocumented
individuals could affect remittances in at least three ways:

1.
Reduces uncertainty regarding the future stay of illegal immigrants and
allows families to unite in the US, thus reducing the need to save or keep ties
to their native communities.
2.
Increases incentives for people to enter the US illegally due to a higher
expected present value.
3.
Reduces volatility of employment for immigrants, which is very important for
migration decisions.
The final effect of these three forces is not obvious. However, the experience with
the 1986 Immigration Reform Control Act, which included amnesty, shows that
remittances initially fell and that it did not change long term migration patterns.*
* Amuedo-Dorantes and Mazzolari
2009; Orrenius and Zavodny 2003.
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4. Impact on Latin America
ii.
Stricter immigration policy enforcement makes illegal border crossings more
costly and dangerous; though this may deter marginal migrants, the
literature suggests that the effect on immigration may not be considerable.*

The marginal deterrence created by the tightening of enforcement efforts
to reduce immigration has two main costs, the direct cost of the policy and
an increase in wages due to reduced labor supply.

Immigrant-labor intensive industries, such as agriculture, could experience
significant output reductions and wage increases. Zahniser et al (2012)
suggest a relative fall in agricultural output of 2-5%, and a relative wage
increase of 7-9% in the long run if the undocumented immigrant labor
force were reduced by 40%.**
*Cornelius and Salehyan 2007, Parrado 2012.
** Martin, Calvin 2010; Martin 2012;
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4. Impact on Latin America

Remittances have a myriad of effects on welfare and other economic
variables:
•
Reduce poverty
Esquivel and Huerta-Pineda (2007) estimate that remittance recipient households
in Mexico are 23-36% less likely to live under the poverty line than their nonrecipient counterparts.
Adams (2004); Yang and Martínez (2005); López-Córdova (2005); Orrenius et.al. (2009)
•
Foster financial penetration and promote growth
Demirgüç-Kunt et al. (2011) find that remittances increase the number of bank
branches and accounts per capita, as well as amounts deposited as a share of
GDP in Mexico.
Giuliano and Ruiz-Arranz (2009)
•
Improve health
Frank and Hummer (2002) find that being born in a remittance recipient
household protects newborn infants from the risk of low birth weight.
Hildebrandt and McKenzie (2005); Amuedo-Dorantes and Pozo (2009)
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4. Impact on Latin America
•
Improve human capital
Alcaraz, Chiquiar and Salcedo (2010) find that the negative recessionary shock on
remittances of 2008-2009 caused a significant rise in child labor and a significant
fall in school attendance.
Yang (2008); Acosta (2006); Mansuri (2006); Hanson and Woodruff (2003); Amuedo-Dorantes, et al.
(2010).
•
Promote entrepreneurship
Woodruff and Zenteno (2007) find that micro entrepreneurs associated with
migration networks are less capital-constrained, and their micro enterprises have
higher investment and profit levels.
Yang (2008);

The positive effects on growth and development that remittances have
generated in recipient areas have reduced the incentives to migrate.
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Contents
1. Motivation
2. Immigration Debate in the US
3. Understanding Immigration from LA to US
4. Impact of expected reforms on LA
5. Concluding Remarks
Immigration Reform in the United States: Implications for Latin America
5. Concluding Remarks

Fiscal and political conditions in the US have increased the probability
of an immigration reform.

Despite the recent decline remittances are still relevant for the
Mexican economy.

An immigration reform with a more lenient approach towards
legalization of undocumented immigrants and stricter immigration
policy enforcement would likely generate:

i.
Benefits for immigrant workers already in the US and US workers
ii.
A marginal increase in the number of migrants to the US
iii.
An ambiguous effect on remittances to Mexico
The previous reform with similar characteristics (IRCA 1986) reduced
remittances in the short term, but had no impact on long term
migration patterns.
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5. Concluding Remarks

Since remittances affect fundamental elements of welfare for Mexican
families, such as health, education and poverty in general, the effects
immigration reform on them are a sensible topic for the country.

Moreover, the subject is also relevant for the US as immigrant labor
provides a significant push to labor supply in relevant industries and
regions in the US and has a positive impact on growth as shown in the
literature.*
*Gans 2008, Zahniser et al. 2012
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