Does immigration produce economic benefits during downturns?

Abstract: https://journals.sagepub.com/doi/full/10.1177/0042098020925407#abstract

Immigration has brought many known benefits to the US economy and community. Research has shown that immigrants are more entrepreneurial than the native-born, and immigrant workers complement the local workforce and spur expansion and innovation of local firms. However, one question that remains is whether immigration also produces benefits during economically challenging times.

In the wake of the Great Recession and challenges in immigration policymaking at the federal level, many localities have sought to leverage immigration for development. This trend is particularly pronounced in old industrial towns and Rust Belt cities where the economy and population have been on the decline. Local governments adopted programs to attract and integrate immigrants, such as increasing language access of government agencies, providing international students with job readiness training, and promoting immigrant entrepreneurship.

But does immigration help localities withstand economic turbulences and enhance resilience? Or does it exacerbate cities’ economic hardships?

There has been scant research on the relationship between immigration and resilience, especially in the context of the Great Recession. The few existing studies draw different conclusions. Some find a positive immigration effect on resilience, but others suggest that rapid influxes of immigrants are a shock to a region’s growth path.

In this article, I examine whether and how immigration improved resilience to the Great Recession in US cities. Specifically, how did the immigrant share of the local population affect a region’s employment and per capita income growth paths during and after the recession? I use data from the US Census, the Bureau of Economic Analysis, and the Bureau of Labor Statistics, among other sources, to estimate the effect of immigrant share in 2007 on the economic growth paths between 2008 and 2010, and between 2010 and 2014 on a sample of 352 US metropolitan areas.

Because immigrants may be responsive to local economic opportunities, a positive relationship between immigration and resilience could be an outcome of immigrants moving to high-growth places. To account for this potential problem, I build instrumental variables based on immigrants’ historical settlement patterns in 1980 and 1990, which should not be driven by contemporary economic conditions and changes.

The results suggest that, on average, immigration was associated with greater resilience in terms of employment and per capita growth. Metropolitan areas with higher shares of immigrants were more likely to maintain their growth paths during the Great Recession and recovered more quickly after.

These findings provide important evidence to local officials for policymaking. They suggest that immigration helped regions weather economic shocks. Different immigration policies may be pursued for diverse reasons, but policymakers should be aware that restrictions on immigrants during downturns could hamper the economic development and health of the local economy.

Finally, it is worth noting that policymakers should not stop helping new immigrants. Despite the promise of immigration-spurred development, many immigrants and refugees still live in poverty and experience social isolation and economic barriers. Local governments in particular should make sure they help accommodate and integrate immigrants into the local community so their economic impacts could be strengthened and maximised.

Although the study does not speak to the current context specifically, it does point to the potential challenges policy-makers will face in making decisions to contain the spread of the COVID-19 virus. Restrictions on immigration reduce population movements but also cities’ abilities’ to recover from economic shock.  

Read the accompanying article on Urban Studies OnlineFirst here.