Immigration, uncertainty and macroeconomic dynamics

• Date: 01 February 2020
• Author: Daniela Arzu,Luca Gerotto,Michael Donadelli,Marcella Lucchetta
• Published date: 01 February 2020
• DOI: http://doi.org/10.1111/twec.12865

326

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wileyonlinelibrary.com/journal/twec World Econ. 2020;43:326–354.

© 2019 John Wiley & Sons Ltd

Received: 6 December 2018

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Revised: 15 April 2019

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Accepted: 11 June 2019

DOI: 10.1111/twec.12865

ORIGINAL ARTICLE

Immigration, uncertainty and macroeconomic

dynamics

MichaelDonadelli1,2

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LucaGerotto3

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MarcellaLucchetta3

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DanielaArzu4

1Department of Economics and Management,University of Brescia, Brescia, Italy

2Research Center SAFE,Goethe University Frankfurt, Frankfurt am Main, Germany

3Department of Economics,Ca' Foscari University of Venice, Venice, Italy

4Department of Management,University of Bologna, Bologna, Italy

Funding information

Research Center SAFE; State of Hessen Initiative for Research LOEWE

KEYWORDS

business cycle, fear, Google trends, immigration, life satisfaction, uncertainty

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INTRODUCTION

Even though the recent economic debate has raised concerns on the distributional consequences of mi-

gration (Borjas, 2018; Naumann & Stoetzer, 2018), it is widely accepted that the movement of people

across the world's borders boosts global productivity. Those countries that prioritise integration are

more likely to improve outcomes for their own economies and societies as well as for immigrants them-

selves. In its 2016 Global Report, McKinsey (2016) reports the following statistics about the economic

impact of migrants: (a) 40%–80% of labour force growth in top destinations between 2000 and 2014

was contributed by migrants and (b) migrants' contribution to global GDP is around 9.5%. Moreover, it

is observed that migrants of all skill levels contribute to the productivity effect in top destinations and

do not harm the long‐run employment or wages of native workers. Needless to mention, the interna-

tional movement of workers leads to comparative advantages. Undoubtedly, the increasing degree of

goods and financial markets integration across continents/countries has contributed most to the rapid

increase observed in the stock of migrants around the world. Remarkably, the average rate of growth

of the world migrant stock over the last 50years is above 10%. As illustrated in Figure 1, the number

of migrants jumps from 71.9 million in 1960 to 243.2 million in 2015. Updated estimates provided by

McKinsey (2016) for the year 2016 show that 247 million people live outside their motherland.

However, the increasing number of migrants has raised significant concerns about its economic

and social implications, especially among Western, educated, industrialised, rich and democratic

(WEIRD) countries. The series of terrorist attacks and civil wars in the Middle East (ME) and Africa

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DONADELLI Et AL.

have strengthened these concerns. More importantly, conflicts in the ME and Africa have led to a

rapid rise in the number of refugees. World's refugees jumped from 10 million in 2008 to almost 17

million in 2016 (Figure 1). Notably, refugees and asylum seekers account today for 10% of the world's

total cross‐border migrants. Such numbers have contributed to rise fear among natives, in particular

among the EU population. As argued by Williams and Baláz (2012), migration phenomena serve

as a generator of risk/uncertainty, especially in popular, political and policy discussions. A recent

work by Alesina, Miano, and Stantcheva (2018) has analysed the perceptions of the natives towards

the number and characteristics of immigrants in several countries, finding that these perceptions are

significantly biased. In particular, they observe that natives “greatly overestimate the total number

of immigrants, think immigrants are culturally and religiously more distant from them, and are eco-

nomically weaker”. Needless to mention, in many countries politicians did not miss the opportunity

to stoke fear among domestic citizens. Not surprisingly, major advanced economies are today “full of

fear” and prejudices about any form of immigration. Of course, the success of the UKIP party in the

UK in 2010, the most recent US election outcome, as well as the increasing power of far‐right parties

in several EU countries have contributed significantly to the tangible rise in migration uncertainty.

In this respect, there are studies showing that large immigration inflows and weak immigration

policy generate uncertain effects on labour markets, housing markets, schooling, social services and

government spending as well as anxieties and concerns among communities (see, among others,

Bardin, 2017; Boeri, Philippis, Patacchini, & Pellizzari, 2015; Borjas, 2003; Card, 2005; Castañeda,

2015; Crawley & Skeleparis, 2018; Koyama, 2017; Montesino & Christel, 2018). Moreover, Halla,

Wagner, and Zweimüller (2017) observe that waves of refugees from Africa and ME to theEU have

generated further anxiety, which might certainly influence the political, social and economic outcome

of any society. In the light of these developments and empirical evidence, media's attention to immi-

gration‐related issues has largely increased over the last five years (see Figure 2), as observed by

Baker, Bloom, and Davis (2015).1 Increasing media attention to immigration‐related phenomena (Lee

& Nerghes, 2018) has motivated researchers to further examine the implications of immigration for

macroeconomic quantities and prices, especially employment and wages (D'Amuri & Peri, 2014;

Kerr, Kerr, & Lincoln, 2015; Ruhs & Vargas‐Silva, 2016). A large and growing literature focuses thus

on the effects of immigration on the domestic labour market conditions. No study, however, examines

1 An example of increasing media coverage on immigration‐related issues is given by the ongoing EU debate on rescuing

migrants in the Mediterranean sea.

FIGURE 1 International migrant and refugee stock (thousands people)

Notes: This figure shows the evolution of world total migrant (left axis) and refugee stock (right axis).

Source: World Bank, United Nations Population Division. [Colour figure can be viewed at wileyonlinelibrary.com]

1960

76,000 137,000

Thousands

198,000 259,000

9,000 12,000 14,000 16,000

1970 1980 1990 2000 2010

Year

International migrant stock

World refugee population