Impact of Immigration on Inhabitants' Educational Investments

• Published date: 01 July 2016
• Date: 01 July 2016
• Author: Marianne Røed,Pål Schøne
• DOI: http://doi.org/10.1111/sjoe.12159

Scand. J. of Economics 118(3), 433–462, 2016

DOI: 10.1111/sjoe.12159

Impact of Immigration on Inhabitants’

Educational Investments∗

Marianne Røed

Institute for Social Research, NO-0208 Oslo, Norway

mro@samfunnsforskning.no

P˚

al Schøne

Institute for Social Research, NO-0208 Oslo, Norway

psc@samfunnsforskning.no

We examine whether immigration into the labour market of the building and construction

(BaC) industry affects enrolment in vocational programmes that teach the skills required

in this industry. Results suggest that a higher supply of immigrant labour is associated

with lower enrolment into programmes teaching BaC skills. The strength of this relationship

increases according to the grades that the students achieved in lower secondary school.

This finding indicates that the negative effect of immigration on educational recruitment is

mainly caused by students who turn away from these programmes, rather than a reduction

in apprenticeship positions offered by employers.

Keywords: Enrolment; immigration; vocational education

JEL classification:J24; J61; J22; J23

I. Introduction

Over recent decades, Norway has experienced a large increase in immigra-

tion. In our study period, 2001–2008, the proportion of immigrants in the

population grew from around 5 percent to around 12 percent. In the first

four years of this period, immigrants came mainly from Asia and Africa,

and a majority were seeking family reunification or protection in Norway.

After the extension of the common European Union (EU)/European Eco-

nomic Area (EEA) labour market in 2004, the inflow of labour from the

new EU member countries in Eastern and Central Europe increased sharply.

Since 2006, immigrants have predominately been people who state work to

∗The authors thank Idunn Brekke for her valuable contributions to discussions and data facil-

itation during the initial phase of this work. We also thank seminar participants at the Insti-

tute for Social Research, participants at the “Educational Governance and Finance” workshop

in Oslo in June 2012, participants at “Migration: Global Development, New Frontiers” at

University College London in April 2013, and the two anonymous referees for their valuable

comments and suggestions. The work was financed by the Norwegian Research Council

project “The educational system in Norway: putting it to the test of the labor market”. This

financial support is gratefully acknowledged.

CThe editors of The Scandinavian Journal of Economics 2015.

434 Impact of immigration on inhabitants’ educational investments

be their main motivation for coming to Norway.1A relatively large number

of these new workers have entered the building and construction (BaC)

industry, which has thus experienced a positive supply shift.

The simple equilibrium model of the labour market suggests that if one

type of skill becomes more abundant, the return on investments in this

particular skill will decrease. On the supply side, there is a decrease in the

incentives for young people to attend educational programmes that teach

the skills in question. On the demand side, the incentives for employers

to provide the relevant training for their apprentices are reduced as fully

trained skilled workers become more available in the open labour market.

The questions we ask in this paper concern the effects of short-term

changes in the labour supply on the educational choices of students and

the training investments of employers. Specifically, we answer the following

questions. First, to what extent has the positive immigration-induced supply

shift in the labour market of the BaC industry reduced investments in

vocational programmes that teach the skills specifically required by this

industry? Second, who contributes most to the potential reduction – the

students who choose not to enrol in the vocational programmes teaching

BaC skills or the employers who reduce the number of apprenticeships

offered to the students within such programmes?

Using panel data for all students who entered upper secondary school

from 2001 to 2008, we analyse the likelihood of new students enrolling

in the BaC programme. If they did, we follow them and analyse whether

they entered an apprenticeship later on and, if so, the type of skill spe-

cialization they chose. The key explanatory variables in these analyses are

the measures of immigration into the labour market of the BaC industry.

To gain variations in the exposure to immigration, we use differences over

time in the BaC industry’s share of immigrant employment among both

geographical regions and business areas within the industry. To correct

for endogenous immigration to geographical regions, we apply a two-stage

least-squares (2SLS) procedure.

The empirical economic analysis of immigration effects in receiving

countries is dominated by studies of the impact on labour-market outcomes

(Card, 2001; Borjas, 2003; Manacorda et al., 2012; Ottaviano and Peri,

2012; Ottaviano et al., 2013). Concerning the wage and employment ef-

fects of immigration, no consensus has yet been reached. However, there

is a general agreement that the more the skills of native workers coincide

with the skills of newcomers, the more they stand to lose from higher

rates of immigration. Bratsberg et al. (2014) show generally negative ef-

fects of immigration on wages in the Norwegian labour force as a whole.

They find that immigrant inflows from other relatively rich countries have

1See http://www.ssb.no/en/befolkning/statistikker/innvgrunn.

CThe editors of The Scandinavian Journal of Economics 2015.