Impact of Low‐Skilled Immigration on Female Labour Supply

AuthorEmanuele Forlani, Elisabetta Lodigiani, Concetta Mendolicchio
Publication Date01 Apr 2015
Scand. J. of Economics 117(2), 452–492, 2015
DOI: 10.1111/sjoe.12101
Impact of Low-Skilled Immigration
on Female Labour Supply
Emanuele Forlani
University of Pavia, 27100 Pavia, Italy
Elisabetta Lodigiani
Ca’ Foscari University of Venice, 30121 Venice, Italy
Concetta Mendolicchio
Institute for Employment Research, DE-90478 Nuremberg, Germany
In this paper, segmenting the market by educational levels, we investigate which native-born
women are more affected by an increase of low-skilled immigrants working in the household
service sector. We present a model of individual choice with home production and, using a
harmonized dataset (the Cross-National Equivalent File), we estimate its main comparative
static results. The results suggest that the share of immigrants working in services is positively
associated with an increase of native-born women’s labour supply at the intensive margin,
if skilled, and at the extensive margin, if unskilled. Moreover, the results show that these
effects are larger in countries with less-supportive family policies.
Keywords: Family policy; female labour decision; international migration
JEL classification:J22; J61
I. Introduction
International migration can significantly alter the labour market conditions
in destination countries. As a first-order effect, it might change the pre-
vailing wage rates in sectors where a large number of migrants look for
a job. In particular, unskilled migrants represent a significant fraction of
the employed in sectors that provide services to households. Several recent
studies (Barone and Mocetti, 2011; Cort´
es and Tessada, 2011, hereafter CT;
We acknowledge the financial support of the IAB, the data contribution of Australian Bureau
of Statistics, HILDA, SHP, SFSO, SOEP, BHPS, Office for National Statistics (UK), PSID,
IPUMS, and Bertelsmann Foundation. We are grateful to the editor and two anonymous
referees for insightful comments. The responsibility for any mistakes is our own. E. Forlani
acknowledges support from the Cariplo Foundation project no. 2010-2372.
CThe editors of The Scandinavian Journal of Economics 2014.
E. Forlani, E. Lodigiani, and C. Mendolicchio 453
Far r´
eet al., 2011) show that low-skilled immigrants have contributed to a
decrease in the prices of household services where they specialize, or in
sectors with a high concentration of low-wage workers, such as housekeep-
ing, childrearing, or caring for the elderly; see Cort´
es (2008) and Frattini
(2012) for the US and UK, respectively. Given that these services are,
typically, a substitute for time-consuming activities carried out, mostly by
women, within the family, there might be a second-order effect on the
labour supply of native women. This could be especially true in countries
with weak family policies.
In this paper, we aim to study the impact that unskilled immigrants in the
household service sector have on native female labour supply for a group of
developed countries, which differ in terms of family policies, considering
both their effects on the employment decision and on the number of hours
Previous studies closely related to ours have focused on a single country,
usually one with weak family-supporting policies. In particular, for the US,
CT find that the labour supply of working women at the top quartile of
the female wage distribution is positively affected at the intensive margin
by low-skilled immigration. This effect is particularly relevant for highly
skilled women. For Spain, Farr´
eet al. (2011) show that the positive effect
of female immigration on the labour supply of women depends on the edu-
cational level and the family responsibilities of the native women. For Italy,
Barone and Mocetti (2011) study how the inflow of female immigrants af-
fects the labour supply of both high-skilled and low-skilled women. As in
previous papers, they find a positive impact only on the hours worked by
high-skilled natives. They also find a stronger effect in Italian municipali-
ties where local welfare services are less developed. In a slightly different
perspective, Furtado and Hock (2010) evaluate how immigration affects the
employment–maternity trade-off in the US.
Our paper adds to these results from several points of view. First, we
perform a multilevel, cross-country analysis. This allows us, using the
cross-country dimension of our dataset, to consider how unskilled migrants’
labour supply interacts with the policies adopted to support the families.
This is of particular importance because differences in family policies
across OECD countries contribute to the significant variations in women’s
labour supply behaviour (e.g., Del Boca and Sauer, 2009; Del Boca et al.,
2009). Second, these family policies are usually more effective for unskilled
women, encouraging part-time work and jobs in lower-level positions (Blau
and Kahn, 2013). For this reason, in the empirical analysis, we test whether
this effect is stronger for skilled or unskilled natives, conditional on the
degree of family policy support. Third, using the International Standard
Industrial Classification, we adopt an occupation-based definition to study
the role of unskilled migrants employed in a subgroup of service sectors
CThe editors of The Scandinavian Journal of Economics 2014.
454 Impact of low-skilled immigration on female labour supply
compared to the total labour force size.1Finally, the theoretical model
we adopt to analyse the labour supply decisions extends and generalizes
that of CT. Here, one of the key assumptions is that an increase in the
concentration of unskilled migrants in services puts downward pressure on
the local prices of household services. This assumption is supported by the
literature and confirmed in our empirical analysis. In the model, household
services bought on the market and own time are inputs in a household
production function. Under appropriate restrictions on the utility and home
production functions, as a general result, we find that a decrease in the
price of these services increases the native labour supply. This effect is
larger, for low-wage native women, if the country implements weak family
The empirical analysis aims to test the comparative statics properties of
the model and is based on the Cross-National Equivalent File (CNEF), ob-
tained with harmonized data from different national surveys. Specifically,
we use the compatible surveys for three years (2001, 2003, and 2005)
and for five countries (Australia, Germany, Switzerland, UK, and US). Our
identification strategy exploits the variability within region–year in the con-
centration of low-skilled immigrants in the service sector. To address the
potential endogeneity issues caused by the location choices of immigrants
(because their distribution across regions is not random), and by measure-
ment errors (because of undocumented migrants), we exploit the tendency
of migrants to move to regions with a large share of migrants of the same
origin and use the past distribution of migrants across regions (Card, 2001).
We present three sets of results. First, we estimate the impact of immi-
gration on the probability to be employed for native women aged 22–45 by
skill levels. In contrast to what has been obtained in previous research, we
find that there is a positive and statistically significant effect on the average
probability of working for unskilled native women. Consistently with the
previous body of literature, there is no detectable impact on the probability
of being employed for skilled women. Second, we test the empirical rela-
tionship between unskilled migration and the number of hours worked per
week. We observe that, compatible with the theoretical results, migration
increases the number of weekly hours worked by skilled women. How-
ever, there is no effect on the choices at the intensive margin of unskilled
women. All these findings are particularly strong for women in households
with children. The results are robust to different sample composition and
identification tests. Finally, we show that, consistent with the theoretical
1Barone and Mocetti (2011) also focus on female immigration specialized in household
services. Unlike us, they consider migrants from a subgroup of countries with the highest
share of the employed in domestic services in Italy. Therefore, they define specialization in
terms of home-country basis and not in terms of actual occupation.
CThe editors of The Scandinavian Journal of Economics 2014.

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