The effect of low-skilled immigration on local productivity and amenities: Learning from the South Korean experience

Abstract

In this study, we evaluate the economic effects of a significant increase in low-skilled immigration in Korean Municipalities. Using a change in immigration policy in 2004 and the pre-existing immigrant networks we estimate the effects of low-skilled immigration on local wages, net native migration, and housing prices. We interpret the findings using a canonical representative agent spatial equilibrium model as in Glaeser and Gottlieb (2009) to infer the equilibrium effects of immigration on local productivity and amenities. An increase of immigrants equal to 1 percent of the local population generated a 1% increase in local productivity and a 1.6% decrease in local amenities. We also find a net migration response of zero among natives deriving from an inflow of those who moved for work-related and an outflow of those who moved for amenity-related reasons. Finally, we find a direct negative effect of the immigration shock on measures of local amenities.