Immigration and Economic Growth in Metropolitan Areas

This research answers the question whether immigration contributes to metropolitan areas’ productivity and economic growth, and it also quantifies the impacts of immigration on productivity and economic growth. It examines the relationships between metropolitan Gross Domestic Product (GDP) and the measures of immigration in the United States from 2000-2010 and attempts to find evidence in three mechanisms through which immigration can contribute to the economic growth: the overall effects, the skill effects and the complementarity effects. In each effect’ analysis, this research uses reduced- and structural-form equations and uses fixed-effects and first-difference models. First, reduced-form analysis with the specification of GDP per worker as the dependent variable and share of immigrant workers in total workforce as the independent variable revealed that the overall immigration has a small negative impact on metropolitan productivity growth, and this potential negative impact increases with metropolitan population size. Structural-form analysis with the specification of GDP level as the dependent variable and numbers of immigrant worker as the independent variable found that immigration has a significant positive impact on economic growth. However, using instrumental variables cannot enhance this finding with reduced endogeneity. Second, neither reduced- or structural- form analysis found that high-skilled immigrants contribute to the productivity and economic growth. Interestingly, fixed-effects panel regression results pointed out that low-skilled immigrants make a substantial contribution to the productivity and economic growth. Third, this research revealed evidence that immigration contributes to the economic growth through complementing native workers and the complementarity comes from both the immigrant and native workers with the same and with different levels of education. Immigration’s impact on labor market outcomes has been extensively studied. However, previous literature seldom focuses on immigration’s effect on the aggregate economic measurement such as GDP. By providing an in-depth analysis of immigrants’ impact on metropolitan GDP, this research seeks to fill the gap in the immigration economic impact and regional economic growth literature. This research’s findings provide direct guidance in making and implementing metropolitan-specific immigration policy.