The Impact Of Immigration On The Labour Force Dynamics

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The popular empirical investigation based on spatial correlation for the purpose of analysing the impact of the immigrants on the labour force dynamics has been undertaken by Borjas (1999) for the US. The study has proposed that estimates of the effects of immigration are identified from the spatial correlation between levels of immigration and the changes in the labour market outcomes. The approach has been used within the context of Dustmann et al (2005) that has also used LFS data for the purpose of the analysis of the immigration implications on the labour force dynamics in the UK between 1992 and 2000. This research has made use of the basis developed by Dustmann et al (2005), however has used one outcome of wages and unemployment separately in comparison with employment, participation and wages as the economic outcome of the immigration into the UK used by the paper.

The two estimation equations that have been used for the purpose of this analysis has been summarised as follows:

ln wit = α0 + α1πit + α2 ln nit + α3ait + λ t w + µ i w+ u it w (Equation 1)

Uit = β0 + β1πit + β2 ln nit + β3ait + λ t U + µ i U + u it U (Equation 2)

Where the variables represent the following: wit = wages
Uit = unemployment rate πit = immigrant to native ratio nit = vector of native skill group ait = vector for average age λ = year effect µ = region effect u = disturbance terms

Drawing upon the literature review, the critics of spatial correlation methodology have pointed out three

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