ECN 117 (ECN117) Economics of international migrations Problem Set 1, Answered 100% Latest Spring 25/26 - University of California, Davis.

ECN 117 Economics of international migrations Problem Set 1 In general, the highest grades will be given to clear and precise answers. Use your time wisely, and good luck. A. Multiple choice questions. 1. Which of the following are differences between the “Age of Mass Migration” () and the era of “Constrained Mass Migration” (1946-present)? a. Europe is now a receiving rather than a sending region b. South America is now a receiving rather a sending region c. The US is no longer the major destination country for immigrants d. a and b e. a, b and c 2. Consider the Roy/Borjas model of immigrant selection. The destination country is interested in increasing the number of immigrants that it receives. To do so, it decides to introduce a migration “subsidy”, such that migration costs would decrease from 15 to 10. Such policy would affect the number and selection of immigrants in the same way as if: a. Wages in the destination for those with no education (that, is for those with s=0) decreased by 5 b. Wages in the destination for those with no education (that, is for those with s=0) increased by 5 c. Wages in the origin for those with no education (that, is for those with s=0) decreased by 5 d. Wages in the origin for those with no education (that, is for those with s=0) increased by 5 e. b and c 3. Consider the Borjas model of immigrant selection. Wages in the origin country are given by wo=2+3s, whereas wages in the destination country are given by wd=1+2s, where “s” represents a person’s years of schooling. Moving from the origin to the destination country requires paying a fixed cost of 5. Which of the following is true? a. Migrants are positively selected from the origin country b. Migrants are negatively selected from the origin country c. Migrants are neutrally selected from the origin country (i.e. there are no differences between migrants and stayers in terms of their educational attainment) d. No individuals in the origin country would move to the destination country e. b and d 4. Assume that there are only three possible levels of education: “low”, “middle” and “high”. Among Argentine immigrants in the US, 0% have “low” education, 50% have “middle” education and 50% have “high” education. Among Argentine stayers, 100% have “low” education. The Net Difference Index comparing the education of Argentine immigrants in the US to the education of Argentine stayers is equal to: a. -1 b. -0.5 c. 0 d. 0.5 e. 1 5. Consider the Borjas model of immigrant selection. Assume that migrants are initially positively selected from the origin country. A decrease in the returns to skill in the origin country will cause: a. Decrease in number of immigrants, immigrants to become on average more educated b. Increase in the number of immigrants, immigrants to become on average less educated c. Decline in the number of immigrants, no change in the average education of immigrants d. No change in the number of immigrants, immigrants to become on average more educated e. Decrease in the number of immigrants, immigrants to become on average less educated 6. Feliciano (2000) provides evidence on the educational attainment of immigrants in the US. The evidence in this paper can be summarized as follows: a. Immigrants in the US are on average less educated than natives b. Immigrants in the US are on average more educated than natives c. Immigrants in the US are on average more educated than individuals from their same countries who did not migrate d. Immigrants in the US are on average less educated than individuals from their same countries who did not migrate e. There are no large differences between immigrants and natives in terms of educational attainment 7. Relative to immigrants in the 1880s, immigrants in the contemporary US are characterized by: a. There is a higher fraction of Southern and Eastern Europeans among contemporary migrants relative to immigrants in the 1880s b. There is a higher fraction of men among contemporary migrants relative to immigrants in the 1880s c. There is a higher fraction of Asians among contemporary migrants relative to immigrants in the 1880s d. There is a higher fraction of women among contemporary migrants relative to immigrants in the 1880s e. c and d 8. In the Roy/Borjas model of immigrant selection, a decrease in the returns to skill in the destination country will cause: a. An increase in the number of migrants b. A decrease in the number of migrants c. Immigrants to become on average more educated if migrants were initially negatively selected d. Immigrants to become on average more educated if migrants were initially positively selected e. b and d 9. Assume that the entry earnings (that is, how much immigrants make on average on their first year in the host country) of immigrants who entered in 1990 were lower than the entry earnings of immigrants who entered in 2000, but that the two groups experienced the same pace of earnings growth over time as they spent time in the US. In addition, returns migrants from 1990 to 2000 were negatively (that is, those making less money in the US were more likely to return to their countries of origin). In this case, measuring the progress of immigrants over time using data just from the 2000 census would lead to: a. Overestimate the progress of immigrants over time b. Underestimate the progress of immigrants over time c. Neither overestimate nor underestimate d. It is not possible to know without further information e. All of the above 10. Assume you are interested in measuring the economic progress of immigrants over time. However, you only have repeated cross sectional data following “cohorts” of immigrants in a survey run by the government. When using such data, which of the following would lead to an incorrect measurement of the progress of immigrants in the labor market? a. Immigrants who are doing well in the labor market might be less likely to return to their countries of origin b. Immigrants who are not doing well in the labor market might be more likely to be missed by government surveys c. Those who entered the US in 1980 had higher earnings than those who entered in 1990 d. a and c e. a and b 11. Assume that the only goal of immigrants who move to the US is to send remittances to their families left behind. Further, assume that migrants stay in the US provided that they can send at least $300 per month, and that all migrants save exactly 10% of the money they make. Under these assumptions, measuring the progress of immigrants in the labor market based on repeated cross sectional data following cohorts of immigrants over time will tend to: a. Overestimate the progress of immigrants over time b. Underestimate the progress of immigrants over time c. Accurately measure the progress of immigrants d. It is not possible to know without further information e. None of the above B. Short answer question 1. Returns to education are higher in both Brazil and Puerto Rico than in the US. Feliciano (2000) finds that Brazilian immigrants in the US have more education than Brazilians who stayed in Brazil, but Puerto Rican immigrants in the US have less education than Puerto Ricans who stayed in Puerto Rico. a. Are these findings consistent with the Borjas model of immigrant selection? Explain b. Provide one reason why the selection of Puerto Rican migrants in the US is different from the selection of Brazilian migrants C. Exercise Consider a situation in which there are just two countries: an Origin, and a Destination country. Wages in the origin country are given by: wo=1+2s Wages in the destination country are given by: wd=7+s. where s are years of schooling. Migrating from the Origin to the Destination country requires paying a fixed migration cost of 1. a. [4 points] How many years of schooling do you need to have so as to be indifferent between staying in the Origin country and moving to the Destination country? Are immigrants from the Origin to the Destination positively or negatively selected with respect to years of schooling? Explain The politicians in the Destination country are worried that too many immigrants from the Origin country are moving. To reduce the number of immigrants, they are evaluating two alternative policy proposals: The first proposal is the introduction of a visa fee of 2 (to be paid in addition to the fixed migration cost of 1). b. [4 points] What would be the effect of the visa fee on the number of immigrants? What would be the effect of the visa fee on the years of schooling of immigrants? Show your work The second policy proposal is a tax on the earnings of foreigners, so that wages in the destination country for immigrants would be given by: wd=(1-t)(7+s) where t represents the tax rate. Immigrants would still need to pay the fixed migration cost of 1. c. How large would the tax rate (t) need to be in order to result in the same number of immigrants as the visa fee? Show your work The politicians in the Destination country are worried about the low levels of schooling of the immigrants that the Destination country attracts. To improve the schooling levels of immigrants, they decide that they will charge a higher visa fee to those immigrants with less education. Specifically, they decide that the visa fee will be equal to 2 for those with 3 or less years of schooling (to be paid in addition to the fixed migration cost of 1) and will be equal to 0 for those who have more than 3 years of schooling (those with 3 or more years would just need to pay the fixed migration cost of 1). d. What would be the effect of this policy on the number of immigrants? What would be the effect of this policy on the years of schooling of immigrants? Show your work D. Exercise 2 Consider a situation in which there are just two countries: an Origin, and a Destination country. Wages in the origin country are given by: wo=1+2s Wages in the destination are given by: wd=7+1s. where s are years of schooling. There is no cost of moving from the origin to the destination. e. How many years of schooling do you need to have so as to be indifferent between staying in the Origin country and moving to the Destination country? Are immigrants from the Origin to the Destination positively or negatively selected with respect to years of schooling? Explain Assume that years of schooling in the origin country are distributed according to the following table: Number of people Years of schooling 1 3 2 4 2 5 1 6 1 7 That is, there is 1 person with 3 years of schooling, 2 persons with 4 years of schooling, etc. f. How many people would move under the situation described in part a? For this calculation, you can assume that, if a person is indifferent between moving and staying, the person will stay in the origin country. g. Under the situation described in part a, what would be the value of the Net Difference Index (NDI) comparing the education of immigrants versus the education of stayers from the origin country? You can keep assuming that, if a person is indifferent between moving and staying, the person will stay in the origin country. The politicians in the Destination country are worried about the large number of immigrants that they have been receiving. To reduce the number of immigrants, they have decided that they will introduce a visa fee that migrants would need to pay upon entering the destination country. a. The government is deciding how much charge for the visa fee and is currently considering two prices, $1 or $2. Assuming that the goal of the government is to maximize the total revenue that they obtain from the visa fee, which of these two prices would you recommend? You can keep assuming that, if a person is indifferent between moving and staying, the person will stay in the origin country. .