The effect of immigrants on natives' incomes through the use of capital

Julian L. Simon and A.James Heins

Journal of Development Economics, 1985, vol. 17, issue 1, 75-93

Abstract: This paper deals with questions about the effects of immigrants on three types of capital: the private capital immigrants work with, the public (government) capital that immigrant workers use, and the public capital used for services by immigrants. Private capital dilution is unimportant. The overall effect is an addition to the incomes of natives of a sum equal to perhaps 1% or 2% of the incomes of the immigrants for some number of years, small enough to ignore in this context. In the government sector, workers can be assumed to obtain all the returns to capital, and about 8% of immigrants work in this sector. Therefore, for productive capital taken altogether, we estimate that immigrants capture the returns from only 8% of the capital they work with, the government capital; the result is a loss of perhaps 2% of an immigrant family's income for one year, which is considerably smaller (being for only one year) than the above-mentioned gain to natives through the private capital that immigrants work with. The cost to natives of equipping an immigrant family with ‘demographic capital’ — schools, hospitals, and local roads — turns out to be much more important. This quantity depends upon the cost of such equipment, the proportion financed by bonds, the average length of life of the capital, and the average life of the bonds. We develop an estimating equation, and calculate that the cost to natives in 1975 dollars is $4172, about a fifth of a year's income for an average family. This is not insignificant in magnitude. But this amount — together with the effect through productive capital dilution discussed in the first part of the paper — is considerably smaller than the benefits of immigrants to natives through their relatively low use of welfare services and their relatively high contribution of taxes.

Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:17:y:1985:i:1:p:75-93

DOI: 10.1016/0304-3878(85)90022-7

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