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Big Idea: Evidence-based Research May Illuminate Policy Discussion

The Big Idea: Evidence-based Research May Illuminate Policy Discussion

Strength in Numbers: Undocumented Workers Boost the GDP

A recent research of Francesc Ortega and Ryan Edwards investigates some of important facts related to the undocumented population, providing a useful approach to policy-makers interested in simulating real-life policies currently under discussion.

The Basic Facts Related to the Undocumented Population

The following is taken from: "The economic contribution of unauthorized workers: An industry analysis." (see notes below)

The Important Facts Related to Unauthorized Workers and the U.S. Economy

  • About 5% of all U.S. workers are undocumented.
  • The contribution of unauthorized workers to the U.S. economy is substantial, at approximately 3.1% of GDP annually.
  • Immigrants are not only workers but also consumers, whose demands bring new jobs.
  • The issue that about 11 million people lack legal status has been unresolved for decades.
  • Legalization of unauthorized workers would increase their contribution to 4.8% of private-sector GDP.

Research Approach and Data Source

  • The study employs a theoretical framework that builds on Borjas (2003) and Ottaviano and Peri (2012).
  • The theoretical framework allows for multiple industries and a heterogeneous workforce.
  • Capital and labor are the inputs in production and the different types of labor are combined in the multi-nest CES framework
  • The model is calibrated using data on the characteristics of the workforce, including an indicator for imputed unauthorized status (Center for Migration Studies, 2014), and industry output from the BEA.

Notes

  1. Edwards, R., & Ortega, F. (2017). The economic contribution of unauthorized workers: An industry analysis. Regional Science and Urban Economics, 67, 119-134. https://doi.org/10.1016/j.regsciurbeco.2017.09.004.
  2. George J. Borjas. (2003). The labor demand curve is downward sloping: Reexamining the impact of immigration on the labor market. The Quarterly Journal of Economics, 118(4), 1335–1374. https://doi.org/10.1162/003355303322552810.
  3. Ottaviano, G., & Peri, G. (2012). Rethinking the effect of immigration on wages. Journal of the European Economic Association, 10(1), 152–197. https://doi.org/10.1111/j.1542-4774.2011.01052.x
  4. Center for Migration Studies, Estimates of the unauthorized population, 2014. Dataset based on the augmented American Community Survey data files hosted by IPUMS (Integrated Public Use Microdata Series), 2010 to 2013.

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