2015 Series • No. 15–18
Research Department Working Papers
Does Immigration Crowd Natives Into or Out of Higher Education? 
Over the past several decades, the United States has experienced some of its largest immigrant inflows since the Great Depression. This higher level of immigration has generated significant debate on the effects of such inflows on receiving markets and natives. Education market studies have found that inflows of immigrant students can displace some natives from enrollment. Meanwhile, labor market studies have primarily examined the impact of immigrant labor inflows on the wages of similarly and dissimilarly skilled natives, with mixed results. The lack of consensus in the wage studies has spurred a growing line of research on whether natives respond endogenously to immigrant worker inflows. Yet, it remains unexplored whether native responses in the higher education market also contribute to the absorption of immigrants into the labor market and the effects on equilibrium in both markets.
In a unified framework of the education and labor markets this paper addresses whether skill level via college enrollment is another margin on which natives endogenously adjust to immigrant inflows of students and labor. This study differs from previous research by separately identifying native human capital accumulation responses to both immigrant labor and student inflows at the college margin, where such responses may be strongest due to the high school-college wage gap. The analysis also contributes to our understanding of how local markets respond to immigrant inflows.
Key Findings
- While state-level increases in the number of immigrant college students do not significantly lower native college enrollment rates, increases in the ratio of unskilled immigrant workers to skilled immigrant workers within a state do significantly raise enrollment rates. Thus, these results provide indirect evidence of market price effects of immigration on natives.
- The results suggest that inflows of unskilled immigrant labor do lower the relative unskilled wage and also show that this effect is mitigated by the positive enrollment response of natives.
- The crowd-in effect is driven largely by young natives, who may be most sensitive to college returns, and is also moderately greater for natives on the margin of public school attendance, where enrollment slots are more flexibly supplied.
- Crowd-in coupled with a lack of crowd-out is shown to imply that the native response arises primarily from the wage sensitivity of college demand and the high elasticity of college supply, rather than from large market price effects.
Implications
The paper suggests that education studies on displacement effects of immigrant students on natives, by ignoring immigrant labor inflows, miss an important component of immigration that significantly affects native skill choice. Additionally, over long time horizons, displacement effects appear to be small to nonexistent. Government policies on immigration that do not take into account how the composition of immigrant inflows is affected may have unanticipated consequences due to the resultant changes in native enrollment that this paper identifies. Moreover, the degree to which individuals respond more to changes in the costs or the benefits of higher education also has direct implications for government policy. If the goal of a government intervention were to increase college enrollment rates, the paper suggests that labor market policies targeting relative wages might be more effective in the long run than education market policies adjusting costs through loans and grants.
Abstract
This paper investigates the impact of immigration on the college enrollment of U.S. natives. Many studies have focused on the effect of increased demand for schooling by immigrants on the enrollment of natives. However, changes in immigrant labor supply may also affect native enrollment by changing local market prices. Using U.S. Census data from 1970 to 2000, I find that state-level increases in the number of immigrant college students do not significantly lower the enrollment rates of U.S. natives. On the contrary, state-level increases in the ratio of unskilled immigrant workers to skilled immigrant workers significantly raise native enrollment rates. These findings suggest that the demand for college is sensitive to wage rates and that college slots are flexibly supplied over a decadal time horizon.