Estimating the Local Employment Impacts of Immigration: A Dynamic Spatial Panel Model

Sheffield Migration Research Group member Prof. Gwilym Pryce introduces his recent article published in Urban Studies.

Until the publication of our paper, there had been no serious attempts at estimating the sub-national impacts of immigration on employment in the UK. This is a major omission because it means we do not know whether there are regional inequalities in the employment impacts of immigration and therefore an absence of empirical evidence to support the case for redistributing the economic gains from immigration. This omission is largely because the main data source used for producing national estimates—the Labour Force Survey—does not have a large enough sample size to estimate city-level or even regional impacts of immigration. In this paper we develop a approach that makes it possible to draw on the very large sample sizes of the Census to estimate regional and city-level impacts of immigration. Our approach opens up the possibility of estimating regional variation of employment impacts in the UK with potentially significant policy implications.  Ours is also the first paper to take into account spatial spillover effects (which have the significant potential to bias results) when estimating these impacts.

Fig 2. Simulated impacts on employment of a 1% fall in European migrants’

Since being published online on 12 Dec 2019 this paper has had over 16,800  views/downloads, making it the most viewed/downloaded paper of all time in Urban Studies, one of the leading international peer reviewed journals in this field. The level of interest is likely due to the importance of immigration impacts on employment to understanding the ramifications of Brexit. For example, we find that just a one per cent drop in the number of EU migrants living in London after Brexit could cause nearly 120,000 job losses in the city.

Methodological Contribution

Our goal has been to make a step change in the robustness of estimates in this area in three main ways:

(i) our Census-based approach allows researchers to base estimates on sample sizes that 500 times larger than previous approaches;
(ii) we deploy a cutting-edge spatial panel econometric approach that incorporates spatial spillovers as well as controlling for endogeneity;
(iii) we have created the first ward-level consistent geographies for Census data stretching back to 1971 allowing us to consider a much longer time span than most previous UK studies of the employment impact of the impact of immigration and we are the first to achieve this at the local level.

 

Hopefully, our new approach will lead to a new era of immigration impacts research that explores the differences across local and regional areas in the employment effects of immigration and the implications for social justice and public policy.

Gwilym is also the PI on ‘Life at the Frontier’, a new £1.2m research project, launched to investigate how the social integration of migrants in the UK, Norway and Sweden can be improved through social mobility – further information about LATF can be found here.