Flocking Eastern Europeans Ç. Börke Tunalı, Jan Fidrmuc and Nauro F. Campos.

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Flocking Eastern Europeans Ç. Börke Tunalı, Jan Fidrmuc and Nauro F. Campos

Introduction UK: One of only 3 EU15 countries with no restrictions on immigration from AC8 Result: large inflow of Eastern European migrants after 2004 Most AC8 migrants young (80% <35), unskilled and low paid (74%<£6 and 93%<£8 by 2009)  Very different from UK workers Previous research: little evidence of adverse labor-market effect (Gilpin et al., 2006; Lemos and Portes, 2008; Lucchino et al., 2012) But important social and political impact

What would you say is the most important issue facing Britain today? Source: Ipsos MORI, Economist/Ipsos MORI September 2015 Issues Index,

EU Migration to the UK EU nationals in the UK (Wadsworth et al, 2016): 1995: 0.9 mn (1.5%) 2015: 3.3 mn (5.3%) Net immigration from the EU: 184K in 2015 (cf. 188K from outside of EU) 79K EU15, 47K EU8, 58K EU2 2.1 mn EU nationals work in the UK (7.6% of overall employment) 0.9mn EU15, 1mn EU8, 0.2mn EU2 EU migration one of the key factors cited in favor of Brexit

Source: Migration Statistics Quarterly Report: May 2016, Office for National Statistics

This Paper Location choices of immigrants not random  Estimated effects of immigration on labor- market outcomes contaminated by endogeneity and reverse causality Standard solution: IV E.g. previous stock of immigrants EU8+EU2 were restricted from migrating to the UK during the Cold War Our solution: Causality analysis

Data UK Labor Force Survey (LFS): 2004q2-13q4 20 regions Unemployment rate: overall and by skill groups Average hourly wage rate: overall and by skill groups Share of immigrants: EEA, EEA18, EU10

Methodology

Unemployment and Immigration UnemploymentEEA28UnemploymentEEA18 UEEEA28UEEEA28UEEEA18UEEEA18 Lag *** ***0.701*** *** (0.048) (0.072) (0.025) (0.053) (0.052) (0.091) (0.017) (0.025) Lag *** *** ** (0.059) (0.091) (0.032) (0.076) (0.059) (0.097) (0.014) (0.100) Lag (0.070) (0.090) (0.024) (0.073) (0.075) (0.121) (0.022) (0.108) Lag ** *** (0.043) (0.097) (0.023) (0.059) (0.043) (0.138) (0.017) (0.033) UnemploymentEU10UnemploymentNon-EU UEEU10UEEU10UENon-EUUENon-EU Lag *** ***0.670***0.103* *** (0.046) (0.096) (0.018) (0.047) (0.045) (0.058) (0.030) (0.047) Lag *** *** **0.076 (0.059) (0.138) (0.025) (0.057) (0.060) (0.079) (0.033) (0.058) Lag *** (0.069) (0.118) (0.022) (0.042) (0.070) (0.049) (0.031) (0.058) Lag * * (0.043) (0.148) (0.020) (0.038) (0.039) (0.049) (0.030) (0.060)

Unemployment and Immigration: Regions with greatest EU10 change UnemploymentEEA28UnemploymentEEA18 UEEEA28UEEEA28UEEEA18UEEEA18 Lag *** ***0.708*** *** (0.075) (0.094) (0.036) (0.077) (0.080) (0.111) (0.027) (0.042) Lag *0.262** ** (0.074) (0.101) (0.054) (0.062) (0.077) (0.191) (0.024) (0.085) Lag * (0.078) (0.128) (0.021) (0.076) (0.086) (0.241) (0.029) (0.121) Lag ** *** (0.049) (0.113) (0.026) (0.061) (0.049) (0.223) (0.018) (0.051) UnemploymentEU10UnemploymentNon-EU UEEU10UEEU10UENon-EUUENon-EU Lag *** ***0.656*** *** (0.070) (0.152) (0.019) (0.045) (0.070) (0.055) (0.042) (0.069) Lag ** ** (0.078) (0.168) (0.046) (0.062) (0.074) (0.109) (0.048) (0.078) Lag * (0.084) (0.153) (0.020) (0.065) (0.074) (0.104) (0.038) (0.097) Lag * ** (0.051) (0.205) (0.019) (0.064) (0.043) (0.063) (0.050) (0.063) Northern Ireland, Strathclyde, Rest of Scotland, Wales, South Yorkshire, East Midlands, Merseyside, Rest of Yorkshire & Humberside, Rest of West Midlands, West Midlands (Metro)

Unemployment and Immigration: Regions with lowest EU10 change UnemploymentEEA28UnemploymentEEA18 UEEEA28UEEEA28UEEEA18UEEEA18 Lag ***0.175* ***0.675*** *** (0.054) (0.096) (0.032) (0.077) (0.060) (0.132) (0.015) (0.027) Lag ** (0.094) (0.114) (0.030) (0.126) (0.095) (0.109) (0.014) (0.123) Lag (0.122) (0.082) (0.041) (0.120) (0.133) (0.127) (0.034) (0.147) Lag (0.072) (0.138) (0.039) (0.089) (0.078) (0.196) (0.031) (0.052) UnemploymentEU10UnemploymentNon-EU UEEU10UEEU10UENon-EUUENon-EU Lag *** ***0.664*** *** (0.055) (0.112) (0.033) (0.088) (0.054) (0.096) (0.020) (0.047) Lag ** * * (0.094) (0.151) (0.021) (0.103) (0.092) (0.087) (0.033) (0.071) Lag (0.119) (0.133) (0.039) (0.050) (0.128) (0.047) (0.043) (0.069) Lag (0.070) (0.210) (0.033) (0.040) (0.065) (0.040) (0.031) (0.077) Greater Manchester, Rest of North West, West Yorkshire, Tyne & Wear, East Anglia, Rest of South East, Rest of Northern Region, South West, Outer London, Inner London

Unemployment and Immigration: Regions with UKIP MEPs > 0.33 UnemploymentEEA28UnemploymentEEA18 UEEEA28UEEEA28UEEEA18UEEEA18 Lag *** ***0.685*** *** (0.067) (0.101) (0.031) (0.074) (0.072) (0.128) (0.020) (0.032) Lag * (0.072) (0.137) (0.038) (0.084) (0.072) (0.165) (0.015) (0.063) Lag (0.078) (0.112) (0.024) (0.071) (0.085) (0.229) (0.017) (0.093) Lag * (0.063) (0.124) (0.032) (0.043) (0.060) (0.237) (0.018) (0.054) UnemploymentEU10UnemploymentNon-EU UEEU10UEEU10UENon-EUUENon-EU Lag *** *** *** (0.063) (0.132) (0.019) (0.051) (0.058) (0.093) (0.029) (0.043) Lag * (0.074) (0.173) (0.032) (0.065) (0.075) (0.089) (0.038) (0.055) Lag ** (0.077) (0.129) (0.025) (0.050) (0.076) (0.066) (0.036) (0.073) Lag * (0.060) (0.208) (0.025) (0.034) (0.052) (0.053) (0.039) (0.062) Tyne & Wear, Rest of Northern Region, South Yorkshire, West Yorkshire, Rest of Yorkshire & Humberside, East Midlands, East Anglia, South West, West Midlands (Metropolitan), Rest of West Midlands, Greater Manchester, Merseyside, Rest of North West)

Wages and Immigration  Hourly Wage EEA28  Hourly Wage EEA18 WW EEA28 WW WW EEA18 WW Lag ***-3.541***0.001*0.853***-0.461*** **0.730*** (0.029) (1.277) (0.001) (0.059) (0.029) (1.807) (0.000) (0.028) Lag ***7.116*** *** ** (0.024) (1.947) (0.001) (0.081) (0.023) (2.898) (0.000) (0.103) Lag *** ** *** (0.023) (2.126) (0.001) (0.077) (0.022) (2.318) (0.001) (0.105) Lag ***-5.558*** *** *** (0.018) (2.354) (0.001) (0.054) (0.020) (2.848) (0.000) (0.033)  Hourly Wage EU10  Hourly Wage Non-EU WW EU10 WW WW Non-EU WW Lag *** ***-0.466*** *** (0.029) (2.582) (0.001) (0.049) (0.028) (1.510) (0.001) (0.048) Lag ***8.714*** *** (0.024) (2.904) (0.001) (0.060) (0.024) (1.679) (0.001) (0.057) Lag *** ** ***-3.313* (0.023) (2.813) (0.001) (0.041) (0.022) (1.668) (0.001) (0.059) Lag ***-7.276*** *** *0.108* (0.018) (2.508) (0.001) (0.035) (0.018) (1.519) (0.001) (0.055)

Wages and Immigration: Highly Skilled  Hourly Wage EEA28  Hourly Wage EEA18 WW EEA28 WW WW EEA18 WW Lag ***-4.602** ***-0.471*** *** (0.049) (2.140) (0.001) (0.058) (0.044) (3.263) (0.001) (0.027) Lag *** *-0.233** (0.063) (2.704) (0.001) (0.082) (0.054) (5.427) (0.001) (0.104) Lag *** ** *** (0.040) (3.932) (0.001) (0.077) (0.039) (4.526) (0.001) (0.108) Lag * *** (0.034) (2.869) (0.001) (0.054) (0.035) (2.805) (0.001) (0.034)  Hourly Wage EU10  Hourly Wage Non-EU WW EU10 WW WW Non-EU WW Lag ***-5.213***0.001*0.791***-0.471*** *** (0.050) (2.541) (0.001) (0.048) (1.095) (0.001) (0.049) Lag ** (0.060) (3.547) (0.001) (0.057) (0.055) (1.538) (0.002) (0.056) Lag *** ** *** (0.040) (3.653) (0.001) (0.041) (2.705) (0.002) (0.060) Lag ** * * (0.032) (2.612) (0.001) (0.034) (0.036) (1.296) (0.001) (0.056)

Wages and Immigration: Intermediate Skilled  Hourly Wage EEA28  Hourly Wage EEA18 WW EEA28 WW WW EEA18 WW Lag *** ***-0.521*** ***0.729*** (0.034) (1.568) (0.001) (0.058) (0.033) (2.178) (0.000) (0.028) Lag ** (0.043) (2.161) (0.001) (0.079) (0.042) (2.351) (0.000) (0.101) Lag *** *** (0.027) (1.774) (0.001) (0.075) (0.027) (1.885) (0.001) (0.104) Lag *** *** *** (0.024) (1.738) (0.001) (0.054) (0.026) (2.280) (0.000) (0.033)  Hourly Wage EU10  Hourly Wage Non-EU WW EU10 WW WW Non-EU WW Lag *** ***-0.525***-3.283** *** (0.035) (2.590) (0.001) (0.049) (0.035) (1.285) (0.001) (0.047) Lag (0.041) (3.543) (0.001) (0.060) (0.042) (1.426) (0.001) (0.058) Lag *** *** (0.027) (3.022) (0.001) (0.041) (0.027) (1.332) (0.001) (0.059) Lag *** *** *0.109* (0.025) (2.455) (0.001) (0.036) (0.026) (1.498) (0.001) (0.054)

Wages and Immigration: Low Skilled  Hourly Wage EEA28  Hourly Wage EEA18 WW EEA28 WW WW EEA18 WW Lag *** ***0.859***-0.661*** **0.731*** (0.030) (1.380) (0.001) (0.059) (0.031) (2.044) (0.001) (0.030) Lag ** * ** (0.037) (1.901) (0.001) (0.080) (0.039) (2.102) (0.001) (0.105) Lag *** *** (0.027) (2.052) (0.001) (0.077) (0.029) (2.585) (0.001) (0.104) Lag ** **-4.698** *** (0.038) (1.387) (0.001) (0.055) (0.038) (2.276) (0.000) (0.033)  Hourly Wage EU10  Hourly Wage Non-EU WW EU10 WW WW Non-EU WW Lag *** ***-0.663*** *** (0.030) (2.325) (0.001) (0.049) (0.031) (1.359) (0.001) (0.048) Lag **4.926*0.001* *** (0.037) (2.501) (0.001) (0.060) (0.041) (1.281) (0.002) (0.055) Lag *** *** (0.027) (3.074) (0.001) (0.042) (0.029) (1.256) (0.001) (0.060) Lag * * (0.038) (1.879) (0.001) (0.037) (0.038) (1.291) (0.001) (0.056)

Unemployment and Immigration: High Skilled UnemploymentEEA28UnemploymentEEA18 UEEEA28UEEEA28UEEEA18UEEEA18 Lag *** ***0.859***-0.105*** *** (0.035) (0.087) (0.011) (0.051) (0.037) (0.127) (0.008) (0.038) Lag ** ***-0.429** * (0.050) (0.216) (0.014) (0.087) (0.048) (0.163) (0.008) (0.134) Lag *** ***0.462** (0.034) (0.201) (0.018) (0.098) (0.034) (0.203) (0.008) (0.137) Lag ***-0.173* *** *** (0.043) (0.097) (0.023) (0.059) (0.043) (0.138) (0.017) (0.033) UnemploymentEU10UnemploymentNon-EU UEEU10UEEU10UENon-EUUENon-EU Lag *** ***0.803***-0.108*** *** (0.036) (0.158) (0.009) (0.046) (0.037) (0.055) (0.016) (0.054) Lag *** ** (0.050) (0.260) (0.012) (0.060) (0.050) (0.093) (0.016) (0.060) Lag *** *** (0.032) (0.240) (0.013) (0.043) (0.033) (0.112) (0.028) (0.064) Lag ***-0.286* *** (0.031) (0.148) (0.009) (0.041) (0.030) (0.110) (0.014) (0.062)

Unemployment and Immigration: Intermediate Skilled UnemploymentEEA28UnemploymentEEA18 UEEEA28UEEEA28UEEEA18UEEEA18 Lag *** ***-0.119*** *** (0.021) (0.218) (0.009) (0.052) (0.022) (0.338) (0.007) (0.039) Lag *** *** * (0.021) (0.237) (0.005) (0.083) (0.021) (0.400) (0.004) (0.131) Lag ***0.449* ***0.544** (0.022) (0.259) (0.007) (0.098) (0.023) (0.250) (0.004) (0.139) Lag ** * (0.043) (0.097) (0.023) (0.059) (0.043) (0.138) (0.017) (0.033) UnemploymentEU10UnemploymentNon-EU UEEU10UEEU10UENon-EUUENon-EU Lag *** *0.796***-0.118*** *** (0.021) (0.301) (0.005) (0.046) (0.020) (0.200) (0.012) (0.050) Lag ***0.819* *** (0.023) (0.414) (0.005) (0.060) (0.023) (0.218) (0.010) (0.058) Lag *** *** (0.021) (0.333) (0.005) (0.046) (0.022) (0.232) (0.006) (0.064) Lag ** (0.026) (0.289) (0.006) (0.041) (0.025) (0.226) (0.011) (0.061)

Unemployment and Immigration: Low Skilled UnemploymentEEA28UnemploymentEEA18 UEEEA28UEEEA28UEEEA18UEEEA18 Lag *** ***-0.123*** *** (0.031) (0.369) (0.004) (0.051) (0.034) (0.663) (0.003) (0.039) Lag *** *** * (0.040) (0.353) (0.004) (0.085) (0.039) (0.698) (0.002) (0.132) Lag *** *** (0.025) (0.462) (0.004) (0.100) (0.027) (0.492) (0.002) (0.138) Lag ****-0.910** *** *** (0.043) (0.097) (0.023) (0.059) (0.043) (0.138) (0.017) (0.033) UnemploymentEU10UnemploymentNon-EU UEEU10UEEU10UENon-EUUENon-EU Lag **** **0.798***-0.124*** **0.750**** (0.031) (0.566) (0.002) (0.045) (0.033) (0.324) (0.005) (0.052) Lag ***1.086** *** (0.039) (0.497) (0.004) (0.059) (0.038) (0.307) (0.007) (0.059) Lag *** *** *0.004 (0.026) (0.737) (0.003) (0.044) (0.028) (0.312) (0.004) (0.062) Lag ***-1.269** *** (0.025) (0.617) (0.003) (0.040) (0.023) (0.322) (0.005) (0.063)

Conclusions EU immigration after 2004 had a dramatic impact on the UK society and the labor market Previous evidence suggests no or limited labor market displacement due to EU immigration Those results can be plagued by endogeneity

Conclusions (cont’d) Causality analysis of unemployment and immigration confirms the previous findings  Little causal effect of EU or EU10 immigration on unemployment or wages  Robust to splitting the sample according to intensity of immigration exposure or anti- immigrant sentiment  Robust to controlling for skills of native workers Flocking (Eastern) Europeans have not caused any dramatic labor-market displacement in the UK