1 The Economics of Canadian Citizenship A Common Ground for Social Scientists ? Don J. DeVoretz Senior Research, MBC Professor, Simon Fraser University Canada Presentation to Metropolis June 24 th, 2009 Ottawa, Canada

2 Overview Economists and inter-disciplinary work –Limited Success: RIIM example –Necessary and Sufficient ingredients Correct research question(s) Lends itself to utility maximazition with – derivable hypotheses –Empirical verification –Translate demographic, political into costs or benefits Economics of Citizenship fulfills the above

3 Objective of Research on Economics of Citizenship To answer –Why do immigrants ascend to citizenship at different rates ? –What are the economic consequenses of this ascension ? To Model The affect of economic (income, occupation), social (marital status, household size, children, etc.), political (dual citizenship up or out,) and demographic (age, years in host country) variables on the immigrant decision to ascend to citizenship The economic impact of citizenship on the occupational distribution and earnings levels of immigrants

4 Literature: Ascension: Non- Economists Yang (1994) –Demographic, political and social variables. Bloemraad (2002) Canadian dual citizenship more likely if : –Youth, education and offical language in Canadian home Mata, Fernando. (1999): –Principal Components 1996 Canadian Census –No evidence of economic impact of Canadian citizenship Yang (1994) Conclusion: Ad hoc and no role for economic variables

5 Literature: Economic Impact Pivnenko and DeVoretz (2003) –evidence of citizenship affect on Ukrainian earnings in Canada –Earnings of Ukrainain foreign-born citizens equals Canadian-born Ukrainians Chiswick (1976) –Found no evidence for citizenship effect in USA. Bratsberg B, et. al(2002) –Youth panel data in USA: citizenship alters occupational distribution and raises earnings Affect is greater for immigrants from less developed areas

6 Methodological Conclusions No comprehensive study of ascension and economic impact of citizenship to date. Economic Methodology supports merging of two questions: –Utility maximization at the ascension stage affects economic impact: e.g. human capital accumulation during ascension stage

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8 Why the Ascension Gap? Presence of Dual citizenship ? Level of development home country ? Externalities of Home country passport Length of stay in Canada: –Temporary or permanent ? Ease of Family Renification ? –Remittance costs vs parental help with kids

9 Why Smaller Age Earnings Gap After Citizenship ? Age of ImmigrantEntry Age Earnings Immigrant earnings: Optimistic Native-born Earnings X Immigrant Earnings: Pessimistic

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12 Employment Outcomes

13 Costs and Benefits of Ascending to Canadian Citizenship Costs –no access to the home country labour market; –the possible loss of the right to hold land, or the requirement to pay higher land taxes –loss of entitlement to home country public services, such as subsidized education for children; –curtailing of social benefits in home origin country. Benefits –access to the federal government labour market; –potential access to merged labour markets (e.g. NAFTA or EU); –any wage premium paid by private employers to citizens; –a host country passport with its implied visa waivers, which lead to greater worldwide mobility; –immunity from a military conscription in home country: –ability to participate in the political process

14 Some Empirical Evidence on Immigrant Citizenship Ascension Prediction: ALL HOLD Rates of ascension to citizenship are a positive function: of age,years in Canada, >0 occupation status, >0 home countries absence of dual citizenship policy,<0 marital status and presence of children >0 and ECONOMIC GAINS >0 and

15 Citizenship Impact on Earnings Citizenship increased earnings –More for non-OECD immigrants Females 12.6 %, males 14.4% Non-OECD Females 5.8 %, males 4.1% OECD All other variables as predicted

16 Blinder-Oaxaca Decomposition Decompose sources of earnings differences for citizens and non-citizens –Endowment differences – Discrimination: amount that productive characteristics of Foreign- born are overvalued or undervalued relative to Canadian-born

17 Table 3. Decomposition of wage differentials between naturalized and native-born Canadians[1][1] Human capital endowments effect “Discrimination” component Wage differential Females OECD5.91%-5.57%0.34% non-OECD9.87%10.94%20.81% Males OECD-5.81%-7.06%-12.86% non-OECD5.10%21.45%26.55% Source: DeVoretz and Pivnenko (2006) [1][1] These estimates are based on the log-linear OLS

18 Decomposition Conclusions: End of Discrimination ? OECD Males earn 12.86% more as citizens because: –Greater human capital than Canadian-born –Greater return on human capital OECD Males earn 26.5% less as citizens because 21.45% smaller rewards for human capital and 5.1% less human capital than Canadian-bonr

19 Conclusions on the Common Ground Citizenship Ascension and Economic Impacts should be jointly modeled Economic, Political and Social variables should be merged Need Comparative studies across –Countries: Netherlands, Sweden, USA –Disciplines: Political Science