Lured in and crowded out? Estimating the impact of immigration on natives’ education using early XXth century US immigration

Immigration can impact educational decisions of natives through two different margins. First, it can increase the potential returns to education by generating a larger supply of unskilled workers, thus raising the relative wages of more educated individuals. Secondly, it can increase the cost of acquiring education through crowding out natives of public schools. We separate these two channels by separately estimating the causal impact of the immigration of adults and children on the educational decisions of natives at the state-cohort level in a context of rapid changes in educational attainment, the United States from 1910 to 1935. We find that more adults leads to an increase in school attendance, high school enrollment and graduation while immigration of children has the opposite effect. We find these two effects to be particularly relevant for urban males of US born parents. We document that parents attempted to counteract the effect of immigration by enrolling their children in private schools but we find little evidence of change in geographic locations. We finally use our estimates to calibrate that only 10 to 15 percent of the “high school movement” can be attributed to the 1920s limitations on immigration and that other factors were obviously more important determinants. ∗The usual disclaimer applies. We wish to thank Claudia Goldin for generously sharing her data with us. The economics literature has focused mostly on the impact of immigrants, in particular, lowskill immigrants on labor market outcomes of natives. While some natives may be unable to readjust their human capital investment in response to immigration shocks, younger generations may have more flexibility if they are “forward-looking” in their educational decision (see Smith (2012) for an example of this for a recent migration wave). However, those same cohorts may also face another, and of opposite size, impact of immigration through the fact that more immigration, in particular of school-age individuals, may also crowd them out of the public education system. In this paper, we separate the two effects using the age at which immigrants arrive to the United States and measure their causal impact at a period where Americans were increasing their high school attendance in large number. We first present a simple theoretical framework that specifies more formally the two channels through which immigration can impact educational decisions of natives. It can first do so by increasing the return to education since immigration over this period was mostly low-skilled working males1 and this leads to a larger supply of lower-skilled individuals thus raising the relative wages of high-skilled individuals. But at the same time, more immigrants may increase the cost of acquiring human capital through having larger classrooms, classrooms with more heterogenous students, etc. Thus, the overall impact of immigration on educational attainment is unclear. This simple model is then used as a basis to develop our empirical strategy. Our key assumption will be that the crowd-out effect should be particularly strong when the immigrants are fellow teenagers but the return effect could be generated by slightly older immigrants. We thus distinguish between immigration flows by age and age at arrival by state to effectively capture the relevant source of variation. However, since immigrants may clearly elect their state of residence based on labor market or schooling market factors, the simple correlation between the two outcomes is unlikely to offer us the causal estimate of immigration. To achieve this, we allocate newly arrived migrants using past location shares of immigrants, as was previously done in Card (2001)and others. Lafortune and Tessada (2010) show that ethnic networks were as important over this period as they are nowadays in determining the location choices of immigrants. We estimate the causal effect of the immigration of children and adults on educational attainment using two different data sources. The first correspond to state-level aggregates of enrollment and graduation rates, as compiled by Goldin and Katz (1999) from reports “Biennial Survey of Education” and “Reports of the Commissions of Education”. These have the advantage of being more precisely measured and of distinguishing between private and public schools. However, they also include both natives and immigrants and thus could generate a spurious relation if immigrants enroll or graduate at a different rate than natives. To alleviate this concern, 1Only one percent of immigrants were classified as professionals by immigration authorities. Furthermore, a great majority were males between the ages of 15 and 40 and 56 percent of all immigrants were in the labor force (Carter and Sutch (1997)).