Labor Supply, Unemployment and Education Investments in Immigrant Families: Evidence for Australia

Credit constraints and a need to invest in host country-specific human capital may lead immigrant couples to adopt a family investment strategy. Researchers attempting to evaluate this family investment hypothesis, however, face severe data limitations, because standard data sources often identify the foreign born, but typically provide no information about the migrating unit or the immigration process itself. Principal applicants are usually indistinguishable from accompanying family members and while family units at the time of data collection are identified, family units at the time of migration are completely unknown. This paper re-examines the family investment hypothesis by utilizing new panel data for a recent cohort of immigrant households. The Longitudinal Survey of Immigrants to Australia provides a unique opportunity to simultaneously consider the labor-supply and human capital investment decisions of men and women in the same migrating household. In particular we are interested in how selection criteria are related to the settlement process and whether these patterns support the family investment hypothesis. The determinants of participation, unemployment, hours, and human capital investment decisions of couples entering Australia under different visa categories are assessed. Information about principle applicant/accompanying spouse status is used to sort out whether the observed relationships are driven by comparative labor market advantage or by gender roles. While some decisions appear consistent with comparative advantage and the family investment hypothesis (e.g., participation), others appear to stem from traditional gender roles (e.g., investment in education).