Chen Liu

Ph.D. Candidate - Department of Economics

Job Market Paper

"Quantifying the Impacts of a Skill-based US Immigration Reform"

Immigration policy is under scrutiny in many high-income countries. In the United States, there is active debate about the possibility of implementing a regime that would curtail family-reunification visas, instead favoring applicants based on their education, occupational specialty, and language ability. This paper develops a multi-country, general equilibrium model with endogenous migration entry modes to analyze the economic consequences of changes in immigration policy regimes. My model relates exogenous changes in the visa regime to endogenous changes in immigration composition and can evaluate the welfare effects of policy reform on the U.S., immigrant-sending countries, and competing destinations for immigrants. I estimate the model and simulate a counterfactual of a hypothetical skill-based US immigration reform in a world economy of migrants from 115 origin countries and four education and gender groups. I find that switching from family-based to a skill-based system will not just lead to a one-to-one swapping of low-skilled with high-skilled immigrants. For every 100 family visas that are shifted to skill-visas, there would be 68 low-skilled legal immigrants replaced by high-skilled ones. At the same time, there would also be 8 more low-skilled illegal immigrants. The skill-based reform also narrows US college premium and gender wage gap, and raises US welfare and output. I also find the welfare impacts are large for Indian and Central American countries, but are small among other countries, including Mexico. The small impact for Mexico is due to the entry mode adjustments and the intermediate selection of Mexican emigrants to the US.

Working Papers

"Who Produces "Made in China": The Global Impacts of China's Labor Market Liberalization" (with Xiao Ma) (Coming soon)

Can countries' domestic restrictions to labor mobility affect foreign economies? This paper argues that in a well-globalized world, China's internal migration --- resulting from the Hukou reform --- has lowered Chinese export prices, shaped global trade flows and influenced the world economy. We first document that (1) China's massive internal migration preceded China’s export surge; and (2) China's internal migrants constitute a crucial manufacturing labor force in exporting zones. Using a spatial general equilibrium trade model, we show that because of the Hukou reform, China's internal migration lowered the price of China's export goods and accounts for 15% of China's overall export growth since 1990. Moreover, this export growth has impacted the welfare of foreign countries differentially. In the absence of Hukou reform, China's export activity would have shifted disproportionately towards East Asian and Southeast Asian countries.

Work in Progress

“Testing the Roy Comparative Advantage: The Determinants of US Immigration Occupation Sorting” (with Gordon Hanson)

Do labor market frictions shape workers’ allocation to jobs, or do comparative advantages play a role? The answers to these questions are crucial in understanding the misallocation of workers to jobs and its implications for the aggregate total factor of productivity. However, the literature lacks an empirical validation of both hypotheses. This paper provides supportive evidence of the Roy’s comparative advantage hypothesis based on immigrants' occupation sorting both in the US and Canada. We show that emigrants from countries with high scores in educational subjects (PISA math score, linguistic proximity) are more likely to work in occupations where these subjects are important in performing tasks. This positive association appears to be stronger among the sample of immigrants who had more years of exposure to education in their home countries than those who had less. We also find similar results for the case of Canadian immigrants.

Publications

"The Rise and Fall of U.S. Low-Skilled Immigration" Brookings Papers on Economic Activity, 2017 (with Gordon Hanson and Craig McIntosh) Press Coverage: [VOX , The Washington Post , The Economist , The Wall Street Journal , The New Yorker, Bloomberg View], [NBER Version]

"High-Skilled Immigration and the Comparative Advantage of Foreign Born Workers across US Occupations" in High-Skilled Migration to the United States and its Economic Consequences, University of Chicago Press, 2017 (with Gordon Hanson)