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": China's Internal Migration and Export Growth" (with Xiao Ma)

Rapid growth in productivity and the liberalization of trade barriers are viewed as the major determinants of growth in China's exports, which have increased by a factor of more than 20 in real terms since the early 1980s. This paper quantifies the contribution, previously unknown, of various sources of export growth. We analyze determinants that have commonly been associated with export growth but add a less traditional mechanism, that is, China's massive internal migration, which has lowered labor costs in exporting sectors and reinforced China's export advantages. Using China's 2005 population survey, we first document that China's internal migrants are a crucial labor force in China's exporting provinces and in manufacturing sectors. We then employ a spatial general equilibrium trade model to account for the proportion of China's export growth due to each source. We find that productivity growth accounts for 50-60% of export growth between 1990 and 2005. Tariff reduction explains about 26% of export growth, whereas internal migration resulting from reduced barriers to labor mobility accounts for another 15%. We also find that without the reform to internal migration policy, China's export activity would have been replaced disproportionately towards East Asian and Southeast Asian countries.

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)

Work in Progress

“Estimation of A Two-side Selection Model: Decomposing Migration Selectivity Bias”

This paper proposes a two-side selection model to reconcile the positive selection of international migration, a fact which the classical theory of immigration self-selection fails to capture. I use IPUM census to estimate the two-side selection model and to decompose migration skill-bias to two forces: the self-selection decision of foreign workers and the policy barriers to labor movement. The decomposition exercises show that, in addition to self-selection, policy selectivity also plays a major role in explaining the skill composition of the actual migrants, suggesting immigration selection as a two-side selection process.

“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.