Does Immigration Crowd Natives Into or Out of Higher Education?

This paper investigates the impact of immigration on market prices and how natives respond by examining how inflows of immigrant students and immigrant labor affect the postsecondary enrollment of natives. Existing studies have focused on the effect of increased immigrant demand for schooling on native enrollment, omitting the effect that changes in immigrant labor supply also have on prices relevant to native enrollment decisions. I propose, in a unified framework, that immigration-induced price movements in both education and labor markets that change the private return to higher education are mechanisms that can motivate native enrollment responses. Using U.S. Census microdata from 1970 to 2000, I find that a 1 percent increase in relatively unskilled immigrant labor raises the rate of native college enrollment by 0.33 percent, while a 1 percent increase in immigrant college students does not significantly lower enrollment. The positive, crowd-in effect of immigrant labor inflows is driven primarily by natives ages 18-24, consistent with younger natives having college demand that is more sensitive to returns than the demand of older natives. The results imply that the rise in the average college enrollment rate of young natives between 1970 and 2000 would have been 18 percentage points higher if the skill composition of immigrant labor inflows had remained constant over this period. With the identification of a crowd-in effect and, contrary to prior studies, the lack of a significant crowd-out effect, these findings are suggestive of college demand that is fairly wage-sensitive and college slots that are flexibly supplied over a decadal time horizon. ∗Department of Economics, 611 Tappan Street, Ann Arbor, MI 48109. Email: [email protected]. I greatly thank John Bound, Sue Dynarski, Dan Silverman, and Jeff Smith for all of their invaluable guidance and support. I also thank Charlie Brown, Wenjie Chen, John DiNardo, Owen Kearney, Stephan Lindner, Ryan Michaels, Matt Rutledge, Gary Solon, Kevin Stange, and seminar participants at the University of Michigan, Midwest Economics Association conference, Federal Reserve Bank of Cleveland, RAND, Northeastern University, CNA, Economic Policy Institute, Cornell University, Bureau of Labor Statistics, American Enterprise Institute, and Analysis Group for their helpful comments. I acknowledge generous support from the Ford Foundation, Rackham Graduate School, and Verne and Judith Istock. This research was also generously supported by a grant from the American Educational Research Association which receives funds for its “AERA Grants Program” from the National Science Foundation and the National Center for Education Statistics of the Institute of Education Sciences (U.S. Department of Education) under NSF Grant #DRL-0634035. Opinions reflect those of the author and do not necessarily reflect those of the granting agencies. All errors are my own.