Low-skilled Immigration and Education Policy with Endogenous Fertility

This paper studies the impact of low-skilled immigration on the host country’s education policy, which is formulated by the natives via voting and refers to both school funding sources and resources in the public funded schools. When the size of low-skilled immigrants is large, it is found that wealthier natives are likely to opt out from public into private school. The effects of immigration are four-folds: (1) it increases congestion in public school while (2) decreasing the average tax base for education funding; moreover, (3) it reduces the low-skilled wage and so amplifies low-skilled natives’ dependence on public education whereas (4) by raising skill premium, it induces high-skilled natives to privately invest in their children’s education and hence weakens their support to finance public school. The theoretical predictions are consistent with cross-country stylized facts revealed in both micro and macro data. Moreover, with endogenous fertility, the opting-out decision taken by some native parents results in the empirically observed fertility differential between natives and immigrants. Journal of Economic Literature Classification: H42, H52, I21, D72, O15