The B.E. Journal of Economic
Analysis & Policy
Contributions
Volume 11, Issue 1 2011 Article 34
Immigration, Family Responsibilities and the
Labor Supply of Skilled Native Women
´ ´
Lidia Farre
∗
Libertad Gonzalez
†
Francesc Ortega
‡
``
´ ´
∗
Institut d’Analisi Economica (CSIC), lidia.farre@iae.csic.es
†
Universitat Pompeu Fabra, libertad.gonzalez@upf.edu
‡
Queen’s College - CUNY, fortega@qc.cuny.edu
Recommended Citation
Lidia Farre, Libertad Gonzalez, and Francesc Ortega (2011) “Immigration, Family Responsibili-
ties and the Labor Supply of Skilled Native Women,” The B.E. Journal of Economic Analysis &
Policy: Vo l . 11: Iss. 1 (Contributions), Article 34.
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Immigration, Family Responsibilities and the
Labor Supply of Skilled Native Women
∗
Lidia Farr
´
e, Libertad Gonz
´
alez, and Francesc Ortega
Abstract
We investigate the effect of immigration on the labor supply of skilled women, using data on
Spain’s large recent immigration wave. We adopt a spatial correlations approach and instrument
for current immigration using ethnic networks. We find that female immigration increases the
local availability of household services and reduces their price. It also increases the labor supply
of skilled native women, by allowing them to return to work earlier after childbirth, and to continue
working while caring for elderly dependents. Immigration can account for one third of the recent
increase in the employment rate of college-educated women providing child or elderly care.
KEYWORDS: immigration, female labor supply, fertility, elderly care, household services
∗
We thank seminar attendants at the University of Michigan, Columbia University, University
of Alacant, ECARES and GRIPS, as well as attendants at the III Inside Workshop (IAE-CSIC),
the 2009 SAE Meeting and the 2011 AEA Meeting. We are also grateful to the editor and two
anonymous referees for their comments and suggestions, which improved the paper significantly.
We acknowledge the support of the Barcelona GSE Research Network and the Government of
Catalonia, as well as the Spanish Ministry of Science (grants ECO2008-05721/ECON (Farr
´
e),
SEJ2007-64340/ECON (Gonz
´
alez), and ECO2008-02779 (Ortega)).
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1. Introduction
There is a large literature addressing the effects of immigration on the host
country’s labor market. Most studies focus on the direct effects of immigration on
the wages and employment opportunities of natives with the same skill level.
However, immigration may also affect the labor market decisions of natives with
different skills, through general-equilibrium effects. One such effect may arise if
immigration increases the local supply of market-provided services that are close
substitutes with housework (such as cleaning, cooking or child and elderly care).
As a result, women that can afford to purchase those services may be able to shift
time from house work toward market work.
As pointed out by Kremer and Watt (2006), this particular channel through
which immigration can affect the labor market of the receiving economy may be
quantitatively important. Through a calibration exercise, they estimate that taking
this form of skill complementarity into account implies that the immigration
surplus in the US may be more than 10 times larger than previously thought. In
turn, Cortes and Tessada (forthcoming) provide empirical evidence that supports
this mechanism. Their estimates indicate that low-skilled immigration led to a
significant increase in the labor supply of highly skilled women in the US. This
link between immigration and native female labor supply is present in other
countries as well. Cortes and Pan (2009) show that educated women with young
children in Hong Kong increased their labor market participation in recent
decades thanks to an increased supply of foreign domestic workers.
In this paper, we empirically analyze the effect of female immigration on
the labor supply of skilled native women in Spain over the last decade, with an
emphasis on the response by women with family responsibilities. The
“responsibilities” that we have in mind include caring for young children and
elderly dependents. The former has already received some attention in the
literature (Cortes and Pan). However, the latter has not been considered prior to
our study, and we argue that it is particularly relevant for Europe, where fertility
rates are low but the population is aging rapidly due to large increases in life
expectancy. Between 2010 and 2050, the elderly population in the European
Union will increase by 77%, while the working-age population will decrease by
16% (European Commission).
Our paper contributes to the literature on the potential impacts of
immigration on the native population. We focus on the case of a Southern
European country, Spain, which has experienced a very large wave of
immigration over the last decade. The foreign-born share in the working-age
population increased from 3% in 1999 to 15% in 2008 (Population Registry). In
addition, there are reasons to believe that immigration may have a larger effect on
the labor supply of women with family responsibilities in Spain than in the US or
1
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Northern European countries. As is common in several Mediterranean countries
and in Latin America, Spain is still characterized by geographically close family
networks and a family-based provision of care for children and elderly (Esping-
Andersen, 1990). As a result, Spanish females bear a larger burden on their time
than women in countries where the government plays a larger role (e.g.
Scandinavian countries) or where there is a larger supply of market-provided care
(e.g. retirement homes in the US). This may partly account for Spain’s low female
employment rates.
1
The paper incorporates three methodological innovations. First, we focus
on female immigration as our main explanatory variable, as opposed to total
immigration flows. The reason is that employment in household services has been
dramatically affected by female immigration. In 2008, 49% of recent immigrant
women were employed as housekeepers or home-providers of child or elderly
care. In the same year, roughly half of all recorded employment in household
services was accounted for by female immigrants, compared to only 12% in 1999.
Secondly, we pay particular attention to the response of women whose
labor supply is more heavily constrained by family responsibilities. We focus on
two types of family situations that impose a burden on women’s time: the
presence of young children, and elderly dependents (typically parents or in-laws).
To the best of our knowledge, we are the first to study the effects of immigration
on the labor supply of women with elderly care responsibilities, which fills an
important gap in the literature.
Third, we demonstrate the benefits of using registry data in the analysis.
These benefits are twofold. First, the availability of population registry data to
measure immigrant concentration makes it feasible to conduct the analysis using
the relatively small Labor Force Survey.
2
This has important implications for
policy-making, as it allows researchers to analyze the effects of an immigration
episode promptly, as opposed to having to rely on Census data that, in most
countries, become available only every ten years. Second, it allows us to measure
regional immigrant concentration more accurately, including undocumented
immigrants. The reason is that registration in the Spanish Local Population
Registry is required in order to gain access to public healthcare and education, but
also to be eligible in the event of an amnesty. The process of registration does not
require proof of legal residence and the data are confidential (that is, cannot be
1
Despite progress in recent decades, female employment remains lower in Spain than in the US
and most Western European countries. In 2008, the female employment rate was 59% in Spain,
compared with 64.5% in the EU-27 and 72% in the US. The gender gap in employment is also
among the highest in industrialized countries (21% in Spain, 18% in the EU-27 and 10% in the
US). See also De Laat and Sevilla-Sanz (2011).
2
Aydemir and Borjas (2006) argue that estimates of regional immigrant concentration based on
5% Census samples (let alone the much smaller Labor Force Survey) may be very noisy, inducing
substantial attenuation bias.
2
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used to identify or deport undocumented migrants). The latter feature is crucial in
our analysis, given that a substantial share of employment in household services is
informal.
The analysis proceeds in three steps. First, we build a simple model of
labor supply. The model shows that, under certain reasonable assumptions, a
reduction in the price of household services leads to an increase in the labor
supply of skilled native women with family responsibilities, relative to other
skilled native women. Second, we analyze empirically the effects of female
immigration on the household services sector, in terms of size (employment) and
prices (wages). We define household services to include nannies (in-house
childcare), housekeepers and in-house personal care workers. Third, we examine
the effects of female immigration on the labor supply of skilled (highly educated)
native women. Because of their high earnings potential, these women can afford
to purchase household services. In contrast, low-educated women tend to earn
lower wages, which makes it unprofitable for them to hire help at home in order to
increase their own labor supply.
Methodologically, we follow a spatial correlations approach. Our
identification strategy is based on correlating changes in immigrant concentration
at the regional level with changes in the labor supply of skilled native women in
the same region. While there are potentially multiple channels through which
unskilled immigration can affect the labor supply of skilled workers, we identify
the effects operating through the price of household services via changes in the
labor supply of skilled women with family responsibilities relative to women
without. Our model is set up so that only skilled women with family
responsibilities purchase household services. The rest of skilled women, therefore,
do not change their time allocation in response to changes in the local supply of
household services. Our identification approach thus departs from the tests
already in the literature
3
.
Crucial to the spatial correlations approach is the large variation in
immigration inflows across Spanish regions. Over the course of the last decade,
immigration generated large regional differences in the foreign-born share, which
in 2008 ranged from below 4% in some regions to almost 25% in others. In order
to provide a causal interpretation for our estimates, we adopt an instrumental
variables approach based on ethnic networks (Card 2001).
We find that female immigration into a region affected the cost and
availability of market-provided household services in the region. We find
3
Cortes and Tessada focus on the effects on the labor supply of all highly skilled native women.
More similar to our approach, Cortes and Pan analyze the gap in participation between women
with children under age 5 and mothers of older children. Hock and Furtado (2009) and Furtado
and Hock (2010) argue that immigration reduced the trade-off between fertility and work in the
US. Note that all these studies use decennial (Census) data while we use annual data.
3
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