A Comparative Static Model of the Relationship between Immigration and the Short-Run Job Prospects of Unemployed Residents

Much of the debate surrounding the impact of immigration on the economy relates to the consequences of immigration for aggregate unemployment. In this paper we explore a related but more specific issue: the consequences of immigration for the probability of unemployed residents finding a job. Two competing effects are modeled. First, by adding to the supply of labor immigrants compete with unemployed resident workers for jobs. Second, immigrants add to employment opportunities because they bring with them savings which are spent on domestic goods and services. Understanding how immigration affects employment prospects requires knowing which effect is bigger. Using Australian data from 1978 - 1997 it is possible to set boundries on the key paramaters affecting the overall effect of immigrantion on employment opportunities for resident workers. From these data there is a clear finding that under the vast majority of Australian labor market considions between 1978 and 1997 immigramts improved rather than worsened the employment prospects of unemployed residents