The Effect of Inflow of Unskilled Immigrants on Natives' Human Capital Accumulation: Difference of Differences Estimation Using Policy Changes in Japan

Utilizing changes of Japanese immigration law in 1990s, I study the effect of the inflow of unskilled immigrants on native's human capital accumulation by applying the difference of differences estimation method. Using 10 percent sample of the Japanese census data, I show that for individual aged 19-20 one percentage point increase of the immigrant-native ratio increased the probability of going to college by 1.3 percentage point for males and 0.8 percentage point for females. Consistently, one percentage point increase of the immigrant-native ratio reduced the probability work by 1.2 percentage point for males and 1.0 percentage point for females. For unemployment, an increase of immigrant ratio did not affect the probability of unemployment for males and decreased it for females. The regression results are robust with respect to several specifications. The results suggest that the inflow of unskilled immigrant increases the human capital accumulation of young natives.