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The Economics of Canadian Citizenship

A Common Ground for Social Scientists ?

Don J. DeVoretz

Senior Research, MBC Professor, Simon Fraser University

Canada

don.devoretz@sfu.ca

Presentation to

Metropolis

June 24th , 2009

Ottawa, Canada

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Overview

• Economists and inter-disciplinary work– Limited Success:

• RIIM example

– Necessary and Sufficient ingredients• Correct research question(s)

• Lends itself to utility maximazition with– derivable hypotheses

– Empirical verification

– Translate demographic, political into costs or benefits

• Economics of Citizenship fulfills the above

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Objective of Research on Economics of Citizenship

• To answer– Why do immigrants ascend to citizenship at different rates ?– What are the economic consequenses of this ascension ?

• To Model• The affect of economic (income, occupation), social (marital status,

household size, children, etc.), political (dual citizenship up or out,) and demographic (age, years in host country) variables on the immigrant decision to ascend to citizenship

• The economic impact of citizenship on the occupational distribution and earnings levels of immigrants

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Literature: Ascension: Non-Economists

• Yang (1994) – Demographic, political and social variables.

• Bloemraad (2002)• Canadian dual citizenship more likely if :

– Youth, education and offical language in Canadian home

• Mata, Fernando. (1999): – Principal Components 1996 Canadian Census – No evidence of economic impact of Canadian citizenship

• Yang (1994) • Conclusion: Ad hoc and no role for economic variables

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Literature: Economic Impact

• Pivnenko and DeVoretz (2003) – evidence of citizenship affect on Ukrainian earnings in

Canada– Earnings of Ukrainain foreign-born citizens equals

Canadian-born Ukrainians• Chiswick (1976)

– Found no evidence for citizenship effect in USA. • Bratsberg B, et. al(2002)

– Youth panel data in USA:• citizenship alters occupational distribution and raises earnings• Affect is greater for immigrants from less developed areas

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Methodological Conclusions

• No comprehensive study of ascension and economic impact of citizenship to date.

• Economic Methodology supports merging of two questions:– Utility maximization at the ascension stage

affects economic impact: e.g. human capital accumulation during ascension stage

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Proportion of naturalized citizens among immigrants from high income countries (USA, Germany, Italy, Netherlands) and low

income countries (China and India)

00.1

0.20.3

0.40.5

0.60.7

0.80.9

1

0-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46+

Years since immigration

Na

tura

lize

d c

itize

ns/

All

imm

igra

nts

USA, GER,ITA, NHL

China andIndia

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Why the Ascension Gap?

• Presence of Dual citizenship ?

• Level of development home country ?

• Externalities of Home country passport

• Length of stay in Canada: – Temporary or permanent ?

• Ease of Family Renification ?– Remittance costs vs parental help with kids

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Why Smaller Age Earnings Gap After Citizenship ?

Age of ImmigrantEntry Age

Earnings

Immigrant earnings: Optimistic

Native-born Earnings

X

Immigrant Earnings: Pessimistic

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Figure7. Age-earnings profiles for the Canadian Born (CB), British Immigrants Canadian citizens (BritIm_C) and non-citizens of Canada (BritIm_NC), Chinese

Immigrants Canadian citizens (ChinIm_C) and non-citizens of Canada (ChinIm_NC)

0

5000

10000

15000

20000

25000

30000

35000

25 35 45 55 65Age

Wag

e ea

rnin

gs,

$

CB

BritIm_C

BritIm_NC

ChinIm_C

ChinIm_NC

Source: Census of Canada, 1996

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Figure 8. Age-earnings profiles for the Canadian Born (CB), US Immigrants Canadian citizens (USIm_C) and non-citizens of Canada (USIm_NC), Indian

Immigrants Canadian citizens (IndIm_C) and non-citizens of Canada (IndIm_NC)

0

5000

10000

15000

20000

25000

30000

35000

25 35 45 55 65Age

Wa

ge

ea

rnin

gs

, $ CB

USIm_C

USIm_NC

IndIm_C

IndIm_NC

Source: Census of Canada, 1996

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Employment Outcomes

Figure 4: Employment rates for naturalized citizens (_C) and non-citizens (_NC) from Great Britain (BritIm) and China (ChinIm) by age group, 2001

Census of CanadaCB = Canadian born

20%

30%

40%

50%

60%

70%

80%

90%

100%

15-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64Age Group

Em

plo

ymen

t R

ate CB

BritIm_NC

BritIm_NC

ChinIm_C

ChinIm_NC

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Costs and Benefits of Ascending to Canadian Citizenship

• Costs– no access to the home country labour market; – the possible loss of the right to hold land, or the requirement to pay higher

land taxes – loss of entitlement to home country public services, such as subsidized

education for children; – curtailing of social benefits in home origin country.

• Benefits– access to the federal government labour market; – potential access to merged labour markets (e.g. NAFTA or EU); – any wage premium paid by private employers to citizens;– a host country passport with its implied visa waivers, which lead to

greater worldwide mobility;– immunity from a military conscription in home country:– ability to participate in the political process

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Some Empirical Evidence on Immigrant Citizenship Ascension

Prediction: ALL HOLD

Rates of ascension to citizenship are a positive function:

of age,years in Canada, >0

occupation status, >0 home countries absence of dual citizenship policy,<0 marital status and presence of children >0

and ECONOMIC GAINS >0 and

)exp(1

)exp()|1(

i

iii X

XXYP

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Citizenship Impact on Earnings

• Citizenship increased earnings– More for non-OECD immigrants

• Females 12.6 %, males 14.4% Non-OECD

• Females 5.8 %, males 4.1% OECD

All other variables as predicted

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Blinder-Oaxaca Decomposition

• Decompose sources of earnings differences for citizens and non-citizens– Endowment differences– Discrimination:

• amount that productive characteristics of Foreign-born are overvalued or undervalued relative to Canadian-born

PT

FBCBFBPTFBPCB

TCBFBCB XXXXWW ˆ)ˆ()()ˆˆ(lnln

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Table 3. Decomposition of wage differentials between naturalized and native-born Canadians[1]

Human capital endowments effect

“Discrimination” component

Wage differential

Females

OECD 5.91% -5.57% 0.34%

non-OECD 9.87% 10.94% 20.81%

Males

OECD -5.81% -7.06% -12.86%

non-OECD 5.10% 21.45% 26.55%

Source: DeVoretz and Pivnenko (2006)

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Decomposition Conclusions: End of Discrimination ?

• OECD Males earn 12.86% more as citizens because:– Greater human capital than Canadian-born– Greater return on human capital

OECD Males earn 26.5% less as citizens because21.45% smaller rewards for human capital and

5.1% less human capital than Canadian-bonr

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Conclusions on the Common Ground

• Citizenship Ascension and Economic Impacts should be jointly modeled

• Economic, Political and Social variables should be merged

• Need Comparative studies across – Countries: Netherlands, Sweden, USA – Disciplines: Political Science