Vol. 14, 2020-15 | June 3, 2020 |
http://dx.doi.org/10.5018/economics-ejournal.ja.2020-15
The direct and indirect impacts of liberal immigration
policies on the United States' economy
Geiguen Shin
Abstract
Many studies have suggested that stringent labor protections and higher labor costs can limit
foreign direct investment (FDI) in host countries. This would imply that the decisions of
foreign firms are sensitive to the degree of flexibility in the labor market in the U.S. The
U.S. has a steady stream of immigration, which has preserved the stability of the labor
supply for the U.S. market. This makes the U.S. a good test case for the relationship between
immigration and FDI because it is not only the largest host for FDI but also has the largest
immigrant population in the world in absolute terms and is experiencing a significant
reduction in labor supply and an increase in the minimum cost of labor. Utilizing a time-
series analysis of data from 1970 to 2016, this study suggests that expansive immigration
policies directly increase FDI inflows in the U.S. and indirectly increase FDI inflows by
lowering labor costs and securing a stable supply of labor.
