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Immigration and Labor Market Mobility in Israel, 1990 to 2009

Immigration and Labor Market Mobility in Israel, 1990 to 2009

Sarit Cohen Goldner
Zvi Eckstein
Yoram Weiss
Copyright Date: 2012
Published by: MIT Press
Pages: 322
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  • Book Info
    Immigration and Labor Market Mobility in Israel, 1990 to 2009
    Book Description:

    After the collapse of the Soviet Union in 1989, Soviet Jews emigrated in large numbers to Israel. Over the next ten years, Israel absorbed approximately 900,000 immigrants from the former Soviet Union, an influx that equaled about twenty percent of the Israeli population. Most of these new immigrants of working age were college-educated and highly skilled. Once in Israel, they were eligible for a generous package of benefits, including housing subsidies, Hebrew language training, and vocational education. This episode provides a natural experiment for testing the consequences of a large immigration inflow of skilled workers. This book provides a detailed analysis of the gradual process of occupational upgrading of immigrants and the associated rise in their wages. Based on their analysis, the authors conclude that even a very large and unanticipated wave of immigration can be integrated within the local labor market without any significant long-term adverse economic effect on natives. The small effect on wages and employment of natives is explained by the capital inflows into Israel and the gradual entry of immigrants into high-skill jobs as they invest in local human capital. An important contribution of the book to the immigration literature is the formulation and estimation of stochastic dynamic models that combine job search with investment in human capital and the analysis of alternative government policies within this framework.

    eISBN: 978-0-262-30521-1
    Subjects: Economics, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-viii)
  3. List of Tables
    (pp. ix-xii)
  4. List of Figures
    (pp. xiii-xiv)
  5. Acknowledgments
    (pp. xv-xvi)
  6. 1 Introduction
    (pp. 1-14)

    The unexpected collapse of the Soviet regime in 1989 led to a dramatic change in the country’s emigration policy, which now permitted its citizens to emigrate freely. In particular, Jews in the former Soviet Union (FSU) were now able to immigrate to Israel without restriction. On arrival, they automatically became Israeli citizens with access to a generous package of benefits, including subsidized mortgages or rental assistance, language courses, and vocational training. They also gained access to a labor market characterized by much higher wages than those in the FSU. Over the next ten years, Israel absorbed approximately 900,000 immigrants from...

  7. 2 The Aggregate Macroeconomic Impact of a Large Inflow of Immigrants
    (pp. 15-40)

    Between October 1989 and the end of 2001, more than 900,000 immigrants arrived in Israel from the FSU (see table 2.1). For purposes of comparison, Israel’s population at the end of 1989 was only 4.56 million. From 1989 to 1993 the population grew at an annual rate of 3.8 percent, which is almost three times the average rate (1.4 percent) of the 1980s (see table 2.2). The growth in the labor force from 1990 to 1992 was even larger and represents the most dramatic change in the Israeli economy since the 1960s.

    In this chapter we summarize the aggregate time...

  8. 3 On the Wage Growth of Immigrants
    (pp. 41-72)

    The macroeconomic analysis in chapter 2 concludes with the claim that wages of natives and immigrants in Israel during the early 1990s were proportional to the marginal productivity of labor. This conclusion has also been the underlying assumption in almost all the literature on the wage growth of immigrants and was the basis for the estimation of a Mincerian wage equation for immigrants.²

    In the international literature on immigration, the typical pattern of immigrants’ integration in a new labor market is characterized by initially low and relatively uniform wages followed by relatively rapid earnings growth. Over time, immigrants invest in...

  9. 4 Immigrants’ Choice of Employment, Occupation, and Human Capital: Dynamic Stochastic Empirical Models
    (pp. 73-162)

    In chapter 3 we showed that wage growth in the early years following arrival is primarily due to the increase in returns on imported skills (schooling and work experience) while the growth in later years is primarily due to occupational transition. In addition, as the value of their imported skills rises, immigrants become increasingly differentiated and their wage distribution becomes less uniform. Furthermore, while the wages of low-skilled immigrants remain almost the same as during the first year following arrival, those of higher skilled immigrants increase significantly. This suggests that occupational mobility and the value of skills are important determinants...

  10. 5 Job Search and Loss of Skills
    (pp. 163-204)

    The two previous chapters described the difficulties faced by FSU immigrants in finding high-paying jobs in white-collar occupations. Given the large number of high-skilled migrants, it is not surprising that many of them were forced into low-skilled occupations. Among males who were 25 to 55 years on arrival, only 26 percent of those who had worked as scientists or engineers in the FSU found similar jobs within their first three years in Israel. The extent of occupational downgrading was even higher among females and older males.¹

    As in chapter 4, this chapter investigates the job transitions of immigrants in a...

  11. 6 The Joint Choice of Residential Location and Employment by Immigrants
    (pp. 205-244)

    Upon arrival in the new country, immigrants make two main choices: their area of residence and their first job. Needless to say, the two decisions are interdependent. In the case of Israel, the government’s immigration policy allowed each FSU immigrant to freely choose his area of residence. Also as part of this policy, the government provided immigrant households with a package of financial and nonfinancial benefits, including a rent subsidy during their initial period in the country. The analysis in this chapter focuses on the effect of the housing policy adopted by the Israeli government at the beginning of the...

  12. 7 Immigrants from the FSU after Twenty Years in Israel: Evidence and Interpretation
    (pp. 245-272)

    The previous chapters followed the immigrants who arrived from the FSU during the period 1990 to 1995 over a relatively short period, that is, up to ten years. We now have data on these immigrants up to 2009, which can provide a longer run perspective of this dramatic event in Israel’s history. This concluding chapter provides a descriptive summary of the integration process of FSU immigrants who arrived in Israel in the early wave of 1989 to 1991, which we follow for almost two decades, until 2009. We show that most of the dynamic adjustments in wages and occupation took...

  13. Notes
    (pp. 273-292)
  14. References
    (pp. 293-298)
  15. Index
    (pp. 299-306)