The Impact of Immigration on the Labour Market Outcomes of New Zealanders

This paper uses data from the 1996, 2001 and 2006 New Zealand Census to examine how the supply of immigrants in particular skill-groups affects the employment and wages of the New Zealand-born and of earlier migrants. We first estimate simple Constant Elasticity of Substitution (CES) production functions that allow for substitutability between workers from different skill-groups, but assume that, within skill groups, migrants are perfect substitutes for non-migrants. We next estimate hierarchical CES production functions that allow for substitutability between immigrant and nonimmigrant workers within skill-groups, but constrain the patterns of wage impacts on different factors in response to changing factor shares, and that natives and migrants are not substitutable across skill-groups. Then, we extend the previous literature by estimating a Generalised Leontief production function that allows for a less restrictive relationship between changes in factors shares and changes in wages within a particular level of the production function and for substitution and complementarity between immigrant and non-immigrant workers both between and across skill-groups. Regardless of the model being estimated, we find little evidence that immigrants negatively affect either the wages or employment opportunities of the average New Zealand-born worker. However, we find some evidence that increases in the number of high-skilled recent migrants have small negative impacts on the wages of high-skilled New Zealand-born workers, which are offset by small positive impacts on the wages of medium-skilled New Zealanders.