{"id":2104,"date":"2020-07-21T09:59:59","date_gmt":"2020-07-21T08:59:59","guid":{"rendered":"http:\/\/blogs.cardiff.ac.uk\/business-school\/?p=2104"},"modified":"2020-07-21T10:08:31","modified_gmt":"2020-07-21T09:08:31","slug":"legal-status-work-permits-and-the-consumption-response-of-immigrant-households","status":"publish","type":"post","link":"https:\/\/blogs.cardiff.ac.uk\/business-school\/legal-status-work-permits-and-the-consumption-response-of-immigrant-households\/","title":{"rendered":"Legal status, work Permits, and the consumption response of immigrant households"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

In our latest post, Dr Ezgi Kaya and Dr Effrosyni Adamopoulou focus on the 2007 European Union (EU) enlargement to show how legal status for undocumented immigrants as well as simplifying the bureaucratic procedure and extending the duration of work permits for documented immigrants have implications for domestic demand.<\/h3>\n\n\n\n

The COVID-19 pandemic\nis reviving the immigration debate as more and more countries\nare adopting some form of legalisation for their undocumented immigrant\npopulation.<\/p>\n\n\n\n

Several advocates (see the European\nCommission<\/a>, UK\nGovernment and Parliament Petitions<\/a> and Social\nEurope<\/a>) have expressed concerns related to health and social issues that involve\nundocumented immigration. Moreover, in many countries, a\nlarge share of immigrants is employed in so-called \u201cessential\u201d occupations<\/a>. Italy\u2019s agriculture sector, for\ninstance, which relies on seasonal farmworkers from countries such as Romania\nand Bulgaria, has been facing a critical labour shortage due to the lockdown restrictions.\n<\/p>\n\n\n\n

To address\nthese concerns, Portugal has enacted measures already in March, granting\ntemporary residence permits to immigrants and asylum seekers, whose\napplications were pending. In mid-May, after a month of negotiations, Italy\nannounced the legalisation of undocumented immigrant workers in the agriculture\nand domestic-work sectors as well as the issuance of temporary residence\npermits for immigrant job seekers with expired permits, who were previously employed\nin those sectors.<\/p>\n\n\n\n

In a recent study<\/a>, we show that gaining legal status for\nundocumented immigrants as well as simplifying the bureaucratic procedure and\nextending the duration of work permits for documented immigrants may have an\nimportant impact on domestic demand.1<\/sup><\/p>\n\n\n\n

In particular, we focus on the 2007 EU\nenlargement and study whether and through which channels the extension of EU\ncitizenship affected the consumption behaviour of immigrant households from new\nmember states (Romania and Bulgaria).<\/p>\n\n\n\n

Figure 1 shows the average monthly\nconsumption expenditure of immigrant households from Romania and Bulgaria and\nfrom candidate member countries2<\/sup> that were already residing in Italy\nbefore the 2007 EU enlargement. <\/p>\n\n\n\n

Romanians and Bulgarians living in Italy\nhad lower average monthly consumption than immigrants from EU candidate\ncountries. The difference remained fairly constant until 2007, suggesting that\nthe consumption expenditure of Romanians and Bulgarians and immigrants from\nother candidate countries were following parallel trends prior to the EU enlargement.\n<\/p>\n\n\n\n

From 2006 to 2007, with the EU accession, the consumption of the immigrants from new member states increased substantially, while the consumption of the immigrants from candidate countries continued to grow at approximately the same rate as in the previous years. <\/p>\n\n\n\n

Figure 1: <\/strong>Average monthly consumption expenditure\nof immigrant households residing in Italy, 2004-2012<\/p>\n\n\n\n

\"\"
Notes: The plot shows average monthly consumption expenditure (in Euros) for immigrants from new EU member and candidate member countries residing in Italy.<\/em>
Source: Authors\u2019 elaborations on ISMU data. <\/em> <\/figcaption><\/figure>\n\n\n\n

Why an increase in consumption?<\/h3>\n\n\n\n

Uncertainty about future legal\nstatus can depress the economic activity of immigrants, by inducing them to\npostpone consumption decisions until the uncertainty is sufficiently resolved.3<\/sup>\n<\/p>\n\n\n\n

With the 2007 enlargement, Romanian and\nBulgarian immigrants were instantly granted with EU citizenship. <\/p>\n\n\n\n

For undocumented immigrants who were\nalready residing in member states, this implied automatic legalisation, thereby\nresolving uncertainty about their legal status. <\/p>\n\n\n\n

For documented immigrants from new member\nstates residing in Italy, the EU accession also implied a resolution of\nuncertainty in the labour market regarding the renewal of their work permits, as\nItaly\nwas the only major economy in Europe<\/a> to lift temporal labour market\nrestrictions for Romanians and Bulgarians.4 <\/sup> <\/p>\n\n\n\n

Our unique dataset5<\/sup> allows us\nto shed light on the exact mechanisms behind the increase in consumption of\nRomanians and Bulgarians following the 2007 enlargement.<\/p>\n\n\n\n

We find that previously undocumented\nimmigrants experienced an increase in the labour income by moving from informal\nto formal sector. As a result, they increased their expenditure on food,\nclothes, and other basic-need items.6<\/sup><\/p>\n\n\n\n

Documented immigrants also increased their\nconsumption expenditure, but mostly on durable goods.7<\/sup><\/p>\n\n\n\n

In this case, the rise in consumption is\na result of enhanced labour market stability, through an increased probability\nof getting a permanent contract following the EU accession. This decreases the\nuncertainty regarding future labour income and it consequently increases\nhousehold consumption spending on account of a less pressing need to save for a\nrainy day.  <\/strong><\/p>\n\n\n\n

Conclusions<\/h3>\n\n\n\n

While legalisation policies are usually\ndifficult to implement due to the high political cost entailed, our findings\nsuggest that simplifying the bureaucratic procedure and extending the duration of\nwork permits for documented immigrants may lead to similar consumption\nincreases.<\/p>\n\n\n\n

These results have important policy\nimplications in a period of increased legal uncertainty, following the\nwithdrawal of the UK from the EU. The bureaucratic burden is expected to significantly increase for\nmore than 3.5\nmillion<\/a> EU immigrants residing in the UK, who unless they hold British\ncitizenship will need to acquire some kind of permit (settled\nor pre-settled status<\/a>).\n<\/p>\n\n\n\n

Moreover, a positive effect of the EU\nenlargement on the consumption of immigrant households contributes to the recent\ndebate<\/a>\nover the possible accession of Albania and North Macedonia to the EU, as well\nas over the effectiveness of the recent legalisation programmes that various\ncountries have adopted amid the COVID-19 pandemic.<\/strong><\/p>\n\n\n\n

Dr<\/strong> Ezgi\nKaya<\/strong><\/a>\nis a Lecturer in Economics at Cardiff Business School.<\/strong><\/strong><\/p>\n\n\n\n

Dr\nEffrosyni <\/strong>Adamopoulou<\/strong><\/a> is a postdoctoral researcher at the\nUniversity of Mannheim and an external lecturer at the European Business School.<\/strong><\/strong><\/p>\n\n\n\n

Endnotes<\/h5>\n\n\n\n

1<\/sup> See Adamopoulou and Kaya (2020)<\/a> for details. <\/p>\n\n\n\n

2<\/sup> Albania, Bosnia and Herzegovina,\nCroatia, Kosovo, North Macedonia, Montenegro, Serbia, and Turkey.<\/p>\n\n\n\n

3 <\/sup>The uncertainty triggered by the new\npandemic is having also a direct negative effect on consumption due to social\ndistancing and lockdown restrictions. See Baker et al. (2020)<\/a> for a discussion of the short-term\nresponses of household consumption to the coronavirus pandemic.<\/p>\n\n\n\n

4 <\/sup>Bulgaria and Romania joined the EU on\nJanuary 1, 2007. However, the accession treaties allowed member states to\nimpose temporal labour market restrictions on Bulgarian and Romanian workers\nfor up to seven years after accession. The majority of member states, including\nItaly, announced that they would impose interim restrictions to protect their\nlabour markets from a large flow of immigrants from the new member states and\ntherefore Romanian and Bulgarian immigrants would still be required to have a\npermit in order to work. However, just three days prior to the EU accession, on\nDecember 28, 2006, Italy lifted these restrictions.<\/p>\n\n\n\n

5<\/sup> Institute for Multi-ethnic Studies\n(ISMU) 2004-2012 surveys.<\/p>\n\n\n\n

6 <\/sup>A previous study by Dustmann\net al. (2017)<\/a>\nfinds that amnesties boost immigrants\u2019 consumption. Mastrobuoni\nand Pinotti (2015)<\/a>\nshow a decrease in immigrant crime following the 2007 EU enlargement.<\/p>\n\n\n\n

7<\/sup><\/strong> <\/strong>Some examples of durable goods are appliances, home and office furnishings, lawn and garden equipment, consumer electronics, toys, small tools, sporting goods, photographic equipment, jewellery, motor vehicles and motor vehicle parts, turbines, and semiconductors. <\/strong><\/p>\n\n\n\n

References<\/h5>\n\n\n\n
  • Adamopoulou, E, and E Kaya (2020), \u201cNot just a work permit: EU citizenship and the consumption behavior of documented and undocumented immigrants\u201d, Canadian Journal of Economics, forthcoming.<\/li>
  • Baker, S, R A Farrokhnia, S Meyer, M Pagel and C Yannelis (2020), \u201cHow does household spending respond to an epidemic? Consumption during the 2020 Covid-19 Pandemic\u201d, COVID Economics: Vetted and Real-Time Papers<\/em>, Issue 18, 73-108, May 2020.<\/li>
  • Dustmann, C, F Fasani and B Speciale (2017), \u201cIllegal migration and consumption behavior of immigrant households\u201d, Journal of the European Economic Association,<\/em> 15(3), 654-691.<\/li>
  • Mastrobuoni, G and P Pinotti (2015), \u201cLegal status and the criminal activity of immigrants\u201d, American Economic Journal: Applied Economics<\/em>, 7(2), 175-206.<\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"In our latest post, Dr Ezgi Kaya and Dr Effrosyni Adamopoulou focus on the 2007 European Union (EU) enlargement to show how legal status for undocumented immigrants as well as […]","protected":false},"author":1850,"featured_media":2105,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[1549],"tags":[1561,28,100,1562,1312,1313,219,166,1566,1563,1565,116,1568,1555,355,1564,118,1550,1559,366,1557,1553,1551,1316,1556,1554,1558,1560,245,48,1567,1552,32],"class_list":["post-2104","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-immigration","tag-bulgaria","tag-cardiff-business-school","tag-cardiff-university","tag-citizenship","tag-coronavirus","tag-covid-19","tag-economics","tag-eu","tag-eu-accession","tag-eu-enlargement","tag-eu-member","tag-europe","tag-european-business-school","tag-european-commission","tag-euros","tag-expenditure","tag-health","tag-immigration","tag-italy","tag-labour","tag-labour-shortage","tag-legalisation","tag-migrant-workforce","tag-pandemic","tag-parliament","tag-population","tag-portugal","tag-romania","tag-society","tag-uk-government","tag-university-of-mannheim","tag-work-permits","tag-workers"],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/paOfaS-xW","meta_box":[],"jetpack_featured_media_url":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-content\/uploads\/sites\/620\/2020\/07\/Graphic-depicting-migrant-workforce.jpg","_links":{"self":[{"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/posts\/2104","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/users\/1850"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/comments?post=2104"}],"version-history":[{"count":3,"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/posts\/2104\/revisions"}],"predecessor-version":[{"id":2111,"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/posts\/2104\/revisions\/2111"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/media\/2105"}],"wp:attachment":[{"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/media?parent=2104"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/categories?post=2104"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.cardiff.ac.uk\/business-school\/wp-json\/wp\/v2\/tags?post=2104"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}