THE ECONOMICS OF CANADIAN CITIZENSHIP

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1 See discussions, stats, and author profiles for this publication at: THE ECONOMICS OF CANADIAN CITIZENSHIP Article CITATIONS 24 READS 39 2 authors: Don Devoretz Simon Fraser University 73 PUBLICATIONS 1,026 CITATIONS SEE PROFILE Sergiy Pivnenko Associated Economic Consultants Ltd 8 PUBLICATIONS 155 CITATIONS SEE PROFILE Some of the authors of this publication are also working on these related projects: Human Capital Depreciation During Unemployment View project Scholarship, the Law and Immigration Policy View project All content following this page was uploaded by Don Devoretz on 07 February The user has requested enhancement of the downloaded file.

2 Research on Immigration and Integration in the Metropolis 1

3 The Economics of Canadian Citizenship Don J. DeVoretz Willy Brandt Professor, IMER, Malmo University Co-Director RIIM, SFU Sergiy Pivnenko Senior Researcher RIIM Simon Fraser University 2

4 Overview In 1996 Census of Canada 74.6% of immigrants reported Canadian citizenship. Over 88% of immigrants working in government (federal and other) and 74% in non-government sectors were naturalized citizens. A Recent Supreme Court case upheld the citizenship requirement for certain federal jobs and ruled against an immigrant class action suit to recover damages from this alleged discrimination. Canadian immigrants ascend to citizenship at different rates. For example, more than 68% of Polish immigrants acquired Canadian citizenship during their first ten years in Canada, whereas only 24% of the Dutch have become Canadians over the same period. Only a small proportion of the population in 1996, about 3%, had dual or multiple citizenship, up from 2% in Canada has recognized dual citizenship since In 1996, one in every five naturalized Canadians (17%) had dual citizenship with Canada. The source countries for dual citizenship include United Kingdom, Poland, Italy, the United States and Portugal. 3

5 Objectives 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 Canada) variables on the immigrant decision to ascend to citizenship The economic impact of citizenship on the occupational distribution and earnings levels of immigrants To Answer the following What are the individual determinants that affect the citizen non-citizen decision for immigrants at various stages in their lifetime? What are the institutional determinants that affect the citizenship decision at various stages in the immigrant s lifetime? Does the immigrant economically gain in either the public and private sectors from this ascension to citizenship? From an economic perspective what is the optimal waiting period before Canada should allow ascension to citizenship? Does ascension to citizenship retard or hasten return migration of Canadian immigrants? 4

6 Literature DeVoretz, D. and K. Zhang, (2004) Citizenship Choice part of the Brain Exchange decision process Two agents provide subsidized human capital and public good Move or stay in entrepot depending on transfer of acquired human capital Evidence: HK citizen emigres from Canada have greater education obtained in Canada and greater earnings than stayers in HK or Canada. 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 Mata, Fernando. (1999): Principal Components 1996 Canadian Census No evidence of economic impact of Canadian citizenship 5

7 Literature Pivnenko and DeVoretz (2003) evidence of citizenship affect on Ukrainian earnings in Canada Earnings of Ukrainain foreign-born citizens equals Canadian-born Ukrainians Constant and Zimmerman (2003) Found repeat moves of German immigrants to and from Germany by citizens of EU countries. Bloemraad (2002) Canadian dual citizenship more likely if : Youth, education and offical language in Canadian home Conclusion: No comprehensive study of ascension and economic impact of citizenship to date. 6

8 Stylized Facts of Citizen-Non- Citizen Populations All immigrants Citizens Non-citizens (All) Non-citizens (5yrs+) Frequency Percent Frequency Percent Frequency Percent Frequency Percent Age 17<age< <age< <age< <age< <age< Tenure in Canada 0-5 years years years years years years years years years years Highest degree H/School or less Diploma Bachelor Above bachelor Ph.D Occupation Unskilled Skilled Professional Weeks worked Mean Mean Mean Mean Wage earnings Total income

9 Stylized Facts:Patterns Age: Non-citizens younger-spurious Median age group for ascension not much time to recoup income gain Tenure: Time in Canada: Median years in Canada before ascension to citizenship years Non-citizens 50% < 5yrs in Canada Non-citizens (5yrs+) median years in Canada Big trouble 2004: now up or out after 6 years Highest degree: No real advantage Non-citizens slightly more High School or less Citizens : same BA or above as Non-citizens Occupational distribution Non-citizens slightly more unskilled Citizens slightly more in professions Weeks Worked: Citizens 75% full time, Non-citizens 62% Earnings: Citizens=33k, Non-citizens=24k 8

10 Stylized Facts:Countries of Origin USA and Western Europe Citizens: fewer but older China and India Citizens:greater percent and younger 9

11 Costs and Benefits of Ascending to Canadian Citizenship Costs: In the absence of recognition of dual citizenship by both Canada and the sending country the major cost of ascending to Canadian citizenship is the loss of home country citizenship and all of the associated economic benefits: access to the home country labour market possibly the loss of the right to hold land and entitlement to public services such as subsidized education for children. application fees and any foregone income arising from continued residence in Canada to fulfill citizenship requirements Benefits: access to the federal government labour market, potential access to the US labour market (NAFTA TN visa) and any wage premium paid by private Canadian employers to Canadian citizens Canadian passport and visa waiver: more mobile to ROW 10

12 Brain Pyramid CANADA 5 Common Patterns 2-5 Canadian Citizenship Nafta Visa Citizenship Citizen No Citizenship 3 ROW 4 USA 2 PRC 1 Hong-Kong 11

13 Decision Tree: Stay-Leave Citizens=Green Person in Source Country (A) Stage 1 Stay Home (A) Go Abroad (entrepôt ) (B) Period I Stage 2 Move (A/C) Stay (B) Period II Return (A) Onward (C) Stay (B) Move (A/C) Stage 3 Return (A) Onward (C) Stage 4 Home (A) ROW (C2) Entrepôt (B) Home (A) USA (C1) ROW (C2) 12

14 Logic of Decision Tree: Myopic Stage 1:Move stay in home country A remaining at home results in earnings stream Y h and zero costs of movement Stage 2: Move from A to B (entrepot country= movement to B results in an earnings stream Y i with C ab costs of movement Period I: acquires subsidized human capital Period 2: acquires a public good Ascends to citizenship: if GAIN EXCEEDS COSTS Gain: Receiving country s labour rewards and passport to third country NAFTA or EU costless if dual citizenship recognition by both countries Costly if no recognition of dual by sending country or Y h costs if income if country A does not recognize dual citizenship No Ascension: If costs exceeds Benefits 13

15 Decision Tree Continued Period 3 Citizen; Stays in B: risk neutral: Gain in income and variance equal Moves to ROW or USA risk taker: Gain in mean Y less than gain in variance Moves home to A: Risk adverse: networks Non- Citizen Forced to leave B Difficult to enter ROW Returns home: loss in value of acquired HC and mean Y declines 14

16 Optimization Problem The problem now becomes for an immigrant to choose which mobility path maximizes his/her income stream net of costs given the citizenship affect on income given his/her human capital stock before and after moving and the transactions costs of movement. Prediction: Rates of ascension to citizenship are a positive function: of age, years in Canada, occupation status, home countries dual citizenship policy, marital status and presence of children and ECONOMIC GAINS 15

17 Naturalized citizens/ All immigrants Proportion of naturalized citizens among immigrants from high income countries (USA, Germany, Italy, Netherlands) and low income countries (China and India) Years since immigration USA, GER, ITA, NHL China and India 16

18 Why the 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 17

19 LOGIT model of probability of acquiring Canadian citizenship (preliminary results) B S.E. Wald Exp(B) AGEP YSM11_ YSM21_ YSM31_ YSM40PL LMARRIED LMAR_CHL Constant AGEP age YSM years since immigration LMARRIED legally married LMAR_CHL legally married with children Need better data! (20% uncensored sample) If we include DUAL dummy with available data it yields negative sign (opposite to expected) 18

20 Economic Effects of Citizenship Predictions: Effect on occupation distribution More Professional More government Positive Effect on Earnings: turnover effect Greater Earnings effect for Admin and Professionals Job match and use of human captial Effect by source countries: English Speaking vs. Non-English Speaking 19

21 Male Occupational Distribution: Intended and Actual Intended and actual occupations of male immigrants in Canada Source: IMDB,1996 Census Percentage Skill Intended Actual_C Actual_NC 1 - Low skilled 2 - Clerical 3 - Skilled 4 - Semiprofessional 5 - Professional 20

22 Female Occupational Distribution: Intended and actual Intended and actual occupations of female immigrants in Canada Source: IMDB,1996 Census Percentage Skill Intended Actual_C Actual_NC 1 - Low skilled 2 - Clerical 3 - Skilled 4 - Semiprofessional 5 - Professional 21

23 Estimation of the effect of citizenship on immigrants labour market performance (preliminary results) Males Females Predictors Regression (Constant) (57.664) (61.362) AGEP (42.101) (28.966) AGESQ ( ) ( ) YSM11_ (13.317) (9.376) YSM21_ (24.928) (16.803) YSM31_ (22.222) (9.544) YSM40PL (17.523) (7.293) CTZN (-.194) (-6.351) MAN_CTZ (18.646) (20.763) PROF_CTZ (28.799) (36.655) ADM_CTZ (0.092) (22.69) LNWEEKS ( ) ( ) F-statistics Adj. R-square Dependent Variable: LNWAGE Dependent variable: natural logarithm of annual wage earnings AGEP age AGESQ age squared YSM years since immigration dummy variable CTZN citizenship indicator (1 for naturalized citizens, 0 non-citizens) MAN_CTZ indicator for citizens in managerial occupations PROF_CTZ indicator for citizens in professional occupations ADM_CTZ indicator for citizens in administrative and clerical occupations LNWKS natural logarithm of weeks worked 22

24 Estimation of the effect of citizenship on immigrants labour market performance (occupational controls) All Females Males Predictors Regression coefficients (Constant) (65.859) (45.474) (41.666) AGEP (46.662) (27.131) (39.412) AGESQ ( ) ( ) ( ) YSM11_ (12.362) (7.205) (10.502) YSM21_ (23.871) (13.812) (19.941) YSM31_ (18.285) (8.309) (17.066) YSM40PL (15.003) (6.783) (13.852) FEMALE ( ) CTZN (1.329) (-1.931) PROF_CTZ (33.066) (27.708) (20.009) ADM_CTZ (13.017) (16.721) (0.527) LNWEEKS ( ) (73.386) (73.719) F-statistics Adj. R-square Dependent Variable: LNWAGE Countries selected: China, India, Hong Kong, Philippines, Vietnam, Poland, United States, United Kingdom, Lebanon, Yugoslavia, France, Portugal, Germany, Italy, Netherlands LNWAGE natural logarithm of wage earnings AGESQ age squared LNWEEKS natural logarithm of weeks worked Dummy variables: YSM years since immigration CTZN citizenship indicator PROF_CTZ professional occupation interacted with citizenship ADM_CTZ administrative occupation interacted with citizenship 23

25 Estimation of the effect of citizenship on immigrants labour market performance (alternative specification) All Females Males Predictors Regression coefficients (Constant) (64.909) (44.496) (41.157) AGEP (47.326) (27.739) (39.931) AGESQ ( ) ( ) ( ) YSM11_ (11.51) (6.838) (9.624) YSM21_ (22.005) (13.263) (17.955) YSM31_ (16.893) (7.845) (15.682) YSM40PL (13.842) (6.517) (12.581) FEMALE CTZN ( ) (15.855) (10.007) (12.849) NESC_CZN ( ) ( ) ( ) NE_PR_CZ (28.223) (22.879) (17.746) NE_AD_CZ (12.705) (14.56) (1.018) LNWEEKS (103.59) (73.066) (74.126) F-statistics Adj. R-square Dependent Variable: LNWAGE Countries selected: China, India, Hong Kong, Philippines, Vietnam, Poland, United States, United Kingdom, Lebanon, Yugoslavia, France, Portugal, Germany, Italy, Netherlands LNWAGE natural logarithm of wage earnings AGESQ age squared LNWEEKS natural logarithm of weeks worked Dummy variables: YSM years since immigration CTZN citizenship indicator NESC_CZN non-english speaking country of origin interacted with citizenship NE_PR_CZ triple interaction of non-english speaking, professional occupation and citizen NE_AD_CZ triple interaction of non-english speaking, administrative occupation and citizen 24

26 Conclusions Simple Model: Citizenship, occupation No general citizenship effect for total foreign-born General Citizenship effect >0 males, <0 females Interaction Citizen-occupation >0 professionals (m) and both (F) Complex Model: English, Occupation and Languáge Gender:Males positive, Females negative Occupation Citizenship positive males and females Language: NES strongly negative citizenship effect Positive NES with profession and citizenship Supreme Court: Incorrect Judgement 25

27 Brief Bibliography 1. Bloemraad, Irene. (2000). Citizenship and Immigration: A Current Review. Journal of International Migration and Integration, Vol. 1, No 1: Bloemraad, Irene. (2002). "Who Claims Dual Citizenship? The Limits of Post nationalism, the Possibilities of Transnationalism, and the Persistence of Traditional Citizenship", Department of Sociology, Harvard University 3. Bratsberg B, Ragan JF, Nasir ZM (2002) "The effect of naturalization on wage growth: A panel study of young male immigrants", Journal of Labor Economics 20 (3): DeVoretz, D. and K. Zhang, (2004)"Citizenship, Passports and the Brain Exchange Triangle " Journal of Comparative Policy Analysis, Vol. 4, no Faist, Thomas (2001) Dual Citizenship as Overlapping Membership Willy Brandt Working Papers, IMER 6. Liang Z. (1994) Social Contact, Social Capital, and the Naturalization Process - Evidence From 6 Immigrant Groups, Social Science Research 23 (4): Mata, Fernando. (1999). "Patterns of Acquiring Citizenship." Pp in Immigrant Canada: Demographic, Economic and Social Challenges, edited by S. S. Halli and L. Driedger. Toronto: University of Toronto Press 8. Sickkan, H.G. (2000). The Political-Historical Roots of West European Models of Citizen and Alien, IMER Norway\Bergen Report 26

28 Verdict 27