The Effects of Immigration on Household Services, Labour Supply and Fertility
| Author | Agnese Romiti |
| Published date | 01 August 2018 |
| DOI | http://doi.org/10.1111/obes.12225 |
| Date | 01 August 2018 |
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©2017 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd.
OXFORD BULLETIN OF ECONOMICSAND STATISTICS, 80, 4 (2018) 0305–9049
doi: 10.1111/obes.12225
The Effects of Immigration on Household Services,
Labour Supply and Fertility*
Agnese Romiti†
†IAB – Institute for Employment Research, Nuremberg, Germany
(e-mail: agnese.romiti@iab.de)
Abstract
Fertility and female labour force participation are no longer negatively correlated in de-
veloped countries. At the same time, increased immigration affects supply and prices of
household services, which are relevant to fertility and employment decisions. This paper
analyses the effect of immigration on labour supply and fertility of native women in the
UK. Adopting an instrumental variable approach, I find that immigration increases female
labour supply without affecting fertility. My results show that immigration increases the
size of the childcare sector, and reduces its prices, suggesting that immigrants may ease
the trade-off between working and child rearing among native women.
I. Introduction
After the mid-1980s, the negative relationship between fertility and female labour force
participation has reversed across developed countries (Ahn and Mira, 2002; Rindfuss,
Guzzo and Morgan, 2003). Among rich countries, those with higher female labour force
participation also enjoy higher total fertility rate (TFR). This trend seems to be explained
by country-specific factors, and by country-heterogeneity in the magnitude of the negative
within-country correlation (K ¨ogel, 2004). Institutional factors, labour market rigidities,
and unemployment have been considered responsible for this reversal (Adser`a, 2004).
More recently, Furtado and Hock (2010) pointed to an additional potential explanation:
the role played by low skilled immigrants in the childcare sector. Household services, in
particular childcare, provided by immigrants can be more flexiblein ter ms of opening hours
and more convenient in terms of proximity with respect to existing services provided by
natives, thus more compatible with full-time jobs or a long working schedule.1Higher
JEL Classification numbers: D10, F22, J13, J22, J61.
*This paper has benefited from many comments from seminar and conference participants. In particular, I am
grateful to the editor, Debopam Bhattacharya, two anonymous referees, Michele Battisti, Daniela Del Boca, Emilia
Del Bono, Catalina Amuedo Dorantes, Delia Furtado, Giovanni Peri, Mariacristina Rossi, and Uta Sch¨onberg. All
remaining errors are mine.
1The higher flexibilityprovided by immigrants is evident comparing the difference in weeklyhours worked between
immigrants and natives in the household services sector. Immigrants work 3.57 hours per week more than natives
(Quarterly Labour Force Survey [QLFS], 2000–07), whereas the gap in other sectors is much lower (+1.29 hours).
844 Bulletin
availability translates into an indirect reduction in the costs of these services, including
search costs. In addition, inflows of immigrants can directly reduce their market cost,
pushing down the wages of those employed in this sector. Given the broad evidence that
reduced childcare costs havea positive effect on both fertility and labour force participation,
immigration can ultimately have an impact on their correlation, thereby easing the trade-off
between labour supply and fertility.
This paper analyses the effect of immigration on labour supply and fertility decisions
of native women in the UK in the years 2000–07, with a focus on the role of immigration
on household services, and in particular on childcare. In order to identify the effect of
immigration I use panel data in addition to an instrumental variable approach based on the
past country-specific distribution of immigrants across regions. This instrumental variable
strategy allows me to isolate the causal effectof immig ration on labour supplyand fer tility.
The individual fixed effects control for potential omitted variables related to unobserved
individual characteristics and the presence of immigrants, not controlled for by my in-
strumental variable strategy. I look at native women of reproductive age, and, thanks to
the longitudinal dimension of the data, I can construct an appropriate measure of fertility,
identifying the timing of the decision. In order to learn whether the mechanism driving
my results is due to an immigrant-induced reduction in childcare costs, I complement the
main analysis by looking at the effect of immigration on the labour market structure of
household services.
My results show that immigrants increase the labour supply of women at the intensive
margin, without affecting fertility decisions. The effectis driven by more educated women,
and women with young children. The results seem to be driven by the contribution of
immigrants to household production, since higher shares of immigrants in the local labour
force raise the market size of childcare services, and reduce their market costs. Overall, I
interpret these effects as producing a weakeningof the negative correlation between fertility
and labour supply, driven by the immigrant-induced reduction in the cost of childcare.2
This paper contributes to the literature on the impact of immigration on the host country
labour market. Despite the broad evidence on the effect of immigration on labour supply,
the evidence on fertility is still scarce. To my knowledge, only Furtado (2016) recently
analysed the effect of low-skilled immigration on fertility decisions for highly educated
women in the US at the individual level. Due to the lack of longitudinal data, the author
models the fertility decision by an indicator of having a child of age zero, and then links
this indicator to the current immigration. By exploiting the same instrumental variable
approach as I do, the main findings of Furtado (2016) show that low-skilled immigration
raises the probability of having a recently born child, as well as the joint probability of
working long hours and having a recently born child. In this paper I look at the UK, which
has a different and more generous childcare system than the US.3
The UK seems to be particularly suitable for my question. First of all, it is one of the
countries experiencing, over the last two decades, a positive correlation between fertility
2My results are robust to potential omitted factors which can be linked to the production side of the economy,
such as complementarity effects as well as to endogenous mobility of natives,or regional shocks.
3Starting from April 2004, all Local Education Authority in the UK havebeen mandated to provide free nursery
places for all 3- and 4-year-old children for 12.5 hours a week and for 33 weeksper year.
©2017 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd
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