3.

Empirical Model
The author identifies three major theoretical approaches to the examination of immigration's
monetary impact on domestic labor markets: The author proposed and the researcher accepted
the "National Skill-Cell Approach," (ii) the researcher used a "Pure Spatial Approach," and (iii)
the author herself used a "Mixture Approach." Both the first and third approaches are criticized
by the authors of the research. To be more explicit, unlike in the pure spatial method, the
parameter produced by the national skill-cell technique is not readily interpretable. Both the
national skill-cell and mixing approaches demonstrate the "relative" effect of immigration, where
"relative" refers to the impact that immigrants have on the most similar natives (i.e. belonging to
the same education-experience group). However, the pure geographical method is used to
identify the "overall" impact, which shows how immigration affects the economy as a whole.
The estimated parameter is the one that has the most influence on decision-making and is easiest
to comprehend in this strategy. To add insult to injury, the mixing and national skill-cell models
both assume that immigrants and natives have similar levels of education and work experience.
Immigrants have been hypothesized to have undergone a process of "skill-downgrading," which
is supported by statistics. Whether measuring the impact of immigration within national skill-cell
or the mixing frameworks, this phenomena plays a crucial role since immigrants (and natives)
are put into certain skill groups depending on their evaluated education and experience.
Therefore, if immigrants are not adequately divided into groups based on their degree of
education and job experience, the estimated impact may be inaccurate. The researcher claims
that the pure spatial technique has the benefit of being "resistant to downgrading" since it does
not rely on categorizing immigrants into skill groups.

Pure Spatial Approach

This article takes a "pure spatial approach" from the get-go since it examines the effects of
immigration on native-born employees. This technique is meant to reveal a coefficient that
indicates immigrants have a "spatial relationship" with the local population's occupational
structure. This strategy, which the researcher pioneered, makes advantage of the fact that
immigration surges have a non-random spatial distribution (and are therefore likely to coincide
with local labor markets) (in terms of their magnitude, that is in terms of the number of people
entering each particular labor market). Immigrants do tend to cluster in specific areas because I
such areas provide more financially advantageous economic circumstances (i.e., greater incomes
and better employment prospects) and (ii) those areas already have preexisting personal or social
networks that are important to the immigrants (i.e. by the presence of a consistent number of
people coming from the same country of origin). This uneven geographical distribution of
foreign-born individuals represents a significant source of variation to the extent that the impact
of immigration on native employment may be evaluated empirically. This method predicts how
the employment of natives with a certain skill cell will change as a result of the influx of new
immigrants. For the sake of this study, people who did not graduate high school or make an
effort to do so are considered "uneducated," whereas those who did complete high school and
college are considered "well-educated" (i.e. at most twenty years of experience and more than
twenty years). A person's level of experience may be calculated by deducting their actual age
from the age at which someone with their level of education would have been anticipated to enter
the employment. Italian provinces are chosen as the geographical units of measurement for our
two variables of interest because they are the administrative units (for which the requisite data
are available) that are most similar to the concept of regional or even neighborhood-based labor
markets. Thus, our bare minimum specs are as follows:

∆ ( y a ,k , t )= ( ∅ k × φt ) + β ∆ ( ma ,t ) +v at (1)

Where ( y a , k ,t ) denotes the shift in native employment in province an instant t for cohort k. The
specific definition of the variable is as follows:

Itb Itb
(La ,k , t+2 −La ,k , t )
∆ ( y a ,k , t )= (2)
popa ,t

Where LItb
a , k ,t +2 is the total number of Italian-born employees in region an in year t, in

education/experience cluster k. The last piece of information is popa , t which represents the
percentage of the total working-age population of region an at time t that falls into each
education-experience category k. Therefore, the native employment growth rate between t and t
+ 2 is represented by( y a , k ,t ). We have analyzed data from 2009, 2011, 2013, 2015, and 2017. The
primary independent variable is denoted by the symbol( ma , t ), and it is designed to reflect the
expansion rate of the overall immigrant population in each Italian regional labor market.
Specifically, this variable is stated as:

∆ ( ma ,t ) =¿ ¿ (3)

Where ma ,t +2 and( ma , t ) are the total number of non-native speakers of Area A who are of working
age at those times. As before, popa , tdenotes the number of people in Province A who are of
working age as of some point in the future, in this case Time T. There are additional fixed effects
provided for the interaction between group (educational background) and time (t, k). The
research claims to account for "temporal changes in the employment market that are degree and
experience specific throughout the nation"13. In the end, vat is a random term with zero mean
and variance 2 that follows an independent and identical distribution. The coefficient of interest
is the percentage increase in native employment associated with a 1% rise in the immigrant
population. Different research have arrived at an "aggregate" version of equation 1 by using the
growth rate of regional employment as the dependent variable. Internalizing cross-groups effects
may assist provide more precise estimates when the number of observations used to determine
the change in employment for each group is minimal and/or the sample does not represent the
whole population of each group (as might be the case of the data from the Italian LFS).
Therefore, we use a specific kind of the pure spatial technique that we name the "Aggregate
Spatial Method" for all these reasons. In this particular setting, equation 1 is rewritten as follows:

∆ ( y a ,t ) =φ t + β ∆ ( ma ,t ) +v at (4)

Where the native employment shift is indicated by( y a , t ) and is defined as:

Itb Itb
( La , t+ 2−La ,t )
∆ ( y a ,t ) = (5)
popa ,t

Where LItb Itb

a , t+2 and La , tindicate the total number of persons working in region a who may claim

Italian ancestry at time t andt+ 2, respectively, and who may identify as Italian. To illustrate the
growth of native employment between the two time periods, we may write ( y a , t ). Finally, t stands
for time-specific fixed effects. One major flaw of the geographic correlation approach is the fact
that local labor markets are not closed economies. This shows that people may "vote with their
feet" and leave places that have recently had large influxes of immigrants. As a result, a local
study will show little to no link between immigrant and native labor market results since internal
movement acts as an adjustment mechanism that returns the labor markets to their original
equilibrium. However, this does not negate the fact that immigration might have negative effects
on native-born citizens. Although internal migration in Italy is quite low, we nonetheless include
a measure of internal migration (the net migration rate) in our baseline definition so that we can
better understand and control the issue. Because of this, we need to make a few adjustments to
Eq. 1:

∆ ( y a ,t ) =φ t + β t ∆ ( ma , t ) + β 2 N a ,t + v at (6)

Where N a , t is the net migration rate, defined in the same way:

N a , t=
[ popa , t ]
I a ,t −Oa , t
. 1000 (7)

Where the number of people moving into Area A at Time T is denoted by the variable " I a ,t " and
the number of people moving out of Area A at Time T is denoted by the variable " Oa , t." Once
again, the term " popa , t" refers to the population of Area A that was of working age as of the
specified point in time t. In the empirical specifications, the variable is first presented as the two-
year moving average net migration rate previous to each observation. Put another way:

N a , t= [ N a ,t−2−N a ,t −1
2 ] (8)

As a reminder, the "cleaned" coefficient of interest is 1, illustrating the impact of immigration on

native employment. A similar modification to Equation 4 is done in order to include internal
migration into the aggregate spatial technique.

Characterization of Immigration's Impact

When making a comparison between the success of native-born employees and that of immigrant
workers, it is essential to take into account how their respective fields have evolved over the
course of time. In a previous section, we discussed how the global financial crisis and the
European sovereign debt crisis dominated the conversation during the preceding decade. Both
shocks had a significant impact on Italy's real economy, which resulted in a significant amount of
unpredictability in the country's many local employment markets. As a result, the well-known
variations in the labor market performances and the areas of specialization that exist between
Italy's regions are among the most distinguishing characteristics of the nation. The Northern
regions are home to industries that are more technologically sophisticated, which contributes to
the region's higher salaries, employment rates, and overall productivity. On the other hand, the
employment market in the Italian "mezzogiorno" is in a worse state, and there are more
enterprises there that are labor-intensive. As a direct consequence of this diversification, different
regions have been hit by the crisis to diverse degrees. Because of this, it may be impossible to
correctly forecast the effect that immigration will have. Therefore, it is essential to make
adjustments for such increases in productivity that various industries may have undergone during
the time period under investigation in order to identify the distinct influence generated by
immigrant flows on the change in the employment of natives. This can be done by looking at
how employment rates have changed over time. To account for these variations in labor demand,
one of the methods that has received the greatest attention in the academic literature is to account
for the so-called "Bartik" instrument. Because of this, the corrected version of equation 6 is as
follows:

∆ ( y a ,t ) =φ t + β 1 ∆ ( ma ,t ) + β2 N a ,t + β 3 ∆ ( B a ,t ) + v at (9)

Where ( Ba , t ) represents the change in the "quantity version" of the Bartik instrument, which may
be described as follows:

( )
La , j ,t
∆ ( B a ,t ) =∑ o
. ∆∈L j ,t (10)
j Lj, t
o
 La , j ,t
Where means the employment share of each industry in province an in the base year t o, and
o

L j ,t o

ln L j , t signifies the change of the (logarithm of) employment happening in each industry j at
o

time t in Italy as a complete country. As a consequence of this, the Bartik instrument takes into
consideration the influence of variations in labor demand that occur outside of the province. The
coefficient of interest is once again 1, which represents the percentage rise in native employment
in response to a unitary percent increase in the immigrant population. This is the case even after
taking into account migration within the country as well as changes in local labor demand as a
result of national shocks. With the inclusion of the Bartik control, we are in a position to go
much closer to proving that there is a direct cause and effect relationship between waves of
immigration and changes in the employment of natives. In point of fact, it is anticipated that this
variable will act as a control for the link between shifts in the regional labor market and the
number of persons who are now employed in that region15. Its adoption, together with the
measurement of internal migration, is anticipated to capture all of the elements that impact the
dynamics of native employment other than the intake of workers who were born in other
countries. This is because the measure of internal migration already exists. As a result, it is
predicted that factor 1 will account for the variation in native employment that can be solely
attributable to changes in the proportion of immigrants present in the labor market. On the other
hand, immigrants' choices about where to settle are probably not chosen at random; rather, they
are likely connected to the outcomes of labor markets in the various nations. As a consequence
of this, and in accordance with what was discussed before, immigrants often choose to plant their
roots in areas that provide excellent economic conditions and a significant population of
individuals hailing from their home country. If this is the case, the regression coefficients that
were produced may have some kind of inherent bias. In order to solve this problem, many people
choose to use a technique based on instrumental variables. This may also be a helpful technique
to determine the degree to which immigration surges have an effect on employment rates among
native-born workers. Constructing a variable that stands in for the labor supply-driven shocks
that are associated with the inflow of immigrants is a common approach that is used in order to
replicate the findings of a research. This is a popular strategy. This tool was designed on the
presumption that immigrants are more inclined to gather in places where people share their
nationality. This presumption informed the development of the tool. That is to say, the number of
immigrants from a certain nation to a province at a given time t is in some way connected to the
number of immigrants from this country throughout the history of the province. It is generally
accepted that the constructed number is a reasonably exogenous and reliable predictor of the
increase in immigrant inflows. As a result, this particular kind of shift-sharing tool has seen a
significant amount of use in the past. As a consequence of this, we use a method known as an
IV/2SLS, with the so-called "shift-share" variable acting as the instrument. Here is how we
define this variable:

ma , t−ma , t−2
∆ ( ma ,t ) = (11)
ma ,t−2 +¿ b a ,t −2

Where

ma ,t =∑ m
O a , o ,t o .
mo ,t
m0 ,t
(12)
o

The year t o represents the baseline year that is expected to be consistently remote from the
year(s) in which the native employment is assessed (in this example, t o = 2003), and the
subscript o denotes the countries of origin of the immigrants. Last but not least, in equation 11,
¿ b a ,t −2 represents those who were born in Italy in yeart−2.