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February 25, 2013

Conference to Explore the Economic Impacts of Enhanced Domestic Energy Production from Shale Gas and Oil Extraction

New technologies and techniques to extract natural gas and gas liquids, as well as petroleum, from shale rock have greatly altered expectations for North America’s capacity to produce energy products. As a result of innovations such as hydraulic fracturing, some government, industry, and academic observers have predicted that the United States will soon become energy self-sufficient and possibly become a net exporter of natural gas and petroleum.

Leaders from both specific markets and regions are looking at the opportunities and challenges associated with the so-called energy production revolution ushered in by the new means to access natural gas and other fuels. Indeed, many from potential energy-producing regions are assessing the trade-offs between economic growth associated with expanded gas and oil production and the risks to the environment that this production may pose. For those from other regions, an energy boom based on shale gas and oil extraction may present opportunities in many different arenas. For instance, some regions will especially benefit from lower consumer prices for home heating and cooling. Similarly, switching to natural gas from diesel in the long-haul trucking industry to take advantage of low natural gas prices may help bring about lower delivery costs for a wide spectrum of household and business goods. Additionally, several parties in regions historically reliant on manufacturing, such as the Midwest, are hoping that low energy prices will bring about new development and jobs in energy-consuming manufacturing sectors, such as chemicals and plastics. Furthermore, greater energy production and chemical manufacturing may lead to more supply chain linkages, which can be developed by regional and local economies.

Our April 8–9, 2013, the Chicago Fed’s Detroit Branch will host an event to discuss the impact of enhanced domestic recovery of natural gas and other fuels on industries and regional economies. The conference will focus on the shifting markets, development opportunities, and economic outcomes resulting from greater shale gas and oil extraction in the United States. We will be meeting at our Detroit Branch from the afternoon of April 8 through early afternoon the next day.

For further details on the conference, including its agenda, and information on accommodations, please click on this conference link.

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Posted by Testa at 2:41 PM | Comments (0)

February 14, 2013

New Issues in Immigration Research

By Maude Toussaint-Comeau

Over the past few decades, U.S. immigrant groups have abandoned a longstanding pattern of settling predominantly in major urban areas. Rather, their residential areas have expanded and diversified to rural locales and smaller metropolitan areas, along with the traditional settlement areas in big cities such as New York, Chicago, Los Angeles, Miami, and Boston. And within these big cities, immigrants are also now living in larger numbers in suburban communities.

In the 7th District, which includes most of Illinois, Indiana, Iowa, Michigan, and Wisconsin, immigrants are expanding their presence from the bigger cities to their peripheries and into rural areas. Immigrants are attracted by job growth, more affordable housing, better performing schools, and safer neighborhoods (Wilson and Singer, 2011).[1] This demographic transformation has heightened racial, ethnic, and linguistic diversity throughout the Seventh District.

While the geographical expansion of the immigrant diaspora offers more employment opportunities and greater access to goods and services, immigrants also face greater uncertainties. Communities that are unaccustomed or unprepared for inflows of foreigners sometimes view newcomers as a drain on resources and a threat to native employment.

For economists, these changes raise questions about the effects of immigration on local communities. Traditionally, economists have largely focused on the impact of inflows of immigrants on labor markets. However, we now look at other socioeconomic outcomes and issues in receiving localities. The pressure on local housing prices is one such outcome. This issue has become all the more important in the aftermath of the recent housing crisis, the worst in U.S. history. Adverse effects of the crisis have been widespread but not evenly distributed, neither geographically nor across different racial and ethnic groups. Researchers are seeking to understand how the increasingly widespread immigrant communities are navigating the crisis, as well as the role of immigrant housing demand in the housing market overall.[2]

In this blog, I discuss the changes in the foreign-born population in the Seventh District during the first decade of the 2000s and review new research on immigration from a workshop organized by the Journal of Regional Sciences (JRS) held at the Federal Reserve Bank of Chicago on November 7–8, 2011. The workshop brought together researchers to discuss new frontiers and directions for the study of immigration. A special issue of the JRS, to be published in February 2013, compiles selected contributions from the workshop.

Foreign-born in the Seventh District

The foreign-born demographic accounts for 13% of the U.S. population (Chart 1), and is expected to provide for most of the population gains in the coming decades (not shown) (Passel and Cohn, 2008).[3] In our District, 8% of the population is foreign born. Illinois, in particular, has remained an exceptionally strong magnet for immigrants among District states, with 14% of its population foreign born.

With the Great Recession and accompanying high unemployment rates in the first decade of the current century, the growth rate in the immigrant population in the Seventh District slowed from the rapid influx seen in the 1990s, the largest on record (Chart 2). This reflected the slowing national trend. Chart 3 distinguishes the growth in foreign-born populations in each Seventh District state’s largest metropolitan area relative to the rest of the state. The slower growth in the foreign-born population in the Chicago metropolitan area relative to the rest of the state is consistent with research that has noted the ongoing outward sprawl of this metropolitan area (Johnson, 2007).[4] In large metropolitan areas where economic growth has been lagging the state’s economic growth and where unemployment has been relatively high, the increase in the foreign-born population has tended to lag that for the remainder of the state. This is also the case for Milwaukee and Detroit (Chart 3).[5]

Source: US Census Bureau, Summary File 1990 and 2000 US Decennial Censuses; 2010 estimates from the US Census Bureau’s American Community Surveys.
Click to enlarge

Source: US Census Bureau, Summary File 1990 and 2000 US Decennial Censuses; 2010 estimates from the US Census Bureau’s American Community Surveys.
Click to enlarge

Source: US Census Bureau, Summary File 2000 US Decennial Censuses; 2010 estimates from the US Census Bureau’s American Community Surveys.
Click to enlarge

Implications for localized markets: New research findings

Research areas such as those examined in the JRS offer useful insights into the potential roles of immigrants in local housing markets, neighborhood characteristics, and local businesses’ survival and growth.

Among other pertinent findings of the studies in the JRS, one article finds that in an area in Europe that experienced a housing boom during the 2000s, about one-third of the increase in house prices and in the available housing stock between 2000 and 2010 can be explained by immigration. (Saiz, 2007, estimated similar effects for the U.S).[6] As the stock of housing is often owned by natives to a large degree, significant shifts in wealth are identified as a possible outcome of large-scale immigration.

Another article found that immigrants can have both positive and negative impacts on communities. On the one hand, the paper identified a positive effect of cultural diversity on average housing prices (e.g., ethnic food restaurants). But other costs associated with immigrant agglomeration may offset some of the positive effects.

Another article looks at whether a high population density of immigrants generates negative outcomes such as increased crime. The analysis reveals that the presence of a large population of immigrants, especially if from the same country, generates much lower crime rates. Accordingly, despite some public perception to the contrary, “enclaves” of immigrants may actually provide an effective way to reduce crime.

Impact on firms

The survival of firms and retention of employees are especially important during times of economic slowdown. One article examines whether businesses lay off native-born workers in response to an abundance of (potentially lower-cost) immigrant workers. The study shows that cities with large inflows of immigrants absorb them by significantly increasing the number of business establishments. The expansion of the number of firms is consistent with the lack of any negative effect of immigrants on wages identified in the literature (see, e.g., Card, 2009).[7] Other research presented in the JRS uses a unique database of immigrants matched to firms in Georgia. It analyzes whether hiring “undocumented” workers increases the probability of survival of a firm. It shows that these firms save on costs (i.e., labor) and have a significantly lower probability of exiting the market, especially if they are in sectors that produce labor-intensive goods.

New approach to studying impact of immigration

The new approach to the study of immigration’s effects acknowledges the diversity (heterogeneity) of skills that immigrants bring. The picture emerging from the studies in the JRS is that the local amenities of cities may be significantly affected by the presence of immigrants. Immigrants bring to urban areas important dynamics of population growth which affect housing values, among other things, and which have wealth implications for the entire community.

The findings in the JRS articles on immigrants and firms are consistent with previous findings that immigration has the potential to stimulate investment and increase the size of the economy without crowding out native workers in some instances. The analysis of undocumented immigrants, their specific characteristics, and their impact on firms has only recently become possible with new and unique firm-level data and offers an interesting avenue of research to be developed.


[1]Wilson, Jill H. and Audrey Singer (2011). “Immigrants in 2010 Metropolitan America: A Decade of Change,” Brookings, Metropolitan Policy Program at Brookings, State of Metropolitan America/Immigration, October 2011 (Return to text)
[2](e.g., for a study of Hispanic neighborhoods in Chicago and the foreclosure crisis see, Martinez, Martha A. (2009). “The Housing Crisis and Latino Home Ownership in Chicago,” Institute for Latino Studies, University of Notre Dame, October 2009. (Return to text)
[3]Passel, J. and D’Vera Cohn (2008). U.S. Population Projections: 2005-2050,” Pew Research (Return to text)
[4]Johnson, Kenneth M. (2007). “Demographic Trends in Metropolitan Chicago at Mid-Decade,” Working Papers on Recreation, Amenities, Forests and Demographic Change. No. 6. (Return to text)
[5]For details on the ethnic and immigrant concentration in smaller geographies see University of Chicago Map Collection for Chicago Census Maps depicting neighborhood level data on the ethnic diversity and location concentration patterns in Chicago. For similar depiction of ethnic/immigrant neighborhoods in Detroit (e.g., Corktown/Irish; Greektown; Dearborn/Arab; and Mexican town), see here. (Return to text)
[6]Saiz, Albert (2007). "Immigration and housing rents in American cities," Journal of Urban Economics, Elsevier, vol. 61(2), pages 345-371, March. (Return to text)
[7] Card, David (2009). “Immigration and Inequality,” American Economic Review, Papers and Proceedings, 99, 1--21. (Return to text)

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Posted by Testa at 10:57 AM | Comments (0)