Do Low-Skilled Immigrants Improve Native Productivity But Worsen Local Amenities? Learning from the South Korean Experience

We evaluate the effect of an increase in low-skilled immigration in Korean municipalities on the internal migration of natives and several economic outcomes. Using Korean data, we distinguish between natives moving for work-related and non-work-related reasons. Using a change in immigration policy in 2004 and the pre-existing networks of immigrants to construct an instrument, we find that locations experienced significant immigration attracted natives who moved for work-related reasons. However, these locations saw outflows of natives moved for non-work-related reasons. We then estimate that immigration had positive effects on firm creation and on wages but that it reduced the quality of local amenities and had little impact on housing prices. These facts together suggest that immigration attracted natives who value labor income over amenities but pushed out those who place a higher value on amenities. Thus, immigration, while generating little net native migration, changed the composition of natives in Korean municipalities