Immigration and Labor Market Mobility in Israel, 1990 to 2009

After the collapse of the Soviet Union in 1989, Soviet Jews emigrated in large numbers to Israel. Over the next ten years, Israel absorbed approximately 900,000 immigrants from the former Soviet Union, an influx that equaled about twenty percent of the Israeli population. Most of these new immigrants of working age were college-educated and highly skilled. Once in Israel, they were eligible for a generous package of benefits, including housing subsidies, Hebrew language training, and vocational education. This episode provides a natural experiment for testing the consequences of a large immigration inflow of skilled workers. This book provides a detailed analysis of the gradual process of occupational upgrading of immigrants and the associated rise in their wages. Based on their analysis, the authors conclude that even a very large and unanticipated wave of immigration can be integrated within the local labor market without any significant long-term adverse economic effect on natives. The small effect on wages and employment of natives is explained by the capital inflows into Israel and the gradual entry of immigrants into high-skill jobs as they invest in local human capital. An important contribution of the book to the immigration literature is the formulation and estimation of stochastic dynamic models that combine job search with investment in human capital and the analysis of alternative government policies within this framework.