different labor skills and capital in production, the rate at which immigrants enter the economy, the rate of economic assimilation of immigrants, the response of investment in labor skills and physical capital to changes in factor returns, and the participation of immigrants in research and development. The evidence points to a substantial capacity of the economy to absorb immigrants. The rate of immigration can have important consequences for the absolute size of the economy (as documented elsewhere in this report), but it is not likely to have major long-run consequences for the distribution of income or the rate of capital formation. The very success of immigrants in assimilating economically across generations mitigates their potential to alter long-run growth rates.

Conclusions

To summarize the main findings of this chapter, as a nation, on net, we gain economically from immigration for several reasons. On the production side, immigration allows domestic labor to specialize in producing goods at which we are relatively more efficient. Specialization in consumption also yields a gain. Immigration thus breaks the rigid link between domestic consumption and domestic production. From this perspective, its effects are comparable to those of international trade. Because the two processes are so similar, when trade is relatively free, changes in the number of immigrants will affect the incomes of the native-born less than they would have without trade.

Even when the economy as a whole gains, though, there can be losers as well as gainers among different groups of U.S. natives. The gainers are the owners of productive factors that are complementary with immigrants—native higher-skilled workers, whose incomes will rise. Those who buy goods and services produced by immigrant labor benefit, too. But there may also be losers: the less skilled native workers who compete with immigrants and whose wages will fall. To the extent that immigrants specialize in activities that otherwise would not have existed domestically, immigration can be beneficial for all the native-born. In this case, there is little substitution against native workers, and native consumers gain from the lower prices of these services.

Overall, immigration is unlikely to have a huge effect on relative earnings or on gross domestic product per capita. Many other factors are far more critical to the U.S. economy than is immigration, including savings and investment and the human capital of U.S. workers.

In the long-run, assuming constant returns to scale, immigrants can affect rates of economic growth only to the extent that they differ from the native-born—if, for example, they arrive with a different mix of skills from those possessed by the native-born. To affect growth rates, this difference between immigrants and natives must persist over each new generation. If the grandchildren of immigrants come to be just like the native-born, all that immigration does is



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