The Effects of Immigration on Socioeconomic Gaps in a Labor Managed System Versus in a Competitive System

While most studies on immigration focus on its impact on the labor market, in this study we address its effect on socioeconomic gaps. By studying Israeli immigration,m we examine the effects of mass immigration on socioeconomic gaps among generations using the Israeli Censuses for 1961 and 1983. We look at the socioeconomic gaps within two difference economic systems within the same economy. One system is perfect competition oriented while the second, the kibbutz, is organized as a labor-managed firm. Both generations distinguished between the different ethnic groups and the parents' country of origin. In particular, three groups are examined, in the first generation using the 1961 census, those who were born in Asian and African countries, in European and American countries, and in Israel. In the second generation, using the 1983 census, we look at those whose fathers were born in the respective areas. The analysis decomposes the Occupation Socioeconomic Score (OSS) differentials into human capital and market evaluation differences for each generation separately. The model develops a gap function that quanti ̀„es the socioeconomic gaps and uses iso-gap curves to compare pre-immigration and post-immigration gaps.The study finds that the score differentials among the examined groups in the kibbutz are lower than in the city, prior to the second wave of immigration. Even after the second wave of immigration the score differentials in the kibbutz, among the examined groups, are lower than in the city. We attempt to explain this occurrence by looking at how society in the kibbutz differs in the treatment of immigrants. In particular, we focus on how the kibbutz, because of its size and reward structure, is able to internalize certain externalities and aim at a relatively higher level of education for all.

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