Immigration in large numbers is a fairly recent phenomenon that may be traced to the period after the industrial revolution. The first wave of immigration from the eighteenth century to the early twentieth century consisted primarily of people from the "mother countries" of Europe such as the United Kingdom, Germany, France, Holland, Spain, and Belgium to the colonies of the United States, Australia, Canada, and New Zealand. The second, and more recent, wave consists of people migrating from the less developed areas of Asia, Africa, and Latin America to North America and Europe. Immigration between and within Europe and North America exists, but the numbers are much smaller. (1)
In the United States, the characteristics of the most recent wave of immigrants can be traced to the Immigration Act of 1965. This law increased the total annual ceiling of visas, with 170,000 designated for the eastern hemisphere and 120,000 for the western hemisphere; for those from the eastern hemisphere, there was also a 20,000 per country limit. Admission now prioritized family reunification and labor market needs rather than national origin. The passage of this law was followed by large inflows of immigrants primarily from Latin America and Asia. The rise in legal immigrant admissions, however, did not lead to reductions in illegal immigration. On the contrary, illegal immigration rose substantially after 1965.
The reaction to increased illegal immigration has resulted in several legislative actions. These include the Immigration Reform and Control Act of 1986, the Immigration Act of 1990, the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, and recent proposals currently being debated in Congress. The House of Representatives passed legislation in 2005 making undocumented presence a felony offense, but Congress has yet to reach a compromise on the most recent immigration policy proposals. Nevertheless, the general overlapping features of the bills include the possibility of temporary work visas for those who have resided in the country for more than 2 years and possible legal residency after 5 years in the country.
U.S. immigration policy has been amended on numerous occasions, but this legislation has focused on defining immigrant categories and quantity limits while largely ignoring issues related to the distribution of immigrants in their choice of residence and work location. An economic analysis of immigration would involve computation of, and comparison between, the costs and benefits to the individuals and households undertaking these moves. Some of the (perceived) benefits include economic opportunity and freedom from persecution. On the other hand, such moves are not costless because they often involve severance with extended families and, in some cases, with immediate families. In addition, the "culture shock" of living in a strange country with different norms, religion, language, and customs may be intimidating. It is thus not surprising that immigrants tend to live in enclaves such as Koreatown near the Wilshire district in Los Angeles and Brixton in London where immigrants from Bangladesh have gravitated.
It appears that social networks influence the choice of destination for immigrants. This may be due to their desire to live and work near people with similar cultures. Indeed, Bartel (1989) shows that, for the United States, not only do immigrants choose to reside where there are other immigrants but also their choice of location is less sensitive to wage changes in comparison to the native population. This is also related to a major issue in the immigration literature, which is the economic assimilation of foreign-born workers. One basic premise of this literature is that if immigrants are able to assimilate, or achieve wage convergence, with the native-born population, they will be less dependent on social welfare programs and will reduce the transfer of resources from native- to foreign-born workers. …