Academic journal article Social Security Bulletin

Incorporating Immigrant Flows into Microsimulation Models

Academic journal article Social Security Bulletin

Incorporating Immigrant Flows into Microsimulation Models

Article excerpt


Building on the research on immigrant earnings reviewed in the first article of this series, "Research on Immigrant Earnings," the preceding article, "Adding Immigrants to Microsimulation Models," linked research results to various issues essential for incorporating immigrant earnings into microsimulation models. The discussions of that article were in terms of a closed system. That is, it examined a system in which immigrant earnings and emigration are forecast for a given population represented in the base sample in the microsimulation model. This article, the last in the series, addresses immigrant earnings projections for open systems-microsimulation models that include projections of future immigration. The article suggests a simple method to project future immigrants and their earnings. Including the future flow of immigrants in microsimulation models can dramatically affect the projected Social Security benefits of some groups.


The preceding article, (Duleep and Dowhan 2008a), focused on forecasting immigrant earnings and emigration for a given population represented in the base sample of the microsimulation model. For many purposes, microsimulation models form a closed system, predicting for an existing population. Some issues, however, demand that the model permit new entrants into the system: people marry, babies come into the world, and new immigrants arrive.

Social Security's Modeling Income in the Near Term (MINT) model, for instance, originally projected for a population represented by data from the 1990-1993 Survey of Income and Program Participation (SIPP) and ignored any post-1993 population growth fueled by immigration. To assess the future well-being of the elderly, Social Security analysts decided that MINT needed to forecast the earnings and retirement income of future U.S. elderly populations, including immigrants who entered the United States after the SIPP surveys of MINT's base sample. Moreover, if microsimulation were to supplement the actuarial forecasts of Social Security's financial status, future immigration would need to be projected.

Incorporating new immigrants into a microsimulation model poses two challenges-the flow of immigrants into the country needs to be projected and the new entrants' earnings profiles imputed. These pursuits are closely related since the characteristics that modelers include in the immigrant projections define what can be done in the immigrant earnings projections.

Projecting the Flow of Immigrants

In the sections that follow, two approaches for projecting immigrant flows are discussed: a time-series approach, where recent trends are used to forecast future trends, and a structural approach involving three steps: (1) determining the variables that affect immigration, (2) estimating the relationships between the predictor variables and immigration, and (3) projecting the predictor variables and their corresponding estimated immigration effects into the future. Combining elements of the time series and structural approaches, a new approach for projecting immigrant flows is introduced.

Using Recent Trends to Forecast Future Trends

U.S. immigration policy, the political state of the world, and various characteristics of the United States and other countries' economies affect the flow of immigrants to the United States. All of those factors are difficult (perhaps impossible) to project. Lacking a crystal ball to forecast their future fate, a pragmatic alternative is to use recent trends in U.S. immigration to forecast future trends. Recent immigration conveys a great deal of information about future immigration because once individuals begin to migrate to the United States from a particular region of the world, U.S. networks and paths are established and the process tends to continue.1

Although once established, migration patterns tend to persist, changes in immigration policy as well as changing circumstances in both the United States and in immigrant source countries occur and can affect both the magnitude and composition of immigration. …

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