Does Low Skilled Immigration Cause Human Capital Polarization?

While there is a vast literature considering the labor market effects of immigration, less has been done to investigate how immigration affects the educational choices of young natives. Using Italian provincial data and an instrumental variables strategy, we show that the recent increase in the immigration of low skilled labor has produced human capital polarization, i.e. an increase in the share of natives with less than high school and with college. This evidence is stronger for males than for females. We adapt the standard Card’s model of educational choice and point out under what conditions human capital polarization occurs. We estimate wage equations by gender and find that these conditions are satisfied for Italian males.