Gifts of the Immigrants, Woes of the Natives: Lessons from the Age of Mass Migration

In this paper, I show that political opposition to immigration can arise even when immigrants bring economic prosperity. I exploit exogenous variation in European immigration to US cities between 1910 and 1930 induced by World War I and the Immigration Acts of the 1920s, and instrument immigrants' location decision relying on pre-existing settlement patterns. I find that immigration triggered hostile political reactions, such as the election of more conservative legislators, higher support for anti-immigration legislation, and lower public goods provision. Exploring the causes of natives' backlash, I document that immigration increased natives' employment and occupational standing, and fostered industrial production and capital utilization. Even in occupations highly exposed to immigrants' competition, there were no employment or wage losses among natives, suggesting that political discontent was unlikely to have economic roots. Consistent with this interpretation, I provide evidence that natives' backlash was increasing in the cultural differences between immigrants and natives. These results indicate that diversity might be economically beneficial but politically hard to manage.