Migrating for Economic Freedom: Economic and Labor Freedom institutions and US State immigrant inflows

This paper examines how state-level institutions shape immigrants' location choices within a federal system. Social Scientists find that foreign-born immigrants migrate to areas with favorable economic conditions and labor markets, and that immigration is associated with positive economic outcomes. Strong economic and labor market institutions also correlate with positive economic outcomes. I show how state-level economic and labor market freedoms shape inflows of both unauthorized and legal foreign-born immigrants into US states. By constructing an annual panel dataset of immigrant stocks spanning 1990–2022 for most models and merging this data with the Economic Freedom of North America (EFNA) index, I estimate economic, labor market, and unionization effects on immigration inflows using an Error Correction Model (ECM) with two-way fixed effects, which allows for the disentanglement of short and long-run effects. Results show that labor market freedoms are positively associated with long-run unauthorized immigration inflows, and that unionization drives this relationship. Specifically, a 1 percentage point increase in state union density is associated with an estimated average 15.9% decrease in the long run equilibrium fraction of unauthorized immigrants (relative to natives) per state. Private manufacturing unionization levels appear to drive these results. Adding economic controls, sectoral economic activity, and state policy indicators related to immigrant mobility and enforcement do not overturn the central results. Overall, these findings highlight the importance of labor market institutions, particularly unionization, in shaping unauthorized immigration flows. JEL Classification : J15 , R23 , H73