A large empirical literature in economics is concerned with identifying the effects of immigration on the economy. A particularly strong focus has been on the effect on wages and employment (see Borjas 1994, 1999b, and Friedberg and Hunt 1995 for overviews).

Many of the papers in this literature fail to find large effects, although there is controversy about this (see recent papers by Borjas 2004 and Card 2004). In any case, effects of labour market competition are frequently perceived to be one of the main driving forces determining public attitudes towards immigration. Those for whose skills immigrant labour is likely to be a substitute may oppose immigration whereas those for whose skills it is complementary may view immigration more sympatheticly.

Of course, immigration also has other economic aspects. Individuals may fear that immigrants burden public finances either through using public services intensively or by contributing to costly social problems such as unemployment or they may by contrast welcome the contributions made by immigrants to the public exchequer. Furthermore, immigrant inflows are frequently suggested as a solution to specific sorts of skill shortages.

In political debate this is often used as an argument in support of more liberal migration policies (see for instance the debate in European member states on allowing for free movement of labour after EU enlargement as of May 1st 2004). Individuals taking a wider view may in addition appreciate the efficiency gains to be expected from free international movement of labour. Economic enquiry can contribute to arguments on all of these issues by attempting to extend knowledge of the nature and extent of any such economic gains and losses.

Recently, a literature has evolved that addresses the formation of opinion and attitudes towards immigrants and immigration in a more direct way than papers that attempt to quantify the economic impact of immigration itself. These papers are based on empirical analysis of attitudinal responses towards immigration and immigrants (see, for example, recent papers by Scheve and Slaughter 2001, Gang, Rivera-Batiz and Yun 2002, Mayda 2002, Schmidt and Fertig 2002, O’Rourke and Sinnott 2003, Dustmann and Preston 2004 and Bauer, Lofstrom and Zimmermann 2001 among others).

Typically such papers relate responses about individual attitudes to further immigration to individual specific characteristics. Interpretation of the coefficient estimates in the economic part of this literature often relies on well established economic theory, most prominently the Hecksher-Ohlin model (see, for example, Scheve and Slaughter 2001), assigning particular interpretation to variables such as education and skills.

Other researchers emphasise the importance of non-economic determinants of attitudes to immigration (see, for example, Espenshade and Hempstead 1996). Dustmann and Preston (2004) develop a model which allows for three factors in determining anti-immigrant feelings: labour market considerations, welfare considerations, and racial attitudes. They find all three determinants to be important in affecting attitudes, but identify a dominant role for the race factor, in particular for the lower educated.

The plausibility of the conclusions reached in these papers about the nature and role of economic considerations is not helped by the need to rely on secondary analysis of responses to questionnaires which are rarely explicit about economic issues. Most of the papers mentioned above rely on attitudes to further immigration as a measure for individual perception of harmful or beneficial effects of immigration in the host economy.

The association of this response with skill or education of the respondent is then interpreted within a Heckscher Ohlin type framework, where differential responses across skill groups are compatible with differently perceived labour market competition from new immigrants.

In this paper, we add to this literature in several ways. Firstly, we broaden the economic argument, by allowing for consideration not only of factors relating to labour market competition, but also to factors relating to public burden, and efficiency considerations. Secondly, we discuss the way such consideration may affect welfare of residents of different skill background in a simple general equilibrium framework.

Thirdly, our empirical investigation is based on more specific survey responses than have been used previously. In particular, we not only study the association between economic opinion and demographic characteristics, but also, having conditioned on such effects, seek to structure the interrelation between overall opinions on whether immigration is good or bad for the economy and opinions on more specific economic effects. In our analysis we allow this overall response to be related to three more specific concerns: labour market competition, public burden, and efficiency considerations. We identify these three response sets from specific survey questions that are directly related to each of these factors.

We draw on new and informative data from the European Social Survey (ESS). This survey includes attitudinal information for some 22 European and associated countries, and has a specific module on migration and minority related issues. This module provides information on the overall attitudinal response of individuals to further immigration, but also direct responses to a battery of questions concerning the effect on the economy.

Our interpretation of the data follows structure imposed by economic theory. We first present a simplified theoretical model which describes the manner and the circumstances under which immigration may benefit or harm different groups in the population. This model is in its nature similar to standard equilibrium models in the literature, but, besides allowing analysis of labour market effects of immigration, allows in addition analysis of welfare effects of immigration through taxation and welfare payments.

According to Borjas (1999) these are the two main concerns people have when forming attitudes about migration. We also discuss generalisations to capture other possible dimensions of economic concern. It is not so important in the current context whether this model accurately reflects the workings of the economy as whether it captures the way individuals might sensibly think about the gains or losses they will incur as a consequence of immigration.

We then discuss the empirical implications of this model, and the way these may be reflected in the data we have available. Our empirical analysis has a descriptive part where we relate responses to the overall evaluation of immigration, as well as to demographic information of respondents. We then proceed to a more structural analysis, where we impose a factor structure on the responses concerning particular issues, and where seek to distinguish between labour market concerns, public burden, and efficiency considerations. Each of these factors is related to a set of responses regarding particular implications of immigration, and we determine the way these factors, in turn, relate to the overall evaluation of whether immigration is good or bad for the economy.

The structure of the paper is as follows. In the next section, we present the background theoretical model(section 2). We then discuss briefly implications for empirical analysis (section 3). We describe the data set we use for our analysis in section 4), and provide descriptive information (section 5). We then explain our estimation method (section 6) for the factor model and discuss results in section 7. Finally, section 8 concludes.

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