BUSINESS GROWTH AND GDP OF ARIZONA, WITH AND WITHOUT A CONTROVERSIAL IMMIGRATION LAW Effects of Arizona's SB 1070 on Business Growth and GDP

Abstract

Arizona’s “Support Our Law Enforcement and Safe Neighborhoods Act”, which was enacted in 2010 and is popularly known as SB 1070, has been contentious since its enactment. The most salient feature of this piece of legislation, which focuses on immigration‐related issues, is that it authorizes law enforcement authorities to ask for identification from people who look like they could be illegal immigrants. Although this law has sparked numerous protests, demonstrations, and criticisms, economic evaluations of its effects are virtually non-­existent. The crime prevention implied in the title of the legislation is not clearly visible in the data, and its costs to individuals and society have not been studied or even considered. This study examines the effects of SB 1070 on business entry rate and real GDP per capita in the state of Arizona using differences-­in-­differences method as well as a new econometric technique pioneered by Alberto Abadie. This technique, called “synthetic control analysis,” expands on standard differences-­in-­differences methods by creating a synthetic comparison group based on a combination of other states that best matches the “treated” state (in this case, Arizona) in terms of key variables of interest, including pre-‐policy business growth and GDP. While the results are inconclusive from both methods for business growth rate, both differences-­in-­differences and synthetic control analysis suggest a drop of about $2000 in GDP per capita of Arizona due to the introduction of SB 1070.