What policy to push for to make the world massively better

In light of Patrick’s recent enumeration of American barriers to immigration, here is a new and noteworthy economics paper. In it, they discuss the literature on trade barriers in general, which estimate that the benefits from removing all other non-labor trade barriers in the world–tariffs and capital controls and everything else–would bring net benefits on the order of a couple percentage points of GDP. Granted, that could be a trillion dollars or more, which would be excellent–but not completely mindblowing. Removing barriers to emigration, however, they estimate could bring benefits on the order of “50%-150% of world GDP”. An implicit doubling of world GDP? While consider my mind blown.

Here’s another eye-opening statistic:

The Gallup World Poll finds that more than 40 percent of adults in the poorest quartile of countries “would like to move permanently to another country” if they had the opportunity, including 60 percent or more of adults in Guyana and Sierra Leone.”

And why would they want to do something like that? Consider that if you live in Mexico and have a roughly average income, you can expect to make around $15,000 a year (at PPP: it’s actually $9,000, but many things tend to be much cheaper in Mexico than here; PPP attempts to adjust for that). Consider also that if you were to emigrate legally to America and settle in Los Angeles, you would be able to find a large population of Mexicans and other Spanish-speakers, making the adjust easier. If you did that, and took a job washing dishes, you would be in line for a pay increase of 20% or more–and that’s merely as a dishwasher, let alone any of the millions of other jobs in the LA area.

Of course, economic choices aren’t the only ones that weigh in: Sierra Leone is likely so high due to the decade-long Civil War, a burgeoning drug trade, and other political factors (although at less than a dollar a day on average, economic factors are likely still vital). Many of these forces push in the opposite direction: it can be hard to emigrate to a foreign country with few other expatriates, or one where few others speak your language. And certainly going from being an esteemed member of your country’s civil society to being a dishwasher would bear an additional toll.

There are doubtless countless reasons why people wouldn’t want to emigrate, even if they could. But I’m arguing for broadened emigration not forced. The inability to choose where one resides is one of the highest barriers to improved welfare. If I was to be Rawlsianly dropped into the world, this is one gamble I would have a lot of trouble taking, and if there is one policy reform that’s benefits should be extolled more frequently and more vociferously, well: this one has my vote.

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5 thoughts on “What policy to push for to make the world massively better

  1. I, too, greatly favor eased immigration controls. Ideally, in an ideal world, no such restrictions would be necessary. Given this sentiment, I am aware that many people, even on the Left, still argue on behalf of the nation-state. Michael Walzer of Dissent magazine (see Winter 2010) comes to mind. They have historically been the guarantee of many good things as well as bad. But, in the end, that is also why Engels and Marx proclaimed “Workers of the world unite. You have nothing left to lose but your chains.” That Soviet experiment wasn’t really what they had in mind I think.

    I do wonder if that study you reference makes anything besides increased GDP. Increased GDP doesn’t say everything about who gets that wealth. I am a bit wary, without parallel political changes, that such immigration reforms would result in a race to the bottom rather than a raising of all boats. However, such a change would definitely result in huge social, cultural, and political rifts.

  2. It does tend to focus on the more quantifiable aspects, but it does take into account distributional issues as well as things like access to public services and other externalities.

    It addresses the potential for two key groups to be worse off than they currently are, income-wise: those that stay behind in poor countries, and those that are faced with a flood of new migrants (eg poor Americans). On the subject of people being worse off at the destination:

    First, the literature contains no documented case of large declines in GDP or massive declines in public-service provision at the destination caused by immigration. Second, [there were] century-old … concerns that any further emigration might degrade the American economy and society. Since then the American population has quadrupled–with much of the rise coming from increesingly diverse immigration to already settled areas–and the United States remains the world’s leading economy, with much greater availability of publicly-funded amenities than a century ago. Third, there are also many plausible positive externalities from increased immigration. … Fourth, all serious economic studies of the aggregate fiscal effects of immigration have found them to be very small overall….”

    And with respect to wages, most estimates show that there is at most a few percentage points of decrease in low-income Americans in response to a 1% increase in immigration (although the price of goods also goes down, helping to offset the burden) while there was a negligible impact on low-wage workers in the UK after large and sudden increases in immigration from eastern Europe.

    On the flip side, the wages in Mexico are roughly 8% higher because of mass emigration from Mexico to the US: those left behind are able to command higher wages than previously.

    So on the whole, there are a whole lot of winners and few losers–and some of the biggest winners are amongst the world’s poorest people. While you’re right that increased GDP says nothing about who gets it, it’s hard to imagine it resulting in an arrangement that’s more unequal than than the current.

    As to social/cultural things, I do think you’re correct. One point they mention in the article is that there is a possibility that it’s worth it to the people of a country to preserve homogeneity at the cost of increased welfare–but they point out that the preference for homogeneity is endogenous to the model. That is, if they were forced to open up, and the result was more multicultural, they might end up preferring that to the earlier homogeneity (but only after experiencing the mix). I think there’s something to that, particularly over time: I am personally much more excited about increased cultural diversity (my favorite new rapper is Chilean born of French parents, my favorite restaurant is Lebanese) than my dad (favorite music is probably Brad Paisley, favorite restaurant is probably Jay’s American Bistro), but he is much moreso than his parents were.

  3. Hmmm. I guess maybe I’m not clear what they mean when you summarize that “Removing barriers to emigration, however, they estimate could bring benefits on the order of “50%-150% of world GDP”.” I’m somehow picturing that scenario as a removal of national boundaries (total free flow of labor). People get to go where they want. That seems not only unfeasible (well, most of this, right?), but politically unstable. Thus, the theoretical question for me is, if national boundaries are taken down, where does protection come from? Where’s the social contract?

    I think a lot of what we’re discussing rests on too many political factors. Is the welfare regulating state further dismantled than it is currently? Increased? For instance, I wonder what they mean when they write the US has a “much greater availability of publicly-funded amenities than a century ago.” In fact, since Nixon, the New Deal state has been pulled apart piece by piece.

    In the end, I’m still uneasy about the world’s poorest being the biggest winners. What here is ensuring they win? Is it the minimum wage laws and labor regulation and history labor activism in the US? Only if that remains in place. And that is secured by the nation-state.

    Does any of that make sense? I get the feeling we’re talking past each other rather than on the same issues.

    I also agree with the general sentiment that more access to many culture produces tolerance (humanizing the other and all that). But, at the same time, there are a lot of people in the US who just do not like other people. The moderate to far Right has youthful members I think though I don’t know any figures.

  4. I do see your point re:politics, and it’s definitely a fair one–and I’m not advocating an immediate dropping of all barriers to labor with no heed to political consequences (nor are the authors–they’re just surveying the literature). The point of the piece is that our current arrangement leaves enormous gains in welfare on the table, and it attempts to quantify those potential gains–in particular relative to the gains from removing restrictions on the flow of goods (eg tariffs) and capital.

    As specific responses: 100 years ago there was no New Deal (70 years ago yes, but..). The trend in between hasn’t been uniformly progressive (although the recent health care reform was), but that occurred largely in an era of more restricted immigration–ie the New Deal programs weren’t dismantled in the face of mass immigration, they were dismantled for other reasons. .

    Second, I don’t think much needs to rely on things like minimum wage laws. The US is not rich because of minimum wage laws, and it didn’t have minimum wage laws (or at least not broadly applicable ones) until after it was the world’s largest economy. India, on the other hand, is still so much poorer that there were (as of 2005, acto World Bank) 456 million people living on less than $1.25 a day (PPP). If they were able to emigrate to America and get an 8-hour a day job making $1.25 an hour they would be five times richer. Even if they were paid at less than our minimum wage laws, it’s hard for me to imagine how they would end up any poorer than they started out. And given the strictly voluntary nature of the arrangement, it’s even harder for me. Particularly when one takes into account the large numbers of people who already come to the US illegally.

    Which isn’t to say that it would be good, or easy, or that people who are here illegally have it so great–clearly they don’t, and it would be good if we had better protections for laborers in that situation, and one would hope we would be able to extend such protections to potential future immigrants too. But even if we didn’t, even if we didn’t grant them minimum wages or overtime pay or etc–I think there’s a good chance that many many people would still take that bargain. Because they do now–there are many illegal immigrants here making less than minimum wage (although there are many more making more than minimum). Because that’s how much there is to offer here and in other rich countries, economically speaking.

    But again, you’re right: the nation-state based political setup that we have makes completely free and open borders a fantasy. The main point that the article was trying to get across is that well the many countries of the world have knocked down a very large portion of trade barriers–I can buy Kenyan coffee or Chinese t-shirts and invest in Indian tech companies or Peruvian jewelry makers–we still have huge restrictions on the world’s labor markets, and those restrictions prevent a very great number of mutually beneficial transactions from taking place.

    Then the question becomes, what can we do, given the national framework(s) that we have in place. My hope is actually for trade blocs a la the EU to continue to remove regional restrictions of labor until most of the world belongs to at least one of these, and that at that point we’ll realize that we might as well just merge the trading blocs. If only we can manage to do that without everyone joining a common currency =)

  5. Two other things: my title probably wasn’t the greatest, given that I was actually not pushing for any particular policy, just generally more open borders. And second, with the idea of “gains going to the poorest”–my basic point is just that they are already the poorest. It would take a lot of effort to screw them any further. By simply being in a country like the US, with a vast store of both human and physical capital, they would be at once more productive and better equipped to capture the gains of that productivity. Perhaps I am more confident of that than I should be, but there are a lot of fairly basic things that the US and other western countries do really well. I just am skeptical that none of the benefit to putting more people here would redound to those people.

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