Immigration at Reason and elsewhere
Katherine Mangu-Ward has an excellent column about BoA issuing credit cards to illegal immigrants over at Reason.
Here's the Brown Peril by Peter Bagge
Here's (old) Julian Simon at Cato
Here are Ottaviano and Peri - abstract, paper, presentations.
The basic point of the Ottaviano and Peri paper is pretty simple. Immigrants ain't like us (well, they ain't like the native Americans). But that's a good thing. It means immigrants' skills are more likely to complement natives' skills which means less downward effect on wages for similar groups and a greater positive effect on wages for unlike groups.
The distribution of skill among natives looks like a normal distribution (or some kind of a bell curve). There's relatively few unskilled workers, relatively few very skilled workers and lots of folks in the middle. But for immigrants to US this the distribution is essentially flipped - n-shaped. US is importing lots of unskilled workers, a fair number of very skilled workers (doctors, engineers, etc.) and little in between. In other words US is importing precisely the kind of labor that is scarce in US, which implies much larger overall economic gains.
Ottaviano and Peri go further (much much further then the Borjas papers) and estimate the substitution/complementarity within each skill group. A perhaps somewhat surprising finding is that even within skill groups the immigrants tend to be more complementary/less substituting than you'd think. Even for unskilled workers, the substitution elasticities between natives and immigrants is fairly small, implying only a modest pressure on natives' unskilled wages (and for the most unskilled workers, immigrants actually push up wages a bit).
The presentation linked above makes this point in a pretty straight forward way (if you don't feel like reading the paper with all the technical details). While unskilled workers might be a little hurt by immigration, the magnitude of the immigration effect on their wages is very small compared to other factors.
The authors also account for changes in capital stock which results from changes in the number of people in the economy. If you're a neoclassical growth guy then you think that an increase in the number of workers raises the marginal product of capital. This in turn means that the return to capital is higher prompting more capital accumulation. As capital stock rises the marginal product of labor rises as well and the negative effect on wages is ameliorated. Note that in the standard neoclassical growth model (the Ramsey/Solow model) an increase in the number of workers has no effect on per capita income in steady state since capital/labor ratio remains constant (here there's a bit of a fudge on whether migration increases L or n). It's more complicated with different types of labor and different substitution/complementarity relationships among them, but the end result is that it's an empirical question. An the data are favorable to the immigrants having a large positive overall effect and only a small negative effect on unskilled workers.
In other words, we shouldn't be building fences, we should be paying their relocation costs.
(Or at least sell entrance visas to capture some rents now going to the coyotes and the like)
Here's the Brown Peril by Peter Bagge
Here's (old) Julian Simon at Cato
Here are Ottaviano and Peri - abstract, paper, presentations.
The basic point of the Ottaviano and Peri paper is pretty simple. Immigrants ain't like us (well, they ain't like the native Americans). But that's a good thing. It means immigrants' skills are more likely to complement natives' skills which means less downward effect on wages for similar groups and a greater positive effect on wages for unlike groups.
The distribution of skill among natives looks like a normal distribution (or some kind of a bell curve). There's relatively few unskilled workers, relatively few very skilled workers and lots of folks in the middle. But for immigrants to US this the distribution is essentially flipped - n-shaped. US is importing lots of unskilled workers, a fair number of very skilled workers (doctors, engineers, etc.) and little in between. In other words US is importing precisely the kind of labor that is scarce in US, which implies much larger overall economic gains.
Ottaviano and Peri go further (much much further then the Borjas papers) and estimate the substitution/complementarity within each skill group. A perhaps somewhat surprising finding is that even within skill groups the immigrants tend to be more complementary/less substituting than you'd think. Even for unskilled workers, the substitution elasticities between natives and immigrants is fairly small, implying only a modest pressure on natives' unskilled wages (and for the most unskilled workers, immigrants actually push up wages a bit).
The presentation linked above makes this point in a pretty straight forward way (if you don't feel like reading the paper with all the technical details). While unskilled workers might be a little hurt by immigration, the magnitude of the immigration effect on their wages is very small compared to other factors.
The authors also account for changes in capital stock which results from changes in the number of people in the economy. If you're a neoclassical growth guy then you think that an increase in the number of workers raises the marginal product of capital. This in turn means that the return to capital is higher prompting more capital accumulation. As capital stock rises the marginal product of labor rises as well and the negative effect on wages is ameliorated. Note that in the standard neoclassical growth model (the Ramsey/Solow model) an increase in the number of workers has no effect on per capita income in steady state since capital/labor ratio remains constant (here there's a bit of a fudge on whether migration increases L or n). It's more complicated with different types of labor and different substitution/complementarity relationships among them, but the end result is that it's an empirical question. An the data are favorable to the immigrants having a large positive overall effect and only a small negative effect on unskilled workers.
In other words, we shouldn't be building fences, we should be paying their relocation costs.
(Or at least sell entrance visas to capture some rents now going to the coyotes and the like)
posted by YouNotSneaky! at 3:23 PM
5 Comments:
If you're a neoclassical growth guy then you think that...
Yes, yes, yes!
I always tell opponents of free immigration the same thing... people are a resource. You wouldn't complain if we had more capital or more land, so why complain when we have more labor?
On the other hand, as M. Friedman said, you can't have both free immigration and a welfare state.
On the other hand, as M. Friedman said, you can't have both free immigration and a welfare state.
Maybe. I actually tried working on it till I realized Alesina already did it (I don't have a reference handy). But I think this sort of thing can be pretty sensitive to the actual set up, for example, assuming median voter theorem holds:
1. Are these voting immigrants or non-voting? If voting then the level of redistribution will depend on whether the median voter is an immigrant or a native. If the two groups don't care about each other then you'll get less redistribution then if they did, but you might get more then if the immigrants weren't there - if the immigrants benefit more from redistribution, or have a higher preferance for it.
2. Are these tax paying or not tax paying immigrants? Relatedly, what share of the redistribution goes to immigrants and what share to natives? If they're tax paying, non-voting immigrants, then the native median voter might choose more redistribution since part of it will be financed by a group which she doesn't care about.
3. Are these assimiliating immigrants or not assimilating immigrants? Once they assimilate are they perceived as "native" by the older natives or still differently? Native voters might anticipate this assimilation and in a dynamic model this will change how they choose the level of redistribution.
4. If immigration increases the overall "pie" and there's diminishing returns to wealth then a richer society might prefer more redistribution to less. So this might offset the anti-welfare effects of more immigrants.
5. If voters choose both the level of redistribution and the level of immigration (or how costly it is to immigrate) then you're talking multi dimensional policy space and the MVT no longer applies, barring some strong restrictions. There could be many (redistribution,immigration) policy combinations that could emerge out of the political process.
I'm reading the Acemoglu and Robinson book on Economic Origins of Democracy and I keep thinking that their basic model would be natural context for these kind of questions. So I don't know, maybe I'll work on this, once other stuff is done. The point being, there's more to it than the simple Friedman pronouncement.
Well, he _had_ reasons for saying that. :-)
Friedman is often dismissed for being a sound-bite guy but it's not him, it's the people who quote him. The fact that he didn't speak (to general audiences) about econometrics and G.E. doesn't mean he was ignorant of them. :-) The same goes for most technicalities.
The point is, I think, that it's easy to see how, under simple assumptions, that combo leads to disaster.
Oops. I now realize I misread your latest comment. Never mind my previous one. :-)
No problem. Here's the Alesina, Gleaser and Sacerdote paper that I was thinking of above - or at least one of the relevant ones:
http://www.economics.harvard.edu/hier/2001papers/HIER1933.pdf
Post a Comment
<< Home