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21 August 2012

Liberalising immigration would double the world’s income overnight

A new paper from NBER suggests that a 116% increase in wages could result.

By Alex Hern

The Washington Post’s Dylan Matthews reports on a new paper from the (US) National Bureau of Economic Research (£), which examines what would happen if all immigration restrictions were dropped.

Matthews summarises:

[University of Wisconsin’s John Keenan] builds a model that assumes that in the absence of restrictions, people will try to maximize income while still feeling some attachment to their native countries, and so some but not all workers will move to where their wages will be highest. He estimates that fully eliminating immigration restrictions worldwide would effectively double the world’s labor supply. This, unsurprisingly, leads to enormous economic growth, such that typical workers in developing countries would see annual wages more than double, from an average of $8,903 today to $19,272 with open borders. That is, the typical worker in the third world would end up making about double the individual poverty line in the United States today. Certain countries have even more astounding results; the typical Nigerian would see gains of $21,940.

The reasoning is simple; if people only move when they would increase their income, then liberalising migration can never make the world, as a whole, worse off.

Of course, the problem is that, as Keenan makes clear, the people who gain the most from those changes are the ones who have the least say in whether or not they actually occur:

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Liberal immigration policies are politically unpopular. To a large extent, this is because the beneficiaries of these policies are not allowed to vote. It is also true, however, that the enormous benefits associated with open borders have not received much attention in the economics literature. Economists are generally enthusiastic about free trade. But if free movement of goods is important, then surely free movement of people is even more important.

Time for those places which do find immigration politically acceptable to have the power to push for it, maybe?