Trillion-dollar bills : gains from a borderless world. Prof. Goldstein Economic Demography Econ/Demog C175 Week 11, Lecture A UC Berkeley Spring 2018

Transcription

1 Trillion-dollar bills : gains from a borderless world Prof. Goldstein Economic Demography Econ/Demog C175 Week 11, Lecture A UC Berkeley Spring

2 Agenda Finish up discussion of whether immigration reduces wages A brief in-class survey and some stylized facts A world without borders? 2

3 The effect of immigration (revisited) With no demand effect With demand effect S L D' L S L D L S' L D L S' L w w w' w' immigrant labor number of workers immigrant labor number of workers Who are winners and losers if both SL and DL shift? 3

4 Advantages of the simple model Explains why (historically) workers tend to oppose more immigration and capitalists tend to favor more immigration Net gain (like comparative advantage) explains why economists tend to favor open borders Magnitude of redistribution explains political conflict 4

5 Problems with the simple model We don't actually see much or any decline in wages Could be that studies are wrong... there is some hard-to-see non-local effect Or it could be that simple model is wrong... immigrants increase demand immigrants improve technology immigrant and native workers are complements 5

6 My conclusion Simple model probably has too much influence ("econ101-ism") Effects of migration on native workers appear to be very small Perhaps anti-immigration sentiment largely driven by psychology and cultural issues, not economics Next week effects of migration on immigrants themselves! 6

7 Our quick survey 7

8 Immigration: an non-iclicker survey Take advantage of a big class Participation optional 8

9 Q1: Your own immigration history? A. Born in US B. Born outside US, moved here as small child C. Born outside US, moved while in school D. Born outside US, moved after high school E. Here only to study 9

10 Q2. Region of the world? (Only for those born outside US) A. East Asia B. Central and South America C. Africa D. Europe E. "West Asia" (Bangladesh to Turkey?) 10

11 Q3. Region of the world? (Only for those born in US, with parents born outside US) A. East Asia B. Central and South America C. Africa D. Europe E. "West Asia" (Bangladesh to Turkey?) 11

12 Q4. Region of the world? (Only for those with parents born in US, with grand-parents born outside US) A. East Asia B. Central and South America C. Africa D. Europe E. "West Asia" (Bangladesh to Turkey?) 12

13 Q5. Reasons for move? A. Better economic opportunity? B. Refugees? C. Something else? 13

14 Q6. Result of immigration? A. Much better than if stayed in origin country B. A bit better off C. A wash: some ways better off, others worse D. Worse off E. Much worse off 14

15 Stylized facts? Origins have shifted (from Europe to Americas and Asia) Pause in immigration from 1920s to 1960s Selection within sending country used to be "negative" (c. 1900), now tends to be "positive" (c. 2000) Recent change in origins since 2007 (fewer from Mexico, more from East and West Asia) We tend to observe "winners" (those who are worse off return) 15

16 Trends in Mexican- US migration 16

17 Trillion-dollar bills on the sidewalk? Compared to gains from mobility of goods (free-trade), mobility of capital... (a few percent of world GDP) Clemens argues that opening borders to migrants has huge potential gains (increases world GDP by %?!?!?) 17

18 The back-of-the-envelope N y poor 6 billion $5,000 rich 1 billion $30,000 migrants? 3 billion? $15,000? Guess 1: 3 billion x $10k = $30 trillion = 50% of world output Guess 2: 3 billion x $7.5 k = $23 trillion = 38% 18

19 Key assumption Wages and productivity depends not simply on own characteristics but also context: capital economic infrastructure rule of law Higher earnings in rich country reflect higher productivity Those who migrate will be more productive after they move 19

20 Who or where? Migrants earn more than those who stay at home Selection vs causal effect of place? Attempts to measure (lottery winners, etc) Clemens concludes lots of place effects 20

21 What happens when migrants leave a poor country? wages in poor country D = demand curve for labor in poor country w 0 O Labor supply in poor country L 21

22 Remembering Malthus wages in poor country D = demand curve for labor in poor country w' w 0 O Labor supply in poor country L' L 22

23 What happens if we have a 2- country world? What happens to population of receiving ("rich") country? What happens to wages? (What is gain/loss to different kinds of people: workers, owners, and immigrants themselves? A diagram helps) 23

24 Now, try a 2-country world wages in poor country w 0 O L O* w 0 * wages in rich country We read blue backwards Big inequality What will happen when emigrants from poor country arrive in rich country? 24

25 Opening borders (slightly) wages in poor country w 0 ' w 0 w 0 * w 0 *' wages in rich country Wages fall in rich country Wages rise in poor country But there's more O L O* 25

26 Q1: Is whole "world" better off? What is "global welfare gain"? wages in poor country w 0 ' w 0 c b a e d w 0 * w 0 *' wages in rich country Let's draw total product before and after migration. O L O* 26

27 Who gets/loses what? Q2. Rich capitalists Q3. Poor capitalists Q4. Migrants wages in poor country w 0 ' w 0 c b a e d w 0 * w 0 *' wages in rich country. Let's split the class up O L O* 27

28 wages in poor country w 0 ' w 0 Small losers, small winners, and c big winners O L O* b a e d w 0 * w 0 *' wages in rich country If we are far from equilibrium and D(L) fairly flat big gains to migrants small effects on everyone else Closer to equilibrium: a gets smaller Steeper D(L): bigger net gains (e) and net losses (b) for owners bigger redistribution (d) and (c) 28

29 Clemens version Quantity of labor Afo<e.The migrants gain welfare corresponding to area a + b. In the low-income country, labor gains area c\ 29

30 Politics, writing before Trump? A substantial expansion of emigration may thus seem politically impractical, and within a time frame of a few years, this objection holds some force. But the global efficiency gains from even small relaxations of existing barriers to emigration are large relative to the gains from further relaxation of barriers to trade and capital flows (as shown earlier in Table 2). Furthermore, economists should be open to the possibility that dramatic changes in what is practical can happen over several decades. After all, changes in geographic labor mobility that were unthinkable only a few decades ago have come to pass. Through the 1980s, a Polish national attempting to emigrate to West Germany could be shot by soldiers sealing the Inner German border from the east. Today, Polish jobseekers may move freely throughout Germany. The world has summarily discarded vast systems of restrictions on the labor mobility of medieval serfs, slaves, women, South African blacks, indigenous Australians, and a long list of others. 30

31 What has changed? 15 years of war in the Middle East à big refugee crisis in Middle East and Europe? Great Recession has left people much less interested in "others"? Increased inequality in receiving countries? A blip or a turning point? 31