Dani Rodrik Argues for More Migration

Dani Rodrik is probably the most prominent critic of globalization among academic economists. He thinks the global trade regime and global norms favoring financial liberalization have unduly constrained the policy space available to national governments. But while he’s for re-regulating trade and finance, he wants to liberalize flows of people. He writes in The Globalization Paradox:

The problems in international trade and finance arise from too much globalization, not properly managed. By contrast, one large segment of the world economy is not globalized nearly enough. Further economic openness in the world’s labor markets could potentially provide huge benefits, especially to the world’s poor. Even a minor liberalization of the advanced countries’ restrictions on the use of foreign workers would produce a large impact on global incomes. In fact, the gains would outstrip comfortably any other proposal currently on the table… Labor markets are the unexploited frontier of globalization.

It may seem surprising to suggest that labor markets are not sufficiently globalized. The news media are full of stories of foreign workers in rich lands, ranging from the inspiring to the terrifying: Indian software engineers in Silicon Valley, illegal Mexicans in New York sweatshops, poorly treated Filipina maids in the Persian Gulf countries, or disgruntled North Africans in Europe. Human smuggling and trafficking in sex workers represent the especially ugly side of the global trade in labor. But the facts are incontrovertible. The transaction costs associated with crossing national borders are much larger in this segment of the world economy than in any other. Moreover, these costs are created for the most part by explicit government barriers at the border, namely, visa restrictions. They can be lowered at the stroke of a pen.

Consider the numbers. Wages for similarly qualified workers in poor and rich countries can differ by an order of magnitude; a worker could increase his income several-fold just by crossing the border. Straightforward comparisons of wages across nations are fraught with problems because it is difficult to tease out the effects of visa restrictions from other factors such as differences in skills, education, experience, or aptitude. A recent study which makes adfjustments for these factors delivers some striking findings. The average Jamaican worker who moves to the United States would increase his earnings by at least twofold, a Bolivian or Indian by at least threefold, and a Nigerian by more than eightfold. To put these numbers ni context, we can compare them to the mere 50 percent gain that a Puerto Rican worker can expect to make when she moves to New York City, which she is of course free to do, unlke other foreign countrparts. Or we can compare them to differences across nations in the prices of goods or financial assets, which are again much smaller in magnitude (50 percent or less at most).

Labor markets are much more segmented internationally than any other market. This extreme segmentation, and the huge wage gaps it gives rise to, induces illegal migrants from low-income countries to take serious risks and endure extreme hardships in the hope of improving their incomes and the living standards of their families back home. The reason such large wage gaps persist is not difficult to fathom. The visa policies of rich countries allow limited numbers of workers from poor countries to move in legally and take up jobs in their economies. Moreover, these restrictions tend to favor, increasingly, the skilled and well-educated workers from abroad.

If the leaders of the advanced nations were serious about boosting incomes around the world and in doing so equitably, they would focus single-mindedly on reforming the rules that govern international labor mobility. Nothing else on their agenda– not Doha, not global financial regulation, not even expanding foreign aid– comes even close in terms of potential impact on enlarging the global pie. (The Globalization Paradox, Kindle Edition, around location 4300)

Rodrik quickly adds that “I am not talking about total liberalization”– so he is not, alas, an advocate of open borders like me. But he sees very clearly that migration is THE way that rich countries can promote development worldwide, that all else is little more than tokenism by comparison. People in rich countries bear much responsibility for world poverty, not because we buy stuff that’s made in foreign “sweatshops,” not because we pollute the environment, not because of past or present “imperialism,” but because we support regimes that tightly control migration. In a world of open borders, there would be far less people living on $2/day or less.

— Nathan Smith

Nathan Smith

Nathan Smith is an assistant professor of economics at Fresno Pacific University. He did his Ph.D. in economics from George Mason University and has also worked for the World Bank. Smith proposed Don’t Restrict Immigration, Tax It, one of the more comprehensive keyhole solution proposals to address concerns surrounding open borders.

See also:

Page about Nathan Smith on Open Borders
All blog posts by Nathan Smith

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