Poor countries and IQ externalities

BK helps make the case for open borders in poor countries:

Interesting point by Jones: if high-IQ people produce positive externalities well above their market wages in poor countries, then citizenists in poor countries should be willing to offer larges subsidies for high-IQ immigration:

“If IQ has the sizeable positive externalities posited here, then there may be room for a Coasian bargain between countries with low current LV IQ and higher IQ individuals in other countries.  One purely suggestive possibility: If the ratio of private to public benefits of higher IQ are even half as large as the 6:1 ratio suggested by Jones and Schneider (2010), a low LV IQ country could rationally offer a 100% subsidy for any wages a high IQ immigrant earns in excess of that nation’s median wage.  In practical terms, a 10 year income tax holiday for permanent immigrants with engineering degrees could accomplish the same goal of encouraging high IQ immigration. “

Favoring engineers seems too much like “picking winners,” and I don’t think the research is really there to support anything so specific (don’t forget that the most obvious externality of engineers, that they invent things, is global in nature) but a simpler policy recommendation to derive from this argument would probably imply that poor countries should simply open their borders to immigrants from rich countries. Rich countries generally have higher average IQ, certainly higher levels of education, and probably other traits– work ethic, perhaps, or trustworthiness– that make their home countries productive. I don’t have great data on this– go, IMPALA!— but I’m pretty sure it wouldn’t be very easy for an immigrant from the US or Western Europe, with or without an engineering degree, to migrate to India or Malawi or China or Russia and just get a job, never mind a tax holiday. Why don’t poor countries offer free immigration to holders of US, EU, Japanese or South Korean passports? I suspect that it’s some combination of (a) elite protectionism– a corrupt business elite makes the rules and doesn’t want the competition from capable Westerners or East Asians– and (b) global norms– rich countries have migration restrictions and they’re either blindly imitating or else retaliating out of pride against countries that exclude them. But it would be interesting to investigate further.

Related thoughts: (1) Would it be easy for rich countries to negotiate away restrictions against their nationals working in poor countries, in return for a bit more openness to migrants from those countries, or perhaps other concessions, e.g., aid or trade? (2) Would a high-profile open-borders movement in the US and/or Western Europe, even while unsuccessful domestically, change the climate of ideas and persuade poor countries to open their borders to migration, to gain the “moral high ground?”

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

7 thoughts on “Poor countries and IQ externalities”

  1. Historically, some poor country dictatorships have even gone so far as to actively discriminate (even if nominally using formally neutral criteria) against immigration from the groups making up most of the citizenry in favor of rich-country immigrants, even when the dictators were of the majority. For example, the mixed-race dictator Trujilo in the Dominican Republic actively recruited European gentile and Jewish immigrants while blocking migration from neighboring Haiti in a racist policy of ‘blanquismo.’ It was pretty unpleasant and reprehensible in terms of formal equality, but the Dominican Republic now has over 8 times the GDP per capita (PPP) of its neighbor Haiti, which drove out whites.

    http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

    Some African and Oceanian dictatorships have had similar policies with Indian and Chinese immigrants. A common thread in these policies is that because the immigrants are from an unpopular market-dominant minority, they can generate a lot of wealth for the dictatorship to appropriate, but can’t win the support of the populace of the army.

    What we haven’t seen is democratic support of (less blatantly racist versions of) such policies from the electorate, I think. Since anti-foreign bias increases as IQ falls, according to Bryan Caplan’s research (among others) along with other voter problems, it looks like a tough sell.

    http://econfaculty.gmu.edu/bcaplan/pdfs/intelligencethinklike.pdf

    Also, while such policies clearly make sense from a short-run poor-country citizenist point of view, the global effects are less positive. And if rich countries make counteroffers reflecting the value of externalities, this would involve imposing big taxes on their low-IQ citizens and immobile assets in order to pay the subsidies. Basically, to the extent that high-IQ people are giving away their positive externalities for free now, a world system in which people are compensated for their externalities could greatly increase inequality (while increasing global GDP).

  2. Other barriers to open borders in poor countries include higher rates of ethnic-based civil war and patronage, resulting in a more zero-sum dynamic, and the greater role of natural resources in the economy: in countries where most wealth stems from oil or natural resources adding more people means smaller shares for the natives unless keyhole solutions are used.

    Still, the case for open borders in poor countries is stronger than for rich countries. And keyhole solutions have been used in the Middle East oil states, where positions in the military and access to oil revenue are restricted to natives. The biggest barriers to keyhole solutions are social democratic norms, not technical expertise, so they are more accessible to many poor countries than places like the U.S. or EU.

  3. One of the problems with trying to use source country-based open borders for poor countries is that there isn’t any reason to believe that the people who will make use of those open borders will be the high-IQ (or otherwise “desirable”) people that the policy would like to attract. If India completely opened its borders to the US, would the subset of the US population that takes up the offer be more “desirable” in terms of IQ/skill/human capital from India’s perspective? If not, then this particular argument wouldn’t work, though, of course, there are moral and practical reasons to have considerably more open borders.

    What types of people from the rich world might want to migrate to a relatively poor and corrupt country such as India? I can think of a few categories:

    (1) Persons of Indian Origin (PIOs): These are people who are not Indian citizens but whose parents, grandparents, or other relatives are from India (see http://en.wikipedia.org/wiki/Non-resident_Indian_and_Person_of_Indian_Origin for more on the terminology). India basically has open borders for PIOs — they can come and acquire long-term residency in India with ease (see http://www.globalvisas.com/india_visas/persons_of_indian_origin__pio_.html for more). This list of people would probably include people high in skills/human capital/IQ relative to the Indian population at large, and perhaps even relative to the developed world population.

    (2) Do-gooders, philanthropists, and missionaries of various stripes: They are attracted by the opportunity to alleviate poverty and help Indians, and also by the evangelical scope offered. These were more common in the era of colonial rule by the British, and are relatively infrequent now. Some of them visit India temporarily, then fall in love with it and settle permanently. Examples include http://en.wikipedia.org/wiki/Annie_Besant and http://en.wikipedia.org/wiki/Mother_Teresa among others. I don’t know how easy it is for such people to migrate to India temporarily or permanently.

    (3) People who are middle-skilled by developed-world standards, but would be high-skilled by Indian standards, and prefer a lifestyle of hustle and bustle with access to cheap labor (nannies, housemaids, drivers) to a relatively quiet lifestyle with better gadgets but more expensive labor. I don’t really know how big this category is, and whether this would fit in with your ideas.

    1. (4) There are also the “low-hanging fruit” of limited scalability sectors with very high returns to skill. For example, even countries with otherwise abysmal productivity will often have enclaves of skilled foreign workers to apply foreign technology to oil extraction, or employees of multinational corporations trying to transfer their internal institutions to a local branch or subsidiary.

      A lot of business migration takes this form, and it often has special visas to grease the wheels. In the U.S. this is the L-1 visa:

      http://en.wikipedia.org/wiki/L-1_visa

      “(USCIS) approved 74,719 L-1 visas, out of 91,086 application (a refusal rate of 18%).”

      “Spouses of L-1 visa holders are allowed to work without restriction in the US (using an L-2 visa), and the L-1 visa may legally be used as a stepping stone to a green card under the doctrine of dual intent.”

      Compare to the H1-B:

      http://en.wikipedia.org/wiki/H-1B_visa

      “Thus the number of H-1B visas issued each year is significantly more than the 65,000 cap, with 117,409 having been issued in 2010.”

  4. Also, I’m not really sure how well high IQ immigration to a poor country with bad institutions would work. One reason I think low IQ immigration to rich countries is not all that harmful is that the institutions of the rich countries are stable due to status quo bias and founder effects. But the institutions of poor countries are also stable for similar reasons, albeit probably less so (given that I think status quo bias is stronger for systems that appear to work than for systems that are clearly not working, as I discussed here). But it would still be a big problem. My guess would be that high skilled people (whether high IQ or otherwise) would do best being next to each other in a productive hub that exploits their talents (such as Silicon Valley for programmers and web/computer innovators), and most of the positive effects of such a hub would be global, with the premium captured locally being quite minimal. That said, if a poor country could facilitate the creation of a productive hub where skilled people from across the world could come across to pool their talents, then the country and its local citizenry would be able to capture some of the benefits. But setting up such a hub is quite tricky and cannot simply be done by declaring an intention to do so. Middle-income countries like Chile might have a better shot at facilitating the creation of such hubs.

    A more general argument that one could make is that poor countries could benefit from the migration of people who are high-IQ and/or high-skilled by the poor country standards, but not ultra-high-IQ or ultra-high-skilled — they might be talented shopkeepers, business managers, restaurateurs, etc.

    1. Chinese immigration to Africa is worth studying more closely:

      http://en.wikipedia.org/wiki/Overseas_Chinese

      “As of August 2007, there were an estimated 750,000 Chinese nationals working or living for extended periods in different African countries.[22] An estimated 200,000 ethnic Chinese live in South Africa.[23] In a 2007 New York Times article, Chad Chamber of Commerce Director estimated an “influx of at least 40,000 Chinese in coming years” to Chad. As of 2006 as many as 40,000 Chinese lived in Namibia,[24] an estimated 80,000 Chinese in Zambia[25] and 50,000 Chinese in Nigeria.[26] As many as 100,000 Chinese live and work across Angola.[27] As of 2009 35,000 Chinese migrant workers lived in Algeria.[28]”

      Much of it is tied to Chinese FDI in Africa, especially oil and minerals, with the Chinese investors using Chinese workers. But there are also immigrants acting as local business elites/market-dominant minorities. They seem to be doing worse than they would in the United States, but well enough to attract some additional immigrants from the PRC.

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