Tag Archives: economic determinism

Migration: how many, what kind, and why it matters

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This post is an introduction to a planned series of posts (some by me, some perhaps by others) that explore questions related to how many people might move under various changes that lead towards open borders (locally or globally). The goal of the current post is to explain why I consider the question extremely important. A subsequent post will take a somewhat opposite stand: namely, try to sketch a case for open borders that is independent of how many people might move. Later posts will look at specific policy changes, some of them realistic and others less so, and estimates of what might happen under these. Another area I plan to explore is the question of what the most critical bottlenecks are to large-scale migration (the most obvious candidates are housing and infrastructure) and what limits they set on migration rates.

A while back, I wrote a blog post critical of what I called “economic determinism”: the idea that migration flows are determined completely by economic conditions and that legal barriers to migration have practically zero effect on the magnitudes of migration flows. There are factors other than economic conditions and legal barriers to consider as well, of course: factors such as cultural connections between the sending and receiving country. Alvaro Vargas Llosa’s recent book Global Crossings: Immigration, Civilization, and America drove this point home for me. So, I guess the position I am broadly critical of could be expanded beyond economic determinism to what I might call “restriction irrelevantism”: the idea that restrictions imposed by nation-state governments on migration are largely irrelevant in terms of their effect on the magnitude and nature of migration flows.

Vargas Llosa is definitely not an economic determinist, but whether or not he’s a restriction irrelevantist remains to be seen. This article seemed to suggest that he might be, but op-eds tend to be oversimplifications, and his book, which I haven’t completed reading, may offer a more nuanced picture. I was nonetheless somewhat disappointed by the fact that Chapter 3 of the book, titled “Why They Move” and otherwise excellent at considering the motivators for migration, gave short shrift to the idea that different degrees of restrictionism in different target countries might significantly affect people’s decision of whether or where to migrate.

In any case, this blog post is not about the somewhat extreme position of restriction irrelevantism, which may or may not have real proponents. The majority of proponents and opponents of open borders do not subscribe to restriction irrelevantism. Rather, I think there’d be general agreement that millions more would move, temporarily or permanently, under open borders. But “millions” is a vague term. It could range from an extra five million people over the next two decades to an extra 100 million migrants (many of them temporary) within 2-3 years of global open borders (the main data for how many would move under open borders in terms of the stated preferences of potential migrants are the polling data on migration, which suggest that over a billion people want to go to other countries temporarily or permanently, and about 500-700 million people think they would make long-term moves if they were allowed to). One could come up with a fairly diverse (albeit less so) range of estimates for the number of people who might move under a more targeted open borders regime. For instance, if the United States announced open borders for Haiti (population about 10 million), one might envision a scenario of anything between 2 million people moving to the United States over the next year to a roughly equal number moving to the United States over the next two decades.

The closer the proposed change is to the status quo, the less likely the range of disagreement, but since we are talking here about relatively radical ideas such as open borders, there could be considerable divergence of opinion.

Closely related to the question of how many is the question of who. Many arguments offered by open borders advocates rely on the crucial idea that migrants self-select, i.e., it is not all that easy to migrate to a new land, and therefore migrants are not representative of the populations they hail from, but rather, are selected for positive qualities. As BK has pointed out in the comments (see for instance here and here) you can’t have your cake and eat it too for selectivity: if your estimate says that 25% of the population from region A will move under open borders, you can’t assume that the average migrant who moves will be selected to be in the top 1% of people from region A.

While the precise economics behind double world GDP estimates tends to be complicated, an important point is that all the estimates of huge economic gains also predict that this happens through large numbers of people moving. If, in fact, large numbers of people do not move, then at any rate these specific estimates are not applicable (there may be other mechanisms by which world GDP might increase considerably, such as innovation, but at any rate the specific estimation exercises of the papers would be flawed if very few people moved). For instance, in his blog post about John Kennan’s paper on Open Borders, Nathan Smith writes:

In predicting the volume of migration, Kennan does not assume that humans are strict homini economici who will go wherever they can earn the most. He writes:

One might initially expect that in a world with open borders, everyone would move to the most productive location. But this ignores the strong attachment to home locations that is evident in the data.

He takes this into account by making the migration decision probabilistic, such that the proportion of people who stay in a country is the same as the proportion of the rich-country wage that is paid in that country. For example, if there are open borders between the US and Puerto Rico, and Puerto Rican wages are 2/3 of those in the US, then 2/3 of Puerto Rican adults would stay in Puerto Rico. This roughly fits the data in that particular case, but there is no theoretical motivation for that particular functional form. Relative to a homo economicus model in which everyone who could earn more elsewhere migrated, this assumption causes Kennan to understate the economic benefits of open borders. On the other hand, it also makes Kennan’s version of open borders less scary than it would be if all who stood to gain economically from migration migrated.

This still posits a large number of people who’d move under open borders. Nathan writes later (emphasis mine):

Now, two big things we would like to know about open borders are (a) how many people would move, and (b) how much would world GDP actually increase. If I’m not mistaken, Kennan could easily derive estimates of these things from his model. But he doesn’t. He doesn’t tell us how world GDP would rise under open borders, in the short or the long run. He doesn’t tell us how many people would move, or where they would come from. I think Kennan’s model implies a short-run increase in world GDP of about 65%, and I’m pretty sure in the long run world GDP would double. Since the increase in the effective labor supply comes from growth in the populations of rich countries where labor productivity is high, I think Kennan’s model implies that rich countries’ populations would more than double due to immigration under open borders.

Another related concern is swamping. One of the main concerns of people ranging from hardcore restrictionists to moderate pro-immigrationers and even some who identify as being pro-open borders is that true open borders would lead to very large numbers of people moving over short time periods in a manner that would strain housing, electricity, water supplies, and other infrastructure in the countries receiving the immigrants. The typical response is to point out that (i) borders can be opened somewhat gradually to minimize the possibility of an immediate flood of people (see here for instance), and (ii) in any case, migration flows will tend to be self-regulating and people are likely to plan ahead at least somewhat before making a big move. Evaluating the legitimacy of swamping as a concern is part of the reason why it’s important to get a handle on how many might move under migration regimes that move the needle considerably towards open borders.

Finally, in addition to the direct relevance of understanding migration counts and selectivity, making correct predictions, or at any rate, refraining from making laughably wrong predictions, can help build one’s credibility as an advocate or analyst of migration regimes in the eyes of others approaching the matter from the outside view.

Why Are There So Few Unlawful Immigrants?

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This post was originally published on the Cato-at-Liberty blog here and is republished with the permission of the author.

Open Borders Note: See also Vipul’s post and our posts tagged economic determinism.

Labor markets are heavily distorted by immigration restrictions, producing wide and persistent wage differences for observably identical workers in developed and developing nations. Income for low skilled American workers is 16 times as high as Haitians in Haiti, about 7 times as high as Indians in India, and about 4 times as high as Mexicans in Mexico—all adjusted for purchasing power parity. Just by moving here immigrants can largely close that wage gap.

There are very limited avenues for low skilled immigrants to immigrate legally, which raises an important question: if the economic benefits of immigrating are so high, why are there only 11 to 12 million unlawful immigrants here?

Below are the two broad reasons:

First, the benefits of immigrating are not as high as they seem. The probability of being employed in the destination country is a vital variable because unemployment does not confer any benefits on the immigrant. The skill level of prospective unlawful immigrants restricts job opportunities to certain occupations. If the sectors where low skilled immigrants work have high unemployment rates, as many do now, the chances of earning higher wages here is lower so the economic benefits of immigration are lower. Downward wage bargaining by immigrants is limited but unlawful immigrants do take a wage cut, all else being equal, of about 20 percent to compensate their employers for the legal risk of hiring them and other reasons. Growing economies in places like Mexico, China, and elsewhere might partially offset the benefits of immigrating by promising higher incomes in the near future.

Second, the cost of unlawfully immigrating is very high. Opportunity costs, search costs(including language barriers), transportation costs, legal costs, the probability of dying en route, the probability of being sold into slavery, and the probability of not making it to the United States despite paying the smuggling fee are all high and increase risk. Immigration enforcement is very effective at deterring most would-be unlawful immigrants. Highsmuggling fees are a high up front cost.

Immigration can be understood as an investment over a period of years.  The length of time the immigrant spends here employed at higher wages increases the economic benefits of immigrating. The costs of immigrating, like paying for a smuggler, are fixed while there seems to be a low marginal cost for staying here to avoid immigration enforcement. The psychic costs could shift with time.

Here is an example:

Assume a Mexican immigrant wants to illegally move to the United States and work in construction. A marginal worker in the construction sector would have about an 86.2 percent chance of being employed at $40,000 with an effective tax rate of about 18 percent (including income and FICA taxes) and a 2.6 percent annual average wage increase.

The cost of being smuggled in ($9,000 by boat, $4000 by land), buying documents to decrease the chances of detection, and opportunity cost from being out of the labor force is $11,000 assuming no psychic costs. After the first year, I assume that the out of pocket cost of living illegally was $1,000.

Assuming a two percent discount rate, the net present value of moving to the United States for five years is $126,000.  The net present value (NPV) of working in Mexico assuming a starting wage of $10,000 a year, 95 percent chance of being employed, a one percent wage growth, and a two percent discount rate is about $48,000. The wages are about 2.6 times as high assuming the immigrants successfully enters on his first attempt and immediately finds a job.

The uncertainty of working illegally in the United States, a higher smuggling price, and separation from one’s home dramatically increase costs. A relatively low annual cost of $11,000 a year in addition to smuggling fees of $9000 in the first year lowers the NPV to $77,340, just 61 percent greater than staying in Mexico. Psychic costs are higher for immigrants from countries that do not send many in the first place—like Yemen or the Central African Republic—because there is not a diaspora to fit in to. Unlawful immigrantsare typically young, male, single, and without families—groups with the lowest psychic costs of immigrating. The opportunity cost of using capital to pay smugglers is also high, especially in poor countries.

Immigration enforcement has a gargantuan deterrence effect—larger than any other factor. The vast majority of would-be unlawful immigrants are deterred by breaking immigration laws and the punishments—even if there is a small chance of being caught. A 10 percent increase in immigration enforcement hours along the border produced a 2.5 percent increase in smuggling prices—raising the cost of unlawfully immigrating. The size and scope of Border Patrol has increased substantially since 1980—virtually doubling in size since 2004.

Here are the first year wage gains including the cost of smuggling from different countries of origin:

Source Country

Smuggling Cost

Median Ind. Earnings, US Full Time

Income in Home Country

Wage Gain

Wage Gain/Smuggling
Brazil

$16,000

$31,905

$12,594

$19,311

1.21
China

$50,000

$31,863

$5,445

$26,418

0.53
Cuba

$10,000

$24,103

$5,400

$18,703

1.87
Haiti

$1,500

$35,103

$726

$34,377

22.92
India

$60,000

$50,443

$1,509

$48,934

0.82
Mexico

$9,000

$13,520

$10,047

$3,473

0.39

Source: 2011 American Community Survey, DHS, Havocscope. 

The smaller the wage gain to smuggling ratio is, the smaller the pure economic benefits of coming here are, assuming successful entry. If the Coast Guard was less effective or if Haitians could find a cheaper way to enter the United States unlawfully, many more would come. The pressure from Mexico is not nearly as great as many imagine. These numbers are only averages and probably understate the desirability of coming here but they explain why Indians and Chinese send so few unlawful immigrants despite the massive wage gains: immigration enforcement is very effective so it raises the price of smuggling.

The costs of moving to the United States are very high and the benefits are lower than international wage differences make them seem. The benefits from moving to the United States for millions of people would be enormous for most Americans, the immigrants themselves, and those who stayed behind. Given those large wage differences, it is truly remarkable that there are so few unlawful immigrants in the United States.

Immigration crackdowns: federal versus state

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Note: This blog post is a little blase about the stock versus flow distinction, namely, the distinction between immigrant numbers (the stock) and net immigration levels (the flow). I didn’t belabor the distinction because I don’t think the distinction was particularly relevant to any of the points I was making, but others might disagree.

Here’s a plausible theory that has emerged from recent blog posts and comments on this site, as well as other material I’ve read, regarding the effect of immigration crackdowns on illegal immigration at the federal and state levels:

  • Ceteris paribus, if a single US state cracks down on illegal immigration in that state, illegal immigrant numbers and proportions would tend to fall in that state. Most of this, however, would be to the detriment (from a restrictionist perspective; open borders advocates might call it “benefit” instead) of other US states: immigrants would move to the other states, and potential immigrants would find other states more attractive to settle in.
  • If, however, all states were to crack down on illegal immigration simultaneously, or if a federally coordinated crackdown were initiated, then the net downward effect on illegal immigrant numbers would be much lower than the effect for any single state, because the immigrants are less likely to leave the country than they are to move to neighboring states. In other words, estimates of the success at a national level of strong immigration enforcement based on their “success” in individual states are likely to lead to overly optimistic (from a restrictionist viewpoint) estimates of the decline in immigration levels and/or total immigrant numbers.

My main criticism of economic determinism (which says that immigration numbers are determined by economic trends rather than immigration policies), at least in the US context, has been that states that embraced immigration crackdowns saw their illegal immigrant numbers decline. At the same time, the numbers regarding overall cross-border migration flows seem to suggest that state-level immigration crackdowns were relatively insignificant in their effects on these flows. The above offers a possible reconciliation.

My co-blogger Nathan Smith, in his book Principles of a Free Society, says something similar in the context of a border fence to what I’ve just said about crackdowns (you can download the PDF or DOC of the immigration chapter from which I quote):

Experts like Douglas S. Massey insist that all the increases in immigration enforcement since the 1980s have failed not only to stop, but even to slow illegal immigration, and even that they have increased permanent illegal migration by making the alternative of seasonal migration more difficult. I find it hard to believe that enforcement has been that ineffective; yet there is an easy way to make sense of the claim. Border enforcement increases the cost, in money and hardship, of migrating, but that cost is still small compared to the value of migrating.

If U.S. GDP per capita is $46,400, while Mexico’s is $13,500, and if we assume the economic growth rate in both countries is about the same and the discount rate is 1% more than economic growth, the benefit of living in the U.S. rather than Mexico for a typical migrant might be on the order of $1.3 million. The rewards, then, may just be too large for the border enforcement measures applied so far to make much of a difference in the incentives for migration. […]

Economically, the United States is rather homogeneous: GDP per capita differs from state to state by a factor of two or less. For a prospective illegal immigrant, one way into the country may be about as good as another; but there is a strong incentive to get in somehow. If there is a fence at one point on the border, a rational migrant will go to another part of it. If there were a fence along the whole border, it would be time to go over or under or around. A person can get over a fence with ladders, or tunnel under it, go around it by boat through the Gulf of Mexico or up the Pacific Coast, or fly over it in a small plane, or perhaps even as a human cannonball with a parachute.

Although the thesis outlined above sounds prima facie plausible, I’m ambivalent about its truth. On the one hand, the substitution effect between states is closer than the substitution effect between countries, so that does point to a plausible reason why the “success” of enforcement measures in individual states would overstate their success if adopted simultaneously by all states, or if adopted through a federally coordinated initiative in which all states participated actively. On the other hand, if the measures were adopted in all states simultaneously, this might deter potential migrants to each individual state more because they know they have fewer fallback options. If Arizona alone had strong enforcement, a person might still migrate to Arizona, knowing that he/she could always escape to California if things got tough. If, however, Arizona and California both have strong enforcement, this makes Arizona even less attractive.

These conflicting effects mean that looking at state immigration crackdowns to predict the effects of an “all-state” or federal immigration crackdown is fraught with uncertainty both ways.

PS: Just to be clear, I think that measures being “successful” in the sense of reducing illegal immigrant numbers does not make them worth enacting (obviously, or I wouldn’t be posting this on an open borders blog). In fact, the very “success” of these measures might cause an adverse economic impact. Also, I think that the morality of many strong enforcement measures is questionable, though this is not the place to voice those concerns. The questions above are more about empirical predictions, not about prescribing a particular course of action.

Legal and illegal immigration: complements or substitutes?

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The question of predicting what will happen under open borders involves trying to make predictions both about legal (authorized) migration flows and about illegal (unauthorized) migration flows. In this post, I’ll be discussing immigration mainly to attractive immigrant destinations such as the US. Also, for simplicity, I will gloss over the distinction between temporary and long-run migration, although your predictions may differ for these two categories.

Open borders advocates, restrictionists, and economic determinists would be led to different predictions by their different theoretical frameworks for understanding migration:

  1. The hardline economic determinist holds that migration levels are determined, not by the laws for and against migration, but by economic conditions. According to the hardline economic determinist, then, the total amount of migration under open borders would remain roughly the same as under the status quo, but probably a lot of currently “illegal” migration would become legal. In this view, there is one-to-one substitutability between legal and illegal immigrants. While I doubt that too many people are hardline economic determinists, this is a plausible reading of some of their writings, such as this post by Hein de Haas and this article by Jagdish Bhagwati.
  2. Most open borders advocates, as well as moderate economic determinists, hold that under more open borders, the total amount of migration will increase, and the level of illegal immigration will decrease (to near-zero levels — i.e., in the few thousands — under open borders), but the increase in legal immigration levels would more than offset this decline. In other words, legal immigration does substitute for illegal immigration, but it’s not a one-to-one substitutability and total levels of migration are affected by migration policies. For those who take double world GDP estimates as serious, this is the position that is most consistent with such estimates.
  3. Some restrictionists, however, have argued that increases in legal immigration could lead to increases in, or at any rate are unlikely to lead to decreases in, illegal immigration. An article by Washington Watcher for VDARE titled Legal Si, Illegal No? The Treason Lobby Says Immigration Is Inevitable So We Should “Relax And Enjoy It” makes this kind of argument (though it is not central to the post). Washington Watcher first concedes that under truly open borders, illegal immigration would drop to near-zero levels, but still argues that for a halfway solution (considerably expanded, but not unlimited, legal immigration) the quantity of illegal immigration would increase. Washington Watcher identifies two relevant phenomena — camouflage (whereby large quantities of legal migration make illegal migrants less conspicuous) and chain migration (where legal migrants are able to assist friends/relatives in migrating illegally, something that would not be possible if the legal migrants weren’t in the destination country in the first place). The relevant paras:

    A writer I know once had the chance to ask Griswold just how many visas we should give out. He replied that we should give the same number of additional visas to the total number of illegal aliens and that would satisfy demand.

    But this would not stop illegal immigration—in fact. it would increase it.

    Why? One reason is “Say’s Law” , one of the classic economic doctrines. It states that supply creates its own demand. With an unlimited supply of cheap labor, many jobs that would not exist in an advanced economy exist anyway. For example, in Third World countries, someone making what would be considered a middle class income in America can afford several servants. Because labor is more expensive in the U.Ss, servants only work for the very wealthy. But if labor prices went down, more people would hire servants. For the same reason, cheap labor undercuts the development of labor-saving technological innovations.

    Legal immigration also makes it easier for illegal aliens to live in America without detection. In 1960, 99% of the population outside of the Southwest was White or African American. Were it not for the fact that we admitted legal Braceros, then a farmer with hundreds of Mexican laborers would obviously be hiring illegal aliens. But the legal Braceros allowed for the illegal alien Mexican workers to blend in.

    Most illegal aliens would not even think of coming here to begin with were it not for legal immigration. When a Third World peasant sees that a friend or family member who came here legally can live a relatively extravagant lifestyle, they are going to want to come too—regardless of whether they can get a legal visa.

    Finally, there are a lot of people who have no intention of coming into this country illegally, either because they come from law-abiding societies and respect our laws too and/or they are falsely concerned that they might be deported or be unable to get a job.

Which of these comes closest to reality? I’m inclined to support (2), but then, that’s where my bias lies. I think that the phenomena observed by Washington Watcher in support of (3) are real and genuine phenomena, but I don’t think that these would be quantitatively sufficient to override the effects of (2). Particularly in the context of the United States, considering that the US already has large numbers of people of different ethnicities, camouflage is already almost fully operational, and so the marginal gains in camouflage through additional legal migration are probably not too high.

That being said, the phenomena observed by Washington Watcher might be important in the context of a country that has extremely closed borders, like Japan, to the point that there could be a significant increase in camouflage effects through increases in legal migration. If, for instance, Japan allowed substantially more legal migration from Vietnam, then the camouflage and chain migration effects might lead to more illegal migration from Vietnam as well.

Against economic determinism for migration trends

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My co-blogger John Lee recently retweeted Hein de Haas’s tweet which began with “Migration… it’s the economy, stupid!” and linked to a blog post of the same name. The central claim of this blog post is that trends and variation in migration are better explained by changes in the economy than they are by changes in immigration policies and the extent of crackdown on illegal/undocumented immigration. Hein de Haas writes:

Politicians know all too well that migration serves vital economic interests, and cannot stop immigration even if they would want so, but do not dare to tell so to their voters. Their tough talk about reducing immigration is usually nothing more than a smokescreen to hide their inability and unwillingness to stop immigration.

Hein de Haas also links to an article by Jagdish Bhagwati that appeared in Foreign Affairs in 2003, titled Borders Beyond Control, which makes the same point.

Bhagwati writes:

Paradoxically, the ability to control migration has shrunk as the desire to do so has increased. The reality is that borders are beyond control and little can be done to really cut down on immigration. The societies of developed countries will simply not allow it. The less developed countries also seem overwhelmed by forces propelling emigration. Thus, there must be a seismic shift in the way migration is addressed: governments must reorient their policies from attempting to curtail migration to coping and working with it to seek benefits for all.

Bhagwati later writes:

All three problems raise issues that derive from the fact that the flows cannot be effectively constrained and must instead be creatively accommodated. In designing such accommodation, it must be kept in mind that the illegal entry of asylum seekers and economic migrants often cannot be entirely separated. Frustrated economic migrants are known to turn occasionally to asylum as a way of getting in. The effective tightening of one form of immigrant entry will put pressure on another.

This “economic determinism” — the idea that migration that happens for economic reasons is beyond the ability of governments to stem — runs rife through the writings of many people generally considered to be pro-immigration. For instance, the Immigration Policy Center blog recently had a piece titled New Research Casts Doubt Upon “Attrition Through Enforcement” stating:

These conclusions are bolstered by new research from the Tomás Rivera Policy Institute in Los Angeles and El Colegio de la Frontera Norte in Tijuana. This research indicates that, when it comes to Mexican migration patterns, “northbound flows are holding steady with signs of increasing unauthorized migration, while southbound flows are decreasing. The result is that the size of the Mexican-born population in the United States has fully recovered from losses experienced during the recession.” Moreover, “given the available indicators as of mid-2012, it appears that even a relatively small increase in the demand for Mexican labor in the U.S. economy would prompt a positive response in the migration flows despite intensified enforcement efforts by the federal government, several states, and some local governments.”

My quick reaction upon reading these: these statements, although correct in a very narrow sense, are wrong and misleading and play right into the hands of restrictionists.

Technical problem with the research: open borders and closed borders out of sample

The research seems to be correct in so far as it estimates the relative roles of variations in the economy and variations in immigration enforcement policy over the years in terms of determining migration trends. But the main reason this is so is that, despite some widely publicized moves on the pro-immigration and anti-immigration side, the immigration enforcement policies of the US, and of many other countries, has been remarkably consistent across the years. There has been too little variation in these policies to meaningfully say that drastically freer migration, or drastically less free migration, would not be more decisive in determining migration flows.

Claiming the inevitability of immigration plays into the hands of support for the status quo

Bryan Caplan says of democracy:

“In the naive public-interest view, democracy works because it does what voters want. In the view of most democracy skeptics, it fails because it does not do what voters want. In my view, democracy fails because it does what voters want.”

I’ll shamelessly borrow Caplan’s logical structure:

“Restrictionists claim that immigration restrictions (if well designed) can and do work, and that’s a good thing. Economic determinists claim that immigration restrictions cannot or do not work and are overruled by the economy, and we just have to live with it. Open borders advocates argue that immigration restrictions do work, and the very fact that they work exactly (or approximately) as advertised is the problem.”

For the open borders advocates, the problem with immigration restrictions is not that they don’t work. The problem is that they do! Open borders advocates should be calling out economic determinists for their flawed reading of history and heavy status quo bias, not siding with economic determinists just in order to contradict or one-up restrictionists! By siding with economic determinists, open borders advocates undersell the significance of immigration restrictions and their effectiveness in destroying wealth.

Even the weaker claim that borders are already at their most closed point is suspect

When I made a condensed version of this argument to John Lee, he pointed out a somewhat different interpretation of Bhagwati’s piece. In John’s reading, it may be the case that borders are already at the most closed level possible. Thus, government policies restricting immigration do affect the levels of immigration, but they cannot cut immigration down to zero, and current policies already achieve the maximum possible restrictiveness for the current political climate.

I am skeptical of this. Continue reading Against economic determinism for migration trends →