Singapore: 29% of the labor force is foreign

From Singapore’s Success: Engineering Economic Growth, by Henry Ghesquiere:

Like other countries, Singapore controls the income of foreign labor. Here, too, economic growth has benefited from openness. Augmenting the domestic labor supply is an integral part of the country’s overall development strategy.

Foreign manpower made a key contribution to Singapore’s economic growth. By 1970, full employment had been achieved and Singapore began to attract temporary foreign workers, then accounting for 3.2 percent of the labor force. Their number grew rapidly, reaching 7.4 percent of the workforce by 1980. By 2000, foreign workers made up an estimated 29 percent of Singapore’s labor force– 5 percent higher-skilled or professionals on an “employment pass” and 24 percent lower-skilled holders of a “work permit.” Expatriates filled half of the 600,000 new jobs that were created during the 1990s, with the other half filled by the domestic labor force. The upward trend has continued since.

Foreign workers now play a key role in Singapore’s economy. Low-income earners, mainly from the Philippines and Indonesia assist in households and with elderly care, while road and construction workers hail from all over South and East Asia. Professionals and highly skilled workers are being courted through an aggressive open-door policy to attract global talent. Foreigners on temporary work permits and employment passes are expected to leave at the expiry of their term, unless renewed. There are procedures to keep the lower skilled as a revolving pool on fixed employment terms to prevent them from establishing roots. Jail penalties await landlords and employers who house or employ illegal immigrants. Foreign labor and the Singaporean economy have become intertwined in mutual dependence.

In this area as well, Singapore relies on the price mechanism as a policy instrument to manage the total inflow and skill level of expatriate labor. Under the foreign work permit system, employers pay a levy to the government budget that differs according to the skill level of workers and sector of activity. Permits are renewable every two years. Levies are raised if demand from employers is strong. Levies are lower or nil for better-skilled workers. This differentiation has encouraged construction firms to invest in training their workers and to introduce labor-saving techniques. One consequence of improved skill levels is increased competition: during the downturn in 1998, some local employees were retrenched while stronger performing foreigners kept their jobs, unlike in 1985. Also, the inflow of one important category of less-skilled workers may have indirectly contributed to higher productivity. The increase in female labor force participation from 29 percent in 1970 to 53 percent in 1999 has provided more than 228,000 additional workers over the past three decades. This includes 130,000 maids, allowing many families to have a second income-earner. The government explains the beneficial impact of the foreign presence, even though such a policy has led to some concerns among Singaporeans about future job prospects and more intense competition for housing.

Of course, I don’t approve of all of this. In particular, to jail landlords and employers who house or employ illegal immigrants is a  violation of human rights. That said, it may be more tenable for a city to adopt such measures– jail is indefensible, but fines might be tolerable– than for a country to do so, since congestion and local externalities perhaps give people a more legitimate stake in their immediate physical neighbors than any citizen of a large territorial state has in anyone’s residence, or not, somewhere in the territory, including perhaps in wild and uninhabited parts of it.

Most impressive is the statistic: 29% of the labor force is foreign (as of, I think, 2007). This share is a little less than twice as high as the 16.6% in the US. To get to the Singaporean level, the US would need to let in about 30 million more immigrants. Singapore is wealth worth emulating, considering that Singapore is about 20% richer than the United States (per capita). Moreover, Singapore seems to be maintaining rapid rates of GDP growth even since they’ve overtaken the United States and supposedly should be bumping up against the “economic frontier.”

UPDATE: By the way, the idea that foreign nannies and maids could free high-skilled women from housework and childcare and facilitate their entry into the labor force is particularly interesting. The feminist case for open borders?

Nonexcludable but rival goods

There seems to be a widespread sense that while immigration can benefit immigrants, it hurts natives because immigrants grab a share of the pie. This argument is invalid as regards private goods and public goods, but it may be valid for nonexcludable but rival goods.

Economists distinguish private goods from public goods by two criteria: (a) rivalry, and (b) excludability. Private goods are rival and excludable. Public goods are nonrival and nonexcludable. At least, that’s what economists do when they’re being rigorous. There’s a frustrating tendency to stretch the concept of a public good from the narrow niche in which it is most proper and to which the theory of public goods– for example, the idea that you sum demand curves for private goods horizontally and demand curves for public goods vertically— properly applies, and use the word in a loose populist fashion to include lots of stuff that governments in fact provide even though it’s rival and/or excludable. Most obviously, here: public education. If economists had more logical rigor and theoretical integrity, they would proclaim with one voice that public education is not a public good, because classroom seats are rival– only one student can sit in a seat at a time; teachers can only grade one homework assignment at a time– and excludable– it’s perfectly feasible, though not permitted by current law but that’s irrelevant in principle, not to let a student into the classroom. But since that’s too politically incorrect, they usually say, with a shade of embarrassment, that, well, yes, education must be a public good, although it’s not an “impure” public good, since… well, since it doesn’t really meet the criteria for being a public good, at all. (At most, it has positive externalities.) I won’t say that education isn’t a public good, since everyone muddle-headedly insists that it is and I don’t feel I have a right to redefine the phrase public goods to be consistent with the theory. But I would advocate limiting the use of the term to exclude education.

While private and public goods get the most attention, the two criteria clearly imply, not merely a dichotomy, but a four-way typology, as shown in the table below:

Excludable Nonexcludable
Rival Private goods, e.g., food, shelter especially if privacy is a human need, a car if sharing isn’t feasible Parking spaces are one example. These goods might make the basis for legitimate nativist complaints
Nonrival Patented inventions and copyrighted books are the most well-known examples National defense is the classic example; public statues; music in the park; clean air

There would be many grey areas here even if what ought to be the clear case of education were definitely reclassified as a private good. We don’t exclude people from the park; but could we? Could we do it at reasonable cost? The park is usually non-rival, but perhaps on a brilliant bright Saturday when winter suddenly melts into spring, it is so crowded with picnickers that one can’t find a place on the grass, and the park becomes rival. Emergency room care is technically excludable: one could leave people who don’t have insurance or cash bleeding outside the doors. But it’s not legally excludable, since 1986, and perhaps it’s not morally excludable somehow, if we think a doctor has a moral obligation to help someone in desperate need in his field of vision even if they can’t pay. (I’m much less sure that that’s true, than that it’s wrong to exclude peaceful people from US territory by force.)

Now, the comparative advantage argument suffices to show that natives will collectively benefit from immigration to the extent that only private goods are at stake, and in a sort of rough, approximate fashion, migration taxes and transfers to natives should be able to make open borders Pareto-improving with respect to private goods. Basically, just by coming into the country, immigrants don’t acquire access to any of the private goods natives previously possessed. Natives’ exclusive claims to their private goods aren’t affected.

As for public goods, while immigrants can’t be prevented from enjoying them, this is not a downside to immigration, because public goods are, by definition, nonrival. The fact that immigrants are enjoying them doesn’t reduce natives’ ability to enjoy them, at all. Even if immigrants make zero contribution to the public goods of their host country, natives have no grounds for objecting to their presence, because the natives still enjoy just as much of the public good as they did before. More likely, immigrants will make at least a small, possibly a large, contribution to the host country’s public goods. In that case, natives are strictly better off.

Nonrival but excludable (or partially excludable) goods are important because they include designs, ideas, blueprints, technologies, whatever you want to call them. Migrants won’t reduce the supply of those. Well, unless open borders has a negative effect on the progress of the global economic frontier, but that’s a topic for another post.

The category of goods for which the nativists’ “smaller-share-of-the-pie-for-us” notion might be valid is for goods that are nonexcludable yet rival. Parking spaces may serve as an example, for although exclusion is sometimes possible– parking meters, gates and tickets in parking garages– it’s costly to regulate street parking, so to hold down transactions costs it might sometimes be best to treat parking as nonexcludable. If parking is nonexcludable, newcomers to a city may lower the quality of life for existing residents, by crowding the streets with cars and making it hard to find a parking space.

How many nonexcludable but rival goods are there? We treat public education as one, though in principle it need not be. Likewise emergency room care. The streets themselves are treated as nonexcludable (and probably exclusion would be infeasible and/or would violate rights in many cases) and might be rival in some respects, e.g., if you’re using the street for a rally of shouting protesters, I can’t very well use it to play serene classical music. Do storefronts have a nonexcludable but rival character for window shoppers on a crowded day? Does the random interaction of people with strangers on the street somehow have the character of a nonexcludable, rival good?

What international evidence exists for adverse impacts from illegal immigration or amnesties for immigrants?

In the US, California is every restrictionist’s (and fair-minded skeptic’s) example of how badly things can go wrong if you mismanage immigration policy. I have not yet seen someone cite country-level evidence of poor immigration policy’s impacts: given that Italy and Spain have given multiple amnesties to unauthorised immigrants over the last 3 decades, and the current state of their economies, this seems surprising. Does anyone know of a comprehensive analysis that looks at jurisdictions outside the US?

To be clear, I often see specific references to how life in California is now terrible because of illegal immigration. Commonly-cited examples are the problem of the state government’s debt, a dysfunctional state government, soaring crime rates, deteriorating levels of social trust, a collapsing public school system, the high level of unemployment…I could continue on. I often see references made to California as the ultimate end-state for any jurisdiction that permits a large amount of illegal immigration, and would like to understand if this conclusion has been validated or supported by analyses that look at other jurisdictions with large amounts of illegal immigration. A previous post considered this question in the context of comparisons between the US states, but for this post, I’m interested in international comparisons.

I’m fine with somewhat unsophisticated stabs at this analysis: breadth can be just as important as depth, and given the rather poor state of knowledge about the ultimate impacts of high levels of immigration, any research or analysis can prove valuable. My understanding is that France and Germany both have ongoing processes for unauthorised immigrants to regularise their status, and considering the widespread use of discrete amnesties in other European countries’ immigration policies, it would be interesting to see if there are any different impacts, and what people’s thoughts are on the impact of either option has been relative to a counterfactual where these European countries did not regularise any unauthorised immigrants whatsoever.

The US has only implemented one amnesty of note, in 1986. In Europe, amnesties are much more common. Poland for example announced in 2011 its third amnesty since 2003 (though to be fair, Poland has much fewer unauthorised immigrants than the US). Surely there has been some study of the impacts of these amnesties, or even some informal comparison that correlates the number of unauthorised immigrants to various socioeconomic indicators at the country level. And I’m only really somewhat aware of amnesty policies in Europe: I’m not even sure what arrangements, if any, exist in other continents.

And going beyond amnesty, large numbers of unauthorised immigrants exist in various countries. The number of unauthorised immigrants could similarly be correlated to various indicators, as informal analyses in the US often do with California. If we rank countries by the percentage of their population that is present without legal authorisation, how would that compare to the ranking of countries by GDP per capita, or public debt per capita, or rankings in international educational aptitude surveys like PISA or TIMMS? What about ranking countries by the number of previously unauthorised immigrants whose legal status has since been regularised? Here are two charts (from link #3 at the end of this post) which rank EU countries:

EU-27 regularizations through programsEU-27 regularizations through mechanisms

A quick glance suggests that some of the worse-performing Eurozone economies have been much likelier to offer larger-scale regularisations. However I’m not sure what to make of Germany and France coming in right behind four of the PIIGS on this scale, or of Germany and France topping the list when it comes to mechanism-based (i.e. ongoing) regularisations. Moreover within the PIIGS it also seems quite clear that Italy and Spain are performing better than Greece (I am not sure where Portugal stands). So the correlation, if there is one, does not appear to be that strong.

(Something else that may be food for thought: according to the source for these charts, France once insisted that the EU adopt a continent-wide ban on mass regularisations of the “amnesty” type currently being discussed in the US. This idea was dropped because Spain vetoed it. It would be fascinating to learn what’s driving the different approaches here.)

If anyone knows of material that might be pertinent to the issues I’ve raised here, I would love to hear about it in the comments of this post. We can compile a compendium and document it on an Open Borders page about illegal immigration, and/or the regularisation of unauthorised immigrants. This compendium would be a useful reference for future discussions and blog posts on this site.

I’ll start by listing out some documents I’ve been able to find, and will add to this list as people post in the comments:

  1. Why Countries Continue to Consider Regularization, Amanda Levinson (2005) — a good summary of how different countries approach regularisation/amnesty, and where volumes stood as of 2005
  2. Regularisation programmes in France, Amanda Levinson (2005) — a good summary of the French approach, but no contextualisation with respect to how it compares to elsewhere
  3. Regularizations in the European Union, Kate Brick (2011) — probably comes closest to what I’ve been looking for, has excellent comparisons of different countries’ approaches to regularisation

The Gang of 8 immigration deal

I’m not a political junkie (anymore) and I try not to follow all the feints and counter-offers and posturing and whatnot that comprises so much of political discourse, but at this point the momentum for immigration reform in Washington seems really to be bearing fruit. A deal has been made. The New York Times celebrates:

Huge news from the scorched desert of immigration reform: germination!

At last there is a bill, the product of a bipartisan group of senators who have been working on it for months, that promises at least the hope of citizenship for 11 million undocumented immigrants. It is complicated, full of mechanisms and formulas meant to tackle border security, the allocation of visas, methods of employment verification and the much-debated citizenship path…

There will be much to chew on in coming weeks, but it is worth a moment to marvel at the bill’s mere existence, and at the delicate balancing of competing interests that coaxed this broad set of compromises into being…

The bill gets around the “amnesty” stalemate by turning the undocumented into Registered Provisional Immigrants — not citizens or green-card holders, but not illegal, either. They will wait in that anteroom for a decade at least before they can get green cards. But they will also work, and travel freely. The importance of legalizing them, erasing the crippling fear of deportation, cannot be overstated.

Yes! Deportation is a particular disgraceful feature of the American polity, and it will be a tremendous moral relief to have it, if not permanently and generally abolished, at least abolished for most of the millions who live under the threat of it now. The Times deplores the length and difficulty of the path to citizenship:

That said, a decade-plus path is too long and expensive. The fees and penalties stack up: $500 to apply for the first six years of legal status, $500 to renew, then a $1,000 fine. If the goal is to get people on the books and the economy moving, then shackling them for years to fees and debt makes no sense.

The means of ejection from the legalization path, too, cannot be arbitrary and unjust — people should not be disqualified for minor crimes or failure to meet unfair work requirements. It should not take superhuman strength and rectitude, plus luck and lots of money, for an immigrant to march the 10 years to a green card.

Here I’m ambivalent, except about the “means of ejection” sentence. You can’t justly deport someone just because they don’t want a job, and to deport someone for, say, a speeding ticket, is a violation of just proportionality. My sympathies lie with a relatively short and easy path to citizenship. But reason tells me that if your goal is an immigration regime that is simultaneously incentive-compatible and humane, you can’t make the path to citizenship easy. And $500 here and $1,000 there are nothing compared to the income gains that immigrants to the US typically enjoy, though I’d prefer to see money extracted from immigrants in the form of taxes attached to earnings rather than as lump-sum fines and fees, so we can raise more revenue from those doing relatively well while mitigating the hardship we cause for the poorest immigrants. Continue reading The Gang of 8 immigration deal

The tendency of economic activity to concentrate itself

Post by Nathan Smith (regular blogger for the site, joined April 2012). See:

At a family reunion in Alaska in August 2007, during a beautiful hike to a place called Exit Glacier, several strands of thought I had been mulling over came together and exploded in my mind. I was in a state of intense intellectual excitement. Without diminishing my enjoyment of the company and the beautiful scenery, I felt an urgent need to be somewhere else, namely, sitting in front of a stack of papers, scribbling equations. David Warsh’s book Knowledge and the Wealth of Nations had clarified for me the bottleneck that economic theory was in– that theory relied on a notion of “equilibrium” to close models which presupposed constant returns– and I saw the way out of it– implement market equilibrium by the interactions of agents in a computer memory instead of by solving systems of equations. Equations, and especially mathematical optimization, still had its place, for agents’ methods of maximizing utility subject to a budget constraint would be lifted lock, stock, and barrel from traditional methods… though more modifications were needed, as I learned the hard way. My first attempt (as a graduate student that fall) involved 90+ pages of code and was a complete fiasco. I got no results at all. Desperate after a failed presentation (though Professor Rob Axtell, sympathetic to my Herculean if futile efforts, asked for my code for an excuse to give me an A-), I went home and read Joseph Schumpeter’s Theory of Economic Development for inspiration. After an enormous amount of work, many rethinkings and failures, I succeeded, yielding a dissertation, Complexity, Competition and Growth (free version here), and helping me to land an academic job at Fresno Pacific University. So far, frustratingly, I haven’t managed to get what my dissertation chair called “a breakthrough” (I agree) into the academic journals, for whom, I suppose, the piece is intimidatingly eccentric and complex (and perhaps arrogant in its sweeping claims, though I can’t really scale them back much). Here’s my latest attempt, entitled “The Aggregate Production with Endogenous Division of Labor,” submitted last week to the Journal of Economic Growth.

This is connected with open borders because it is a theory of increasing returns and therefore of how economic activity tends to concentrate itself. Surely this is one of the most obvious facts about the economy. Economic activity is concentrated spatially: we call those places cities. Economic activity is concentrated temporally: we call the working day. Some theories of economic booms and busts– “coordination failure” models– see them, essentially, as a tendency for economic activity to concentrate itself in time, but I wouldn’t stress that too much. Of course, economic activity is concentrated in certain countries, too. We call those developed or rich countries; those where economic activity is not concentrated we call developing or poor countries. Certainly, the principle that makes people concentrate in cities is not the only principle at work in determining the wealth and poverty of nations. But it probably is one of the principles. In “Geography and Economic Development,” Sachs, Mellinger, and Gallup (1999) make a strong case that geography does much to determine the development, and one of the ways in which it does this is that it places landlocked places, places far from coasts and with poor access to the sea, at a disadvantage, because they can’t plug into networks of international trade.

Imagine what would happen if economic activity has a tendency to concentrate itself but people are not allowed to concentrate themselves. In the places where economic activity is concentrated, the ratio of economic activity to population will be high, and people will be rich. In the places where economic activity is not concentrated, the ratio will be low, and people will be poor. Of course, it’s never as simple as that. Economic activity can’t usually concentrate itself without people concentrating themselves to some extent. But it seems to be true that massive inequality tends to arise when mobility is restricted and people are not allowed to go where the jobs are, or where the high wages are.

Why does economic activity tend to concentrate itself? Adam Smith understood. The first three chapters of The Wealth of Nations are titled:

I. Of the Division of Labor, which begins by asserting that “the greatest improvement*17 in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour.”
II. Of the Principle which Gives Occasion to the Division of Labor [namely, the human propensity to truck, barter and exchange]
III. That the Division of Labor is Limited by the Extent of the Market

When people live in close proximity, they can specialize more, and trade with more specialists. There are all sorts of jobs, and all sorts of services, which one can do, or hire, in New York City, that one can’t do, or hire, in a small town. Cuisine and culture are the most obvious, because here the consumer observes the benefits directly. Foodies and theater fans will fare much better in Manhattan than in Muncie, Indiana. But the same holds in business. If you want to run a think tank, there are big advantages to doing it in DC, where the pool of specialists is deep and rich, and you can find someone with experience privatizing electricity generation or someone who knows a lot about factional infighting in Tajikistan. A friend of mine worked as a professional trumpet player in Chicago, and made a decent living. Now, for the sake of his wife’s job, he lives in a small town in Maine. You can’t make a living by trumpet gigs there. Of course, what business there is might be easier to catch, because the competition is slight, too. But that means that if you want to hire a professional trumpet player, for an Easter service, say, or a wedding, it won’t be easy. It’s not just a matter of urban vs. rural or city vs. small town. I live in a medium-sized city, Fresno. The eating’s OK, but it has far fewer vegetarian options than DC. Classical music concerts take place every month or so, maybe. There’s a continuum, with the abundance of specialized jobs and the availability of specialized services steadily increasing as the city grows. More than that, cities themselves specialize, with LA specializing in movies, Houston in energy, Seattle in airplanes, Detroit in cars, Palo Alto in information technology, New York in finance and culture, Boston in higher education, Washington, DC, in politics and government.

Of course, there’s a downside to concentration, too. People may suffer from one another’s negative externalities– smog, car noise, light pollution, crime– but more importantly, the free goods of nature become scarcer. If you want to live on a large plot of land, that’s exorbitantly expensive in Manhattan. That said, Central Park is available to all, and I’ve often noticed that if you want to take a nice walk and enjoy greenery, it’s sometimes easy to do this in big cities, with their verdant parkland, than in the countryside, with its agriculture and fences. But the free goods of nature are also inputs to production, and for production processes wherein the free goods of nature are important, economic activity has to spread itself out through rural areas. Farming, in particular, has to be spread out over vast expanses of rural territory. Farmers need services– grocery stores, auto dealers, schools, hospitals– so other economic activities, besides farming itself, follow them. Tourists seek beautiful natural scenery, and economic activity follows them, too. Then there’s logging, and drilling for oil and gas, etc. The free goods of nature draw people to rural areas, small towns locate near them, big towns locate near small towns. Meanwhile, when large-scale economic activities don’t particularly depend on the free goods of nature, but also have relatively few synergies with other large-scale economic activities, it may not make sense to locate them in the same city, driving up land prices and giving rise to the usual negative externalities of urban life without important economic complementarities to offset these costs. All these reasons explain why we don’t all concentrate ourselves in one enormous city.

By the way, feel free to challenge me on this, but I think it’s fair to say that neoclassical economics, the mainstream paradigm in economics today, is largely blind to all this. To see why, think about a standard supply-and-demand chart, the central concept of neoclassical economics. Demand slopes down. Fine so far. Supply slopes up. Why? Because marginal costs rise when you produce more? Do they? It seems more typical, if anything, for prices to fall when suppliers can produce in bulk. In that case, however, it doesn’t make sense to view suppliers as “competitive” “price takers.” But neoclassical economics must impose price-taking, because it predicts what will happen in markets by solving a system of equations for the “market-clearing” price that equilibrates supply and demand. Without that device, it doesn’t know how to close a model. Of course, neoclassical economists know that economic activity tends to concentrate itself, and most of them probably understand clearly enough why, namely the benefits of specialization and trade. But when making formal models, they habitually write down production functions with constant returns to scale, thus ruling out an important role for specialization, trade, and the division of labor, and making the existence of cities suddenly mysterious. That was the challenge I set out to tackle.

In the latest iteration of my simulation-based economic modeling, I report a lot of results, but it’s hard to know the best way to elucidate their significance to lay readers, or for that matter to professional economists, who are in some ways in a better position to understand what my model does, but in some ways, not. In some ways, well-trained professional economists may even be at a disadvantage because they have to unlearn certain habits, such as looking for market-clearing prices and “interior solutions” and shunning “corner solutions,” increasing returns, and chaotic, imperfect competition. My work is very close in spirit to Adam Smith and the classical tradition, but from the neoclassical point of view it is definitely “heterodox.” Indeed, if I ever manage to publish versions of these results in both the academic journals and the popular press, it will be interesting to see whether professional economists or lay readers are more receptive. At any rate, the results of one simulation run are shown in the chart below:

Each point in the chart represents a simulation run, with the shape of the point roughly indicating total GDP. The curves represent “isoquants” derived from the production function I estimated from the data. This estimate involved regressing log GDP against log capital and log labor, which yielded the following:

where Y is income, K is total capital, and N is total labor. What matters here is not the precise values of the coefficient and exponents, which would vary randomly depending on the technological specifications, but the high degree of increasing returns that the production function exhibits. If such a production function describes the US economy, a doubling of the labor supply with no influx of new capital would only reduce per capita income of all residents slightly. In the model, capital’s share of income exhibits no tendency to be equal to the aggregate elasticity of capital. Returns on capital and entrepreneurial profits together generally comprised a little over half of income in the simulation, with the rest going to labor. When society’s capital stock increased, the return on capital fell, consistent with the neoclassical prediction, except much less precipitously. A tenfold increase in the capital stock would reduce the return on capital by less than half. Meanwhile, holding the capital stock constant, an increase in labor, holding the capital stock constant, tends to raise the return on capital almost in proportion to the increase in labor, while the effect on the wage of labor, though it is usually negative, is mild.

How is this possible? Because population growth leads to the introduction of new goods, the intensification of patterns of specialization and trade. If the lessons from this model cross-apply to the US economy, under open borders we would see the big cities get even bigger, and even richer in the variety of goods and services they have to offer, while many small towns would grow into big cities, and new towns would spring up– so there would be no shortage of small town life for those who prefer it, but there would be a wider variety of urban life available to city-lovers, including some cities bigger than any available now. (Not that new cities would be founded to surpass New York. Rather, New York itself would surpass what it is now, while other cities would become what New York was.) Wages wouldn’t fall much if at all for low-skilled workers. They might find new niches. Owners of other factors– land, capital, entrepreneurship– would enjoy new opportunities and rising incomes. Specialized jobs that don’t exist now would appear. Specialized jobs that currently exist only in, say, New York, would appear in other places. Foreigners would benefit too, not only from access to “public goods” or “institutions,” but from being able to plug into America’s complex division of labor. New patterns of specialization might emerge at the level of cities, with some cities becoming global rather than merely national hubs for this or that industry.

You can make a strong case for open borders from the standpoint of neoclassical economics. The case for open borders is largely the same as the case for free trade, except that instead of trading with people living abroad you trade with people from abroad now resident in your own country, likely in goods and services that, for whatever reason, can’t be traded internationally. But endogenous division of labor strengthens the case for both free trade and open borders.