Tag Archives: Giovanni Peri

It Can’t All Be About (the) U.S.

In February, National Public Radio aired a segment, part of its Planet Money series, in which it asked three immigration experts what sort of immigration system they would have if they “controlled the borders.” To NPR’s credit, one of the experts was the Cato Institute’s Alex Nowrasteh (a contributor to the Open Borders site). He proposed letting all immigrants in, except for suspected terrorists, criminals, and those with serious communicable diseases. He noted that this policy would benefit the economy and would mean that people wouldn’t have to put themselves at risk crossing the border.

Not surprisingly, the other two experts chosen by NPR did not propose open borders. One expert was the economist Giovanni Peri, a professor of economics at the University of California, Davis, who has researched the economic impact of immigration on the U.S. and found it to be mostly positive. His ideal immigration system would be one in which employers would bid for permits allowing them to employ individual foreign workers, including low-skilled workers. The other expert was Dean Baker, co-director of the Center for Economic and Policy Research (we’ve critiqued Baker before). He would admit immigrants with families in the U.S. and would provide visas to highly skilled individuals who, in the words of NPR’s host, “would benefit our economy the most.” Mr. Baker said he “would like to make sure that you had a lot of immigrants at the high end” but is “less concerned about farm workers.”

The proposals from Mr. Peri and Mr. Baker seem designed to maximally benefit the U.S. and apparently make the interests of immigrants who are excluded from their systems irrelevant. Formulating such an immigration policy probably makes sense to many Americans. After all, some may think, the government should look out first and foremost for the interests of its citizens. Joseph Carens of the University of Toronto articulates this view: “The power to admit or exclude aliens is inherent in sovereignty and essential for any political community. Every state has the legal and moral right to exercise that power in pursuit of its own national interest…”

Mr. Carens suggests, however, that this nationalist position doesn’t justify immigration restrictions. He explains that “When the stakes are high (e.g., legal proceedings) we normally create institutional rules to try to prevent people from being able to favor their friends and relatives. In other words, our notion of justice constrain the extent and ways in which we think it is acceptable for us to favor family members… even if we are morally entitled to favor compatriots in some ways, it is not self evident that we are entitled to favor them by excluding potential immigrants. Perhaps that form of preferential treatment goes too far.” Restricting immigration in effect would be nepotism writ large, an attempt to favor those identified as being more closely connected to us by giving them access to the U.S. labor market and denying access to those deemed less connected.

Bryan Caplan of George Mason University (who has also guest blogged for Open Borders) echoes Mr. Carens in his critique of the analogy between the nation and a family: “…almost everyone recognizes moral strictures against familial favoritism.  Almost everyone knows that ‘It would help my son’ is not a good reason to commit murder, break someone’s arm, or steal.  Indeed, almost everyone knows that ‘It would help my son’ is not a good reason for even petty offenses – like judging a Tae Kwon Do tournament unfairly because your son’s a contestant.” Despite this, Mr. Caplan points out that at the national level citizens tend to lose this sense of morality and use nationalism “as an acceptable excuse for horrific crimes against outgroups.” Nationalism leads to immoral treatment, such as interfering with the right to immigrate.  The logic of Mr. Carens and Mr. Caplan discredits nationalist arguments around the world supporting immigration restrictions, not just those in the American context.

Given Planet Money’s focus on economics, the underlying question posed to the three experts about their preferred immigration regime may really have been: “From a purely economic standpoint, which immigration policy do you believe would most benefit current American citizens?” (Even within these parameters, the proposals of Mr. Peri and Mr. Baker are questionable; open borders, as Mr. Nowrasteh suggests, may have the most beneficial economic impact on the U.S.) Actual policymaking, however, should not exclude moral concerns. NPR should air another segment asking guests, “What would be a moral immigration policy?” That would help Americans think more profoundly about immigration policy.

How Does Immigration Impact Wages?

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

Many Americans are curious about the impact of immigration on the wages of other Americans.  The best research on this focuses on the period between 1990 and 2006, when almost 17 million people immigrated to the U.S. lawfully and a net 12 million came unlawfully.  The first major study is by Borjas and Katz (B&K) and the second is by Ottaviano and Peri (O&P).  O&P borrowed much of B&K’s methodology.  Here are the long run findings:

B&K draw a more negative conclusion than O&P.  The main differences are that O&P assume capital adjusts quicker to increased labor abundance and immigrants are more complementary.  B&K’s paper reflects their assumptions about native-immigrant substitutability.  Since immigrants are more likely to have less than a high school degree and more likely to have a graduate or professional degree than natives, B&K’s model assumes natives in those categories are competing with immigrants for jobs and therefore experience wage declines. 

Both O&P and B&K found that increased immigration has a larger affect on immigrants than natives.  Depending on their level of education, longer settled immigrants experience greater wage declines and smaller wage gains from more recent immigration compared to natives:

Both sets of authors rightly assume that more recent waves of immigrants are most similar to immigrants from older waves, making the two arrival cohorts of immigrants substitutes in the workplace.  Recent papers by Ethan Lewis and Giovanni Peri and Sparber make convincing argument that language ability of recent immigrants makes them more similar and, thus, substitutable with previous waves of immigrants.  Language ability also makes immigrants complements to natives, partly explaining why O&P and B&K found wage increases for so many American workers as a result of immigration.

Here is a comparison of the long run wages effects on immigrants and natives from the O&P and B&K study:

These charts merely explain the results of previous waves of immigration on the American labor market.  If immigration increases in the future these numbers will likely be different but the past is always a useful guide for anticipating the effects of future policy changes.


Bibliography:

Borjas, George, “The Labor Demand Curve Is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market.”

Borjas, George and Lawrence Katz, “The Evolution of the Mexican-Born Workforce in the United States.”

Ottaviano, Gianmarco and Giovanni Peri, “Immigration and National Wages: Clarifying the Theory and the Empirics.”

Peri, Giovanni and Chard Sparber, “Task Specialization, Immigration, and Wages.”

Lewis, Ethan, “Immigrant-Native Substitutability: The Role of Language Ability.”  

Selling Work Visas: Auctions or a Tariff?

The post was originally published at the Cato@Liberty blog here and is reproduced with permission from the author.

Yesterday Professor Giovanni Peri presented an immigration reform plan that would auction work visas to employers. As I wrote yesterday, Peri’s plan would diminish the misallocation of current visas but not do much to increase the quantity of work visas. Since the real problem with America’s immigration system is a lack of work visas and green cards, Peri’s plan seeks to solve a rather miniscule problem by comparison.

Proponents of selling visas either support auctioning a limited number of visas to the highest bidders or establishing a tariff that sets prices but allows the quantity to adjust. An immigration tariff is far superior to an auction of numerically limited work visas. You can read my proposal in more detail here or listen to me explain it here. ADDED BY OPEN BORDERS: For a background on immigration tariffs, see here.

Here are three reasons why an immigration tariff is better than an auction: Continue reading “Selling Work Visas: Auctions or a Tariff?” »

Selling work visas

The post was originally published at the Cato@Liberty blog here and is reproduced with permission from the author.

Professor Giovanni Peri today made an interesting proposal to auction work visas to the highest bidding employer. His reform is similar to an auction proposal made by Gary Becker, but more specific. His idea is innovative and deals with transitioning from the current maze of quotas, visa categories, and other barriers to a more open system that better allocates visas to the highest bidders.

The one problem with Peri’s proposal is that it does not meaningfully increase the number of work visas. The limited number of work visas, not the distribution, is the main problem with America’s immigration system. Instead, he calls for reallocating visas from families to the employment based category. He then wants American employers to bid for the limited quantity of work visas issued quarterly. A government commission would adjust the quantity and immigrants would be free to move between employers who purchase visas.

Economists like Becker and Peri are rightly concerned with how societies allocate scarce resources to different uses, but the scarcity of work visas is an artificial one created by the government, not one that results from a scarcity of the factors of production or other inputs. This is why there should be no numerical limits on the quantity of work visas issued even if they are priced. Charging for work visas is a substantial improvement over the current system, as I say here, here, here, and here. Most of the welfare gains come from allowing the quantity of visas to adjust to the price, not the other way around. An efficient visa selling process will operate more like a tariff than an auction. ADDED BY OPEN BORDERS: For a background on immigration tariffs, see here.

For normal goods and services, a rising price incentivizes consumers to limit their consumption and producers to increase production. A government commission tasked with adjusting visa quantities would face political rather than market incentives and not increase visas in response to rising prices. Unless the incentives are carefully aligned, the result would probably be a more arbitrary and numerically limited immigration system.

Another problem with Peri’s proposal is that it only allows employers to bid for work visas. Continue reading “Selling work visas” »