Tag Archives: technological progress

Open borders and the economic frontier, part 2

In the first post in this three post series, I gleaned a theory of the economic frontier from some of BK’s comments and offered a few of my own responses. In this post, I’ll expound my own theory.

Two general points. First, how the economic frontier advances is both enormously important for human welfare and quite mysterious. It is important because long-run economic growth will determine how well we can mitigate world poverty and deliver ever-improving lives to future generations. A tiny increase in the rate of advance of the economic frontier, say from 3% to 5%, would make our descendants a century hence almost an order of magnitude wealthier. Second, open borders would likely affect the rate of advance of the economic frontier. Before reading BK’s comments, I had pretty much taken it for granted that open borders would boost growth, at least in the short run, as people move from low-productivity countries to high-productivity countries. Based on Clemens (2011)  and Kennan (2012), the modal result of formal studies so far seems to be that open borders would double world GDP, and the assumptions on which this result is based are actually conservative in some ways, e.g., they don’t assume that everyone would migrate to where their marginal product is highest. Negative institutional/productivity side-effects of open borders on frontier countries would have to be very large to offset this, but such effects are not beyond the range of plausibility.

My theory, which I’ll call the “Endogenous Division of Labor” or “EDOL” model, was the topic of the second chapter of my dissertation, Complexity, Competition and Growth (but don’t pay $103, it’s available here for free). More recently, and I think more accessibly, I published a new version as an SSRN working paper here, under the title “Development as Division of Labor: Adam Smith Meets Agent-Based Simulation.” All the data is drawn from a simulation I wrote, which is introduced in this video, and I’ll be happy to send the simulation (as a runnable JAR file) if you’re interested in exploring its properties on your own. It’s not that user-friendly, but I’ll even be glad to give you a tutorial via Skype. I’ll also be glad to present it at academic conferences or seminars or whatever. I think it would lend itself to public presentation quite well, though I haven’t got the chance to transfer. I’m trying to publish it. So far, the Journal of Political Economy rejected it, with some harsh but useful feedback. I plan to submit a completely rewritten version to the Journal of Economic Growth. Any feedback is welcome.

Continue reading “Open borders and the economic frontier, part 2” »

Open borders and the economic frontier, part 1

This will be the first of three posts on the topic of “open borders and the economic frontier.” 

I am indebted to commenter BK for making the major subject of my academic research, on the basis of which I hope to make my name as an academic economist, relevant to this blog. In a long series of comments at my post “The American polity can endure and flourish under open borders,” and previously at “Garett Jones responds…” BK digs up some numbers and makes a sort of loose empirical case, based on the experience of what Amy Chua calls “market-dominant minorities” in many countries around the world, that segregation of humanity based on cognitive ability, with race as a proxy, actually makes the world economy as a whole more productive:

Chinese-Singaporeans generate income almost twice as great in mostly Chinese Singapore as the large Chinese-Malaysian minority does in Malaysia (about $70,000 per annum vs about $38,000), even though there are less than 3 million Chinese in Singapore but almost 7 million in Malaysia. But the Chinese make up 75% of Singapore vs 25% of Malaysia…

There is a Chinese elite, but this isn’t enough to fix the institutions, which have to represent the general population. All this occurred in the context of strong legal discrimination in favor of Malay majority, racialized anti-business sentiment, and big gaps in political views between Chinese and non-Chinese Malaysians. Using the above statistics, if the Chinese-Malaysians could have done as well as Singapore by also seceding from Malaysia into Chinese-dominated countries, total GDP of the region would rise substantially just from letting the Chinese-Malaysians free of the Malaysian electorate, even if incomes back in Malaysia plummeted. But it gets even better: Singapore lets in millions of guest workers from non-Chinese Malaysia, among other places, who send back huge quantities of remittances. Singapore generates more innovations in science and technology with positive spillovers for the rest of the world.

Basically, patterns like this seem to suggest that total GDP and welfare are much increased by international segregation by IQ and other characteristics contributing to productivity and performance, and that giving every country in the world demographics representative of the world would be devastating…

I’ll try the analysis again for a different region, randomly selected to be Africa.

The obvious data are the economic evolution of Zimbabwe (formerly Rhodesia) and South Africa after universal suffrage and the end of apartheid. This is complicated by the fact that both countries were suffering economically from crippling sanctions before majority rule, as well as internal racial conflict which were then lifted and replaced with foreign aid as part of an intentional effort to make post-suffrage conditions better than pre-suffrage conditions. Continue reading “Open borders and the economic frontier, part 1” »