Benefits of Immigration and Migration

Posted 1 year, 4 months ago.

The benefits of migration are significant for both the sending and receiving countries, according to a new NBER paper (via Blattman, who has a link to an ungated version). From the abstract:

We find that immigration increases employment, with no evidence of crowding-out of natives, and that investment responds rapidly and vigorously. The inflow of immigrants does not seem to reduce capital intensity nor total factor productivity in the short-run or in the long run. These results imply that immigration increases the total GDP of the receiving country in the short-run one-for-one, without affecting average wages and average income per person.

How is this possible? Perhaps think of potential immigrants as unemployed-natives-in-waiting. Migration allows them to find and fill jobs that would not otherwise exist, thus boosting output without having adverse effects on native workers. In other words, think of migration functioning as in-sourced entrepreneurship. There is no output loss from the sending country because that labor was un- or under-employed anyway.

This effect is not limited to the U.S. or Europe — the paper covers 14 receiving countries in the OECD, and 74 sending countries — but perhaps it is limited to capital-rich, post-industrial countries that can benefit from an influx unskilled laborers. Still, if the result holds up this study to future study, it may have powerful implications for policymakers in developed and developing countries.