Giant Low-Hanging Fruit

The Economist
November 15, 2012

The economic case for migration is similar to that for free trade. Trade benefits countries by letting workers specialise in activities in which they are relatively more productive, raising output. And the larger market created by trade spreads the fixed costs of innovation more thinly, encouraging the development of new goods and ideas. Governments began the long march towards trade liberalisation after grasping that its upsides outweigh its costs, leaving a surplus large enough to compensate the losers.

The economic case for migration is similar to that for free trade. Trade benefits countries by letting workers specialise in activities in which they are relatively more productive, raising output. And the larger market created by trade spreads the fixed costs of innovation more thinly, encouraging the development of new goods and ideas. Governments began the long march towards trade liberalisation after grasping that its upsides outweigh its costs, leaving a surplus large enough to compensate the losers.

Immigration is an afterthought, in both practice and theory. In traditional trade models wages converge across trading partners with similar technologies even without migration, a phenomenon winningly branded “factor-price equalisation”. Sadly, factor-price equalisation is a real-world rarity. As of 2000, for instance, a worker in Mexico earned a wage 40% that of a Mexican-born worker of similar education and experience working in America.

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