The economic benefits of free trade in people

Linda Nazareth, The Globe and Mail

If you believe that free trade in goods and services enhances growth (I do, as do all but a seriously select group of economists), then it is not much of a stretch to say that free trade in people should do the same thing. Interestingly though, there are not a lot of analyses that look at the impact of migration – which is why I gravitated to an attempt to do just that by a trio of economists.

The study, by Julian de Giovanini, Andre Levchenko and Francesco Ortega (and discussed by Mr. de Giovanini in a piece for the World Economic Forum) examines the economic impact of the migration by looking immigration to and emigration from countries. For the former, they examined the impact on population and average income per person in the host country with and without immigration (they adjust for the latter by basically “removing” the immigrants from population and income estimates and adding them to the country of origin). For the latter, they look at the effect on population, but also tally immigrant remittances into the country from those who leave (i.e. sending money home).

It is a complicated calculation, but each piece is important. Looking at what immigration does to a country is important, but you also have to look at emigration, particularly if you are worried about any kind of “brain drain” effects.

What the study found fits into economists’ presuppositions quite neatly: Letting people move is good for the global economy. Logically we can see that; if people could leave places where there is limited opportunity and employment and go where prospects are better, that would have to make economic sense, particularly if they send money back to their former countries.

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