Trade Diversion

Management Science, Vol. 56, No. 5, May 2010, pp. 745–765, pdf

We find that after controlling for their human capital attributes, foreign IT professionals (those without U.S. citizenship and those with H-1B or other work visas) earn a salary premium when compared with IT professionals with U.S. citizenship. The salary premiums for non-U.S. citizens and for those on work visas fluctuate in response to supply shocks created by the annual caps on new H-1B visas. Setting lower and fully utilized annual caps results in higher salary premiums for non-U.S. citizens and those with work visas…

Collectively, the presence of salary premiums for foreign professionals even when a visa cap is under-utilized and the fact that H-1B professionals’ salary premiums are more directly affected by H-1B visa restrictions than that of green card holders imply that (1) foreign IT professionals are complements of American IT professionals, and (2) H-1B professionals may be substitutes for each other because a reduction in their supply affects their wages much more than that of green card holders.

“Would Americans put up with a program that inhibits them from working in London or Paris? Skilled African migrants don’t need international organizations suggesting restrictions on where they should live and work either.” – Laura Freschi

Michael Clemens in the Washington Post on Haiti and immigration:

In research I conducted with economists Claudio Montenegro and Lant Pritchett,we compared how much Haitians earn in the United States vs. Haiti. A moderately educated adult male, born and schooled in Haiti, typically enjoys a standard of living more than six times greater in the United States than in his homeland. In other words, U.S. policy wipes out more than 80 percent of a Haitian’s earning power when it keeps him from coming to the United States. This affects everything from the food he can buy to the construction materials he can afford. The difference has nothing to do with his ability or effort; it results purely from where he is.

HT: MR.

Giovanni Peri & Francisco Requena have a new NBER working paper:

There is abundant evidence that immigrant networks are associated with larger exports from the country where they settle to their countries of origin. The direction of causality of this association is less clearly established… Using micro data on individual trade transactions from Spanish provinces between 1995 and 2008 and data on the stock of immigrants in those provinces by country of origin… we find that immigrants significantly increase exports (elasticity of 0.10), that the effect is almost entirely due to an increase in the extensive margin and that the effect is somewhat stronger for differentiated goods.

Gallup finds about 16% of the world’s adults would like to move to another country permanently if they had the chance. [Note that the map is misleading, as the regional average response is imputed onto all countries in the region.]

HT: Richard Florida.

The Financial Times has multimedia coverage of the impact of the crisis on migrant workers:

The economic downturn has inevitably hit migrant workers hard. Here, reporters from the FT’s foreign bureaux investigate the plight of migrants from Poland and the US to Brazil and China, to see which groups are returning home and which are finding innovative ways to survive the downturn abroad.

• Downturn slows tide of US-bound workers, by Matthew Garrahan
• Families struggle to survive as flow of dollars dries up by Adam Thomson
• Downturn hastens Nigeria’s ‘brain gain’, by Matthew Green
• Thoughts turn to home for white South Africans by Richard Lapper
• Sun sets on migrants’ Japanese dreams by Lindsay Whipp and Jonathan Wheatley
• China schools offer parents incentive to stay put by Tom Mitchell
• Downturn puts paid to Polish mobility by Jan Cienski
• Ukrainians forced to cross border for work by Jan Cienski

Hat tip: Laurence.

Gary Becker wants to charge immigrants $50,000 to enter the United States. He thinks that letting a large number of immigrants come at that price would be preferable to the current quota, which effectively sets the price to infinity for some immigrants.

The crazy thing is that the international labor market is so distorted that migrant laborers are estimated to gain something like $10,000 – $17,000 annually (Lant Pritchett, Let Their People Come), so many might be willing to pay $50,000. But for this proposal to have any credibility, we’d need loans so that immigrants could purchase this massive increase in lifetime earnings. And what would impoverished immigrants pledge as collateral on the loan? This missing market seems crucial, and Becker’s offhand comments (”along the lines of student loans. There would be some role of government because there would have to be some enforcement provision”) aren’t very convincing.

Oddly, the only reason to offer such a proposal is to try to buy off public opposition to increased immigration, but Becker admits that it is a political non-starter.

HT: Emmanuel.

I haven’t examined this issue at all, but Chris Cook tells a plausible story:

Britain’s Home Office operates a surprising policy: helping Manchester United, Arsenal, Chelsea and Liverpool to dominate football’s Premier League whilst also inflating footballers’ wages, so pushing up ticket prices. These all flow from its ill-considered immigration rules.

This would not be such a problem if the government were to confine its attention to the beautiful game. But, now, it is applying the principles that inform its immigration rules for footballers more widely. Under its newly-tightened system, companies can hire non-European staff only if they meet thresholds for skills and training to enter the country.

In football, the rules have long allowed non-Europeans to play professional football in the UK only if they have played internationally, representing a country whose national team is in the world top 70. Rich teams, such as Chelsea, can improve their midfields by hiring Brazilian World Cup winners.

But poorer teams near the bottom of the Premier League cannot shop in that market. For the most part, they are stuck with what they can scrape together from Europe. The result is that weaker teams suffer, particularly when trying to fill specialised positions – good left-backs are rare. In addition, since lousy European players do not face competition from similarly lousy non-Europeans, their wages are driven up. So, as well as making the league competition less intense, these restrictions on the supply of workers help to pump up ticket prices for ropey teams.