Working Paper: NBER ID: w18307
Authors: John Kennan
Abstract: There is a large body of evidence indicating that cross-country differences in income levels are associated with differences in productivity. If workers are much more productive in one country than in another, restrictions on immigration lead to large efficiency losses. The paper quantifies these losses, using a model in which efficiency differences are labor-augmenting, and free trade in product markets leads to factor price equalization, so that wages are equal across countries when measured in efficiency units of labor. The estimated gains from removing immigration restrictions are huge. Using a simple static model of migration costs, the estimated net gains from open borders are about the same as the gains from a growth miracle that more than doubles the income level in less-developed countries.
Keywords: Immigration; Economic Efficiency; Productivity; Open Borders
JEL Codes: E25; F11; F22; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| immigration restrictions (K37) | efficiency losses (D61) |
| removing immigration restrictions (K37) | economic efficiency (D61) |
| productivity differences (O49) | income levels (J31) |
| free movement of labor (J61) | economic efficiency (D61) |
| gains from open borders (F55) | income levels in developing countries (F63) |
| wage structure changes (J31) | potential losses for residents in developed countries (F65) |