Working Paper: NBER ID: w8971
Authors: Donald R. Davis; David E. Weinstein
Abstract: Two facts motivate this study. (1) The United States is the world's most productive economy. (2) The US is the destination for a broad range of net factor inflows: unskilled labor, skilled labor, and capital. Indeed, these two facts may be strongly related: All factors seek to enter the US because of the US technological superiority. The literature on international factor flows rarely links these two phenomena, instead considering one-at-a-time analyses that stress issues of relative factor abundance. This is unfortunate, since the welfare calculations differ markedly. In a simple Ricardian framework, a country that experiences immigration of factors motivated by technological differences always loses from this migration relative to a free trade baseline, while the other country gains. We provide simple calculations suggesting that the magnitude of the losses for US natives may be quite large $72 billion dollars per year or 0.8 percent of GDP.
Keywords: No keywords provided
JEL Codes: F2; J6; F1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological advantages (O33) | Natives incur losses (J15) |
| Immigration diminishes monopoly power (K37) | Reduced welfare for natives (H53) |
| Trade from technological differences (F16) | Migration does not lead to mutual gains (F22) |
| Inflow of productive factors (F16) | Losses for natives (J15) |
| Collective impact of multiple factor inflows (F62) | Economic dynamics (E32) |