Immigration Is Development and a Development Tool

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Immigration Is Development (and a Development
Tool)

• Lant Pritchett
• May 26th, 2009
• Beyond the Fence

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Immigration is a Development Tool

• Development as people not place
• Good for income, poverty, HDI, freedom
• Movers and Non-Movers
• Depends on the people, type of migration, and
  country circumstances
• Development as accelerated four-fold
  modernizationis migration good for nationalism?

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The common, but crazy, measures of development
Haitian moves from making 2/hr (above average,
above Poverty line) in Haiti to making 8/hr
(below average, below poverty line (large
family)) and considers him/herself much better off
USA Average wage 15/hr Poverty line 15/day
Haiti Average Wage 1 hr Poverty Line 2/day
Suppose no impact on anyone else (envelope
theorem?) --what happened to development? By
all existing indicators development got worse
in both places Average wages fell, poverty rates
rose even if everyones well being increased.
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Development as if people matteredIncome per
natural (Clemens and Pritchett) keeps movers
income in the accounting
Guyanese have same Income per natural as
Braziliansjust not in Guyana
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Development as if people matteredIncome per
natural keeps movers income in at least
someones accounting
Even if the effect isnt big in the aggregate
(e.g. Peru), at least the changes in Income Per
Natural (Peruvians not Those in Peru) get the
right weight in well-being measures at the
margin
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Same is true for any other reasonable definition
of development

• Dont like income, then use (global or national)
  poverty (nearly all non-poor Haitians live
  outside Haiti)
• Dont like money measure, then use HDI per
  naturalinfant mortality, schooling gains are
  just as big
• Dont like any of that because development is/as
  freedomwhat could be more essential to freedom
  that personal mobility (e.g. ending apartheid,
  serfdom, slavery)

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Impact of Movers on Non-Movers in Developing
Countries (the Left Behind)
Rremittances, FSFamily Separation, Wwages,
CVCortex Vortex, PEPecuniary Externality,
RPReform Probability
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Unskilled Labor Why not a no-brainer?

• All people linked to migrants by remittances get
  remittances (circular)
• Cost is family separationon which empirical
  evidence is mixedbut in any case we should
  assume it is internalized
• Reduces supply of low/medium skilled wages so low
  skill wages should rise (good for average, good
  for inequality)
• No obvious negative external ramifications

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Are remittances extra good?

• Two gap thinking might lead one to expect
  remittances are not just good (e.g. increase
  utility) but extra good as they relieve binding
  constraints to growth (FEX gap or investment
  gap)no reason to believe this (or be
  concerned)
• IF returns to investment are high (e.g. good
  business environment, good financial system) then
  might expand S in way that expands I in way that
  increases gbut often not.

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In many plausible models there is nothing special
about remittances

• Worker in San Antonio Texas gets a job in Houston
• Is single and spends/saves incomeno
  remittances
• Is married, husband doesnt move, wages deposited
  in joint account, remittance?
• Job is in Baton Rouge Louisiana?
• Is married, husband moves, no remittance.
• Is married, husband doesnt move, deposited into
  joint account in Texas, remittance?
• Job is in Nogales, Mexico
• Is married, husband doesnt move, deposited into
  joint account in Texas, remittance?

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High Skill Migrants

• Remittances are still on the positive side of the
  ledger (maybe less, maybe more)
• Thee possible (general, first order) effects on
  non-linked, non-movers
• Cortex Vortex has negative productive
  externalities
• Movement of skilled labor leads to a net
  reduction in skilled labor with a negative
  pecuniary externality
• Movement of skilled labor leads to a change in
  the likelihood of growth/well-being enhancing
  reforms
• The likelihood of these likely differ across the
  growth state an economy is in

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Productive Externality

• No one has ever empirically demonstrated an
  empirically or statistically significant
  externality to human capital (and most of the
  evidence suggests that private and social returns
  are roughly equal)
• In otherwise
• Boominglikely a positive effect (e.g. circular
  effects, e.g. Korea)
• Ghostlikely no effect (kind of by definition)

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Productive Externality in Fixable Stagnaters

• Likely near zero impact without reform (e.g.
  impact of incremental HK on growth unlikely to
  make the difference)
• Does the movement of high skill workers increase
  or decrease the likelihood of the initiation of a
  sustained growth acceleration?
• All kinds of stories, both positive (e.g.
  demonstration effects, rent capturing) and
  negative (reduces commitment of elite to progress)

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Pecuniary Externality

• Net emigration of the high skilled leads to net
  reduction in the domestic supply of high skilled
• Raises the price of the goods that are intensive
  in high skilled labor reducing the welfare of
  those whose consumption is intensive in those
  goods
• For those high skill intensive services which are
  publicly produced this has a secondary fiscal
  impact (deadweight loss of incremental taxation)

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Aside Economics typically treats productive and
pecuniary externalities completely differently

• I run a laundry service that hangs clothes
  outdoors to dry. You come into town and start a
  kiln that produces smoke that reduces my profits
  by increasing my costs Negative productive
  externality, polluter pays a plausible default
• I run a laundry service that hangs clothes
  outdoors to dry. You come into town and start a
  laundry that produces clear laundry that reduces
  my profits by reducing my prices Negative
  pecuniary externality, free market a plausible
  default (certainly not tort action against
  entrant)

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Does emigration reduce net domestic supply?

• No reason to assume the stock is fixed
• Chand and Clemens (later today)clearly not.
• Could act as an increase in the return, increase
  the net supply (e.g. Clemens, nurses in the
  Philippines).
• Might discourage accumulation (e.g. Mexico)

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The controversial cases Negative pecuniary
externalities on publicly produced services (e.g.
nurses in health)

• Suppose governments run feeding programshould it
  ban the export of wheat to lower its price to
  them?
• Suppose governments build roadsshould it ban the
  export of gravel to lower its price to them?
• Suppose the government builds cannonsshould it
  ban the export of steel to reduce its price to
  them?
• Suppose the government produces health services
  with nursesshould it ban a domestic private
  sector in health to reduce the price of nurses?
• Actions of the state to reduces its own prices
  are factor specific taxation (e.g. ex post
  selective expropriation) to fund its fiscal need
  is this part of the optimal tax structure?

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Are these effects really first order, even in
their sector?

• India exports doctors
• Around half of public sector doctors are absent
  on any given day
• A huge effort deficit in treatment leads their
  public practice to be apparently health reducing
  (Das and Hammer)
• 85 percent of curative care visits are to provide
  providers
• Barely half of children are fully vaccinated
• Almost half of children are malnourished
• Where does the brain drain of doctors rank on
• health improvement priorities?

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Development is a descriptive and proscriptive
theory ofwhat?
The Goal Denmark (Economically prosperous,
politically liberal (rights respecting
democracy), administratively capable, socially
cohesive)
Modern (Industrial, High income,
Market) Pre-Modern
Modern (Nationalism as a primary
ascriptive Identity) Pre-Modern
Modern (Democratic, Rights respecting, Secular)
Pre-Modern
Modern (Weberian Bureaucracy, Professionalized C
ivil Service ) Pre-Modern

Economic
Administrative
Social
Political
Development is a particular theory of
modernization which has nation-states as its
primary objects of enquiry
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Is immigration good for the development of
nation-states?
The Goal Denmark (Economically prosperous,
politically liberal (rights respecting
democracy), administratively capable, socially
cohesive)
Modern (Industrial, High income,
Market) Pre-Modern
Modern (Nationalism as a primary
ascriptive Identity) Pre-Modern
Modern (Democratic, Rights respecting, Secular)
Pre-Modern
Modern (Weberian Bureaucracy, Professionalized C
ivil Service ) Pre-Modern
Nationalism as social identity promotes political
modernization

Nationalism as social identity promotes
administrative order
Social Inimical to many notions
of nationalism which are condition of
birth dependent
Economic Mostly neutral, Definitely second order
Political Complicates extension of equal
rights to all?
Administrative C.P Neutral
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Is a development that promotes nationalism
and nation-state-ism good for human well-being?

• Modernization as a description of the rise of
  the Westunbelievable progress
• Development as consciously accelerated
  modernizationamazing successes (e.g. Japan)
• Nearly all the evils of the 20th century can be
  laid at the feet of nationalism (e.g. the
  Holocaust) and directed accelerated
  modernization (e.g. Stalin, Mao)
• In large swaths of the globe the attempts at
  accelerated modernization have left us no
  closer to

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Is a development that promotes nationalism
and nation-state-ism good for human well-being?

• Modernization as a description of the rise of
  the Westunbelievable progress
• Development as consciously accelerated
  modernizationamazing successes (e.g. Japan)
• Huge successes in specific dimensions (e.g.
  health) and those aligned with nation-state-ism
  (e.g. education)
• Nearly all the evils of the 20th century can be
  laid at the feet of nationalism ideologies
  (e.g. the Holocaust, Rwandan genocide,
  ex-Yugoslavia atrocities) and centrally directed
  accelerated modernization (e.g. Stalin, Mao)
• In large swaths of the globe the attempts at
  proscriptive accelerated modernization have
  left us no closer to Denmark and probably
  further(e.g. DRC, Somalia, Southern Sudan,
  Nepal, Myanmar, Cambodia, PNG) and lots of places
  with mixed progress (national sovereignty itself
  a decidedly mixed blessing, e.g. Hausmann et al)

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Lets talk justice, Rawlsian style
Would anyone, behind a veil of ignorance about
where they would be born agree to this
distribution?
including the use of coercion to stop people
from crossing borders to carry out mutually
beneficial economic transactions?
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What if these collide?
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Clennsenism (Clemens, Lennon, Sen)

• Imagine theres no country Assessments of
  human well-being not place dependent or spatially
  aggregated
• Development as Freedom Expansion of human
  freedoms the correct metric of human well-being
• Clemens When could it possibly be that
  restrictions on a fundamental human freedom of
  mobility can justified as promoting
  development?
• If immigration is bad for development as
  proscriptive guide to four-fold accelerated
  modernization of nation-states but good for
  development as globally measured human
  freedom/well-being I am for immigration