Dazzling Knowledge

Thursday, January 24, 2008

The best but least popular way to help to poor of the world, particularly the "Bottom Billion," is freedom of migration:

Pritchett is the author of a powerful new book that catalogues the staggering gains to be had from a liberalized immigration regime. Let Their People Come (Center for Global Development) relates, simply and unrelentingly, the voluminous data on global migration. If the 30 affluent countries making up the Organization for Economic Cooperation and Development (OECD) were to allow just a 3 percent rise in the size of their labor forces through loosened immigration restrictions, claims a 2005 World Bank report, the gains to citizens of poor countries would amount to about $300 billion. That’s $230 billion more than the developed world currently allocates to foreign aid for poor countries. And foreign aid is a transfer: The $70 billion that rich countries give leaves those countries $70 billion poorer. According to the World Bank study, wealthy nations that let in 3 percent more workers would gain $51 billion by boosting returns to capital and reducing the cost of production.

The aggregate gains from a regime of completely open borders are so large as to seem unreal, but immigration policy is perhaps best understood at the level of the individual. According to World Bank economists Martin Rama and Raquel Artecona, data from the 1990s show that a Vietnamese laborer who moves to Japan will make nine times what she would at home, adjusted for purchasing power. A Guatemalan will find wages for the same work increase sixfold in the United States; a Kenyan who moves to the U.K., sevenfold. “These wage gaps create pressure for migration,” Pritchett writes, “because they are not primarily explained by differences in the characteristics of people. Wage rates are predominantly characteristics of places.” The biggest single determinant of how well off you will be is not the college you get into, the color of your skin, your gender, or your work ethic; it’s the country listed on your passport.

Reason's Kerry Howley interviews Pritchett here.


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