Migration

Question 1

What is the relationship between immigration and mechanization?

Answer 1

Immigrants can slow mechanization by providing cheap manual labor, reducing the incentive to automate.

Example: After the 1964 end of the Bracero program (Mexican farm workers), California rapidly adopted tomato harvesters, while Ohio (no braceros) did not.

Question 2

Impact of immigrants short-run vs long-run (graph)

Answer 2

SR: labour supply (vertical line) increase and wage decrease
LR: demand increase due to:

• Immigrants Increase Consumption, firms respond by hiring more workers to meet higher demand
• low-skilled immigrants free natives for higher-skilled work, boosts productivity, raising firms’ willingness to hire and pay higher wages.

Question 3

How can we study the effect of immigration on native workers’ wages, and what is the key identification challenge?

Answer 3

Compare wages in areas with high vs. low shares of immigrants

But the challenge is identification:

• Immigrants are not randomly distributed—they tend to move to places with strong labor demand.
• Differences in wages may reflect pre-existing economic conditions, not the causal impact of immigration.
• Must separate labour demand shocks from the immigration supply response.

Question 4

Why Migration May Not Hurt Wages

Answer 4

1. Increased Demand for goods/services (counter: Czech workers in Germany, but live in Czech Rep.)
2. Availability of cheap labour
3. Locals move to better jobs (occupational upgrading)
4. Immigrations bring new ideas –> innovation & entrepreneurship (43% of Fortune 500 firms were founded by immigrants or their children)

Question 5

What did David Card (1990) find in his study of the Mariel Boatlift, and how did he measure the impact of immigration?

Answer 5

• In 1980, 125,000 Cuban immigrants arrived in Miami, increasing the labor supply by 7%.
• DiD method, comparing wage changes in Miami to four control cities
• Finding: No significant impact on the wages of native Miami workers or on previous Cuban immigrants (even though they were direct labor market competitors)

Question 6

What is the central argument of Clemens (2011) ‘Trillion Dollar Bills Lying on the Sidewalk’?

Required Reading

Answer 6

Method:

• Compare wages of identical workers (same age, education, gender) in origin vs. destination countries.
• Adjust for selection bias using the top earnings they could earn at home.

Findings:

• Eliminating migration barriers could yield gains of 50–150% of world GDP—far more than removing trade or capital flow barriers.
• Workers with the same skills and experience earn 5x–10x more simply by moving to a richer country (location-specific productivity and institutions)
• Small or zero negative effects on native wages or employment

Question 7

Economic Effects of Migration (On Immigrants)

Answer 7

Immigrants gain access to better institutions and infrastructure => higher productivity

Question 8

Cultural Dilemmas

Answer 8

Harari’s Three Debates:

1. Host country allows Immigrants in: Is this a Duty or a Favour?
2. Immigrants must embrace host country’s core norms/values: But how much?
3. When are migrants “one of us”?

Question 9

Foreign Aid VS Migration

Pritchett (2018)

Answer 9

Spending $4,545 per person produced annual income gains of just $344.

If the same person is allowed to migrate to a richer country like the US, they can earn: $17,115 more per year, without any spending from the host country.

Question 10

Why Do Governments Choose Aid?

Answer 10

Many voters worry about the cultural and economic effects of immigration. Aid programs can be controlled and measured domestically.

Question 11

What are the key findings of George Borjas (1995) in “The Economic Benefits from Immigration”?

1995

Answer 11

• Immigration creates a small net economic gain for the host country—about 0.1% of U.S. GDP, known as the immigration surplus.
• The surplus arises from wage reductions for native workers, which benefit capital owners through lower labor costs—resulting in a redistribution of income.
• The size of the surplus depends on immigrant skill composition: greater gains occur when immigrants are less substitutable for native workers (i.e., bring different skills).

Question 12

Guest Worker Programs (GWPs)

Answer 12

• Legal, temporary migration schemes with quotas.
• In Hong Kong and Singapore, foreign housekeepers/nannies make up ~7% of the labor force (vs. 0.3% in the U.S.). Their presence frees high-skilled women to work outside the home, boosting national income by 1.3–3.3%.
• Global gains: $56B to rich countries + $305B to migrants/year