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  • John Kennan

    (University of Wisconsin, Madison)

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 raises the income level in less-developed countries by two-thirds. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2012.08.003
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 16 (2013)
Issue (Month): 2 (April)
Pages: L1-L13

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Handle: RePEc:red:issued:12-8

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Related research

Keywords: Immigration; Factor price equalization;

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References

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  1. Francesco Caselli, 2004. "Accounting for Cross-Country Income Differences," NBER Working Papers 10828, National Bureau of Economic Research, Inc.
  2. Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
  3. Ben S. Bernanke & Refet S. Gurkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously," NBER Working Papers 8365, National Bureau of Economic Research, Inc.
  4. Storesletten, Kjetil, 1998. "Sustaining Fiscal Policy Through Immigration," Seminar Papers 664, Stockholm University, Institute for International Economic Studies.
  5. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, 01.
  6. Richard B. Freeman, 2006. "People Flows in Globalization," NBER Working Papers 12315, National Bureau of Economic Research, Inc.
  7. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  8. Michael A. Clemens, 2011. "Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 83-106, Summer.
  9. Todd Schoellman, 2012. "Education Quality and Development Accounting," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 388-417.
  10. Lutz Hendricks, 2002. "How Important Is Human Capital for Development? Evidence from Immigrant Earnings," American Economic Review, American Economic Association, vol. 92(1), pages 198-219, March.
  11. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  12. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-87, December.
  13. Klein, Paul & Ventura, Gustavo, 2009. "Productivity differences and the dynamic effects of labor movements," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1059-1073, November.
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Citations

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Cited by:
  1. Zimmermann, Klaus F., 2013. "Reflexionen zur Zukunft der Arbeit," IZA Standpunkte 56, Institute for the Study of Labor (IZA).
  2. Frédéric DOCQUIER & Marco DELOGU & Joël MACHADO, 2014. "The dynamic implications of liberalizing global migration," Working Papers P88, FERDI.
  3. Zimmermann, Klaus F., 2013. "The Mobility Challenge for Growth and Integration in Europe," IZA Policy Papers 69, Institute for the Study of Labor (IZA).
  4. Biavaschi, Costanza & Elsner, Benjamin, 2013. "Let's Be Selective about Migrant Self-Selection," IZA Discussion Papers 7865, Institute for the Study of Labor (IZA).

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