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Open Borders

Author

Listed:
  • 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)

Suggested Citation

  • John Kennan, 2013. "Open Borders," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 1-13, April.
  • Handle: RePEc:red:issued:12-8
    DOI: 10.1010/j.red.2012.08.003
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    File URL: http://dx.doi.org/10.1016/j.red.2012.08.003
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    References listed on IDEAS

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    1. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
    2. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, January.
    3. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 300-323, April.
    4. Todd Schoellman, 2012. "Education Quality and Development Accounting," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 388-417.
    5. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    6. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
    7. 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.
    8. Richard B. Freeman, 2006. "People Flows in Globalization," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 145-170, Spring.
    9. Francesco Caselli & James Feyrer, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 535-568.
    10. 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, Oxford University Press, vol. 114(1), pages 83-116.
    11. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters,in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72 National Bureau of Economic Research, Inc.
    12. 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.
    13. 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.
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    Citations

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    Cited by:

    1. Marco DELOGU & Frédéric DOCQUIER & Joël MACHADO, 2013. "The dynamic implications of liberalizing global migration," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013029, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Costanza Biavaschi & Michal Burzynski & Benjamin Elsner & Joël Machado, 2016. "The Gain from the Drain - Skill-biased Migration and Global Welfare," CReAM Discussion Paper Series 1624, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    3. Bernt Bratsberg & Oddbjørn Raaum & Knut Røed, 2017. "Immigrant labor market integration across admission classes," CReAM Discussion Paper Series 1702, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    4. Jan Ditzen, 2014. "Economic Growth and Migration," SEEC Discussion Papers 1406, Spatial Economics and Econometrics Centre, Heriot Watt University.
    5. Davide Gandolfi & Timothy Halliday & Raymond Robertson, 2017. "Trade, FDI, migration, and the place premium: Mexico and the United States," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 1-37, February.
    6. John Kennan, 2014. "Freedom of movement for workers," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-86, September.
    7. Biavaschi, Costanza & Elsner, Benjamin, 2013. "Let's Be Selective about Migrant Self-Selection," IZA Discussion Papers 7865, Institute for the Study of Labor (IZA).
    8. Zimmermann, Klaus F., 2013. "The Mobility Challenge for Growth and Integration in Europe," IZA Policy Papers 69, Institute for the Study of Labor (IZA).
    9. DELOGU Marco & DOCQUIER Frédéric & MACHADO Joël, 2017. "Globalizing labor and the world economy: the role of human capital," LISER Working Paper Series 2017-16, LISER.
    10. Zimmermann, Klaus F., 2013. "Reflexionen zur Zukunft der Arbeit," IZA Standpunkte 56, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Immigration; Factor price equalization;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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