David R. Henderson  

Note on Borjas: Non-Binding Constraints Are Not Necessary

PRINT
Trillion Dollar Bills on the S... AD: Eleven stages of enlighte...

One of the most articulate critics of expanded immigration into the United States is Harvard economics professor--and immigrant--George J. Borjas. Because I wanted someone who knew the facts about immigration to the United States and could present a balanced view of immigration, noting costs and benefits, I commissioned him to write the articles on immigration in both editions of The Concise Encyclopedia of Economics. See here for the article in the first edition and here for the article in the second edition.

I still think he did a good job in both. In retrospect, though, I was, as editor, too accepting of his implicit nationalistic way of judging costs and benefits. Notice that in neither article does Borjas discuss benefits to the immigrants.

Co-blogger Bryan Caplan has ably criticized the sections of George Borjas's recent book in which he expresses skepticism about how many low-wage people would move from poor countries to richer countries in response to wage differentials if immigration restrictions were removed. I lean strongly toward Bryan's critique.

But here's what I don't get. If Borjas were right that relaxing immigration restrictions substantially would not lead to much immigration, how is that an argument for keeping the restrictions? Borjas's argument is that moving costs on their own would heavily limit the number of people moving. So why would Borjas have the government impose what he seems to suggest is close to a non-binding constraint?

Incidentally, this view that moving costs heavily constrain moves, even within the United States is new to Borjas. Here's what he wrote in his article in the second edition of The Concise Encyclopedia:

The early empirical evidence on this subject seemed to indicate that immigration did not have a substantial impact on the labor market opportunities of native workers. This evidence was based on the speculation that if the services of natives and immigrants are interchangeable, natives should earn less in cities where immigrants are in abundant supply, such as Los Angeles or New York, than in cities with relatively few immigrants, such as Nashville or Pittsburgh. Although natives do earn somewhat less in cities with large immigrant populations, the correlation between the native wage and the presence of immigrants is close to zero.

Further evidence of the weak correlation comes from the Mariel boatlift. In April 1980, when Fidel Castro declared that Cubans wishing to emigrate could leave from the port of Mariel, 125,000 people accepted the offer and Miami's labor force suddenly grew by 7 percent. Yet, the trends in wages and unemployment rates in Miami between 1980 and 1985, including those of black workers, resembled those observed in comparable cities.

Such evidence, however, is not conclusive. This approach to measuring the labor market impact of immigration ignores the fact that labor and capital are mobile between cities. If an influx of immigrant workers reduced wages substantially in a particular city, native workers and some immigrants would leave that city and find work elsewhere. And natives who contemplated migrating to that city would choose another destination. Also, capital would "migrate" to cities with large numbers of unskilled immigrants, where capitalists can earn a greater return on their investment. Large-scale immigration, therefore, may not drive down wages in particular cities. Rather, its depressing effect on wages is nationwide.


Notice that in the crucial third paragraph, Borjas does use the word "may" and the evidence on moving costs that he cites is his latest book came well after he wrote the piece for the Encyclopedia. So this is not a "gotcha." Rather, I'm pointing to a tension between his earlier and more recent views. Assume, as Borjas now believes, that moving costs within America are very high. Then his reasoning in the above quote does not follow. In other words, if moving for native Americans is very costly, then we would not see the movement of native workers between cities that he suggests is responsible for the apparent absence of negative effects of immigrants on native workers' wages. Then the apparent absence of negative effects within a city that has a lot of immigrants would suggest that immigrants really do not have a substantial negative effect.

P.S. I note that Tiago makes my point in a comment on Bryan's post.



COMMENTS (9 to date)
Tom West writes:

So why would Borjas have the government impose what he seems to suggest is close to a non-binding constraint?

Not saying I agree with him, but one reason is that such battles have an opportunity cost.

If there are multiple policies that one wants to see enacted that are going to have to be "imposed" upon an "unwilling" populace (using efforts to sway opinion through media as well as simple political capital to ram legislation through), then it makes sense to go for the one that will show the most amount of return, rather than ones that might be even more morally correct.

Eelco Hoogendoorn writes:

I still think he did a good job in both. In retrospect, though, I was, as editor, too accepting of his implicit nationalistic way of judging costs and benefits.

I agree, it is a shame he leaves that implicit. Then again, if he tried to make an empirical estimate of the revealed preferences, concerning how much people value a dollar accrued to themselves or their kin, versus a dollar accrued to a stranger, its quite likely he would never find employment in a respectable institution of the Cathedral again.

Similarly, should you make your universalist assumptions explicit; that we ought to weight the utility of the out-group equally to the utility of our in-group, your position would lose what little credibility it has with people of common sense.

And so the sermons to the choir rage on...

David R. Henderson writes:

@ Eelco Hoogendoorn
There’s no need to make any assumptions about utility explicit. I would just like to know, as an economist, what the dollar gain to immigrants is. Then people can put whatever weights they want on the gains to natives and immigrants.
This has nothing to do with a choir. It just has to do with good economics.

Eelco Hoogendoorn writes:

@David

You are correct; your post here does not really touch on what ought to be. Perhaps I am reading too much in your endorsement of Brians critique of Borjas, whom as usual when writing on this topic, does appeal to a few oughts here and there.

Nonetheless, you criticize Borjas implicit 'nationalistic' judgment. But I would say that whether immigrants stand to gain from immigration is hardly the point of contention in the immigration debate; revealed preferences and all. It is only under a highly unnatural assumptions of how people do in fact 'weight their utility functions', that his focus on the impact on natives is not the most relevant issue.

David R. Henderson writes:

@Eelco Hoogendoorn,
Perhaps I am reading too much in your endorsement of Brians critique of Borjas, whom as usual when writing on this topic, does appeal to a few oughts here and there.
No, you’re not reading too much into it. I share Bryan’s “oughts.” It’s just that I was making a different point: the large gains to immigrants were not even mentioned.
But I would say that whether immigrants stand to gain from immigration is hardly the point of contention in the immigration debate
True. I do think, however, that a fair number of Americans care somewhat about foreigners and that many of them would be surprised at the potentially huge gains to be had.

Thomas Sewell writes:
So why would Borjas have the government impose what he seems to suggest is close to a non-binding constraint?

This argument reminds me of the people who argue that there are natural monopolies in certain industries where competition wouldn't be efficient nor sustainable, therefore the government must make competition illegal in that industry and select the only company allowed to do business.

That's never made any sense to me either....

ColoComment writes:

I don't have a high-level comment to make. I just want to pass along an anecdote that I read a few days ago in a FB group that I belong to. If you want open borders, you'll have to convince people like this woman that the consequences would be at worst neutral for her and her family and families like hers. This is what she wrote (BTW, I have no idea where she lived or moved to, and I assume that her comments re: "illegals" would/could be applied to all open-border immigrants):

"The fact is that our entire life was changed by illegal immigration. We lived in a neighborhood, that we paid a premium for, because the elementary school was #1 in the area. The school went from #1 to #11 due to non English speakers flooding the area. Native English speakers were turned into teacher's aides. In fact, my son Tim in 2nd grade was pulled out of the classroom, without my permission, every Tuesday afternoon to tutor a non-English speaker under the guise that this was "culturally enriching" for Tim.
The first thing we did was put our children in private school. However, other services degraded rapidly like the library, parks, health care and police and fire. Budgets were cut to afford more to the social services that illegals needed rather than the services that the American citizens wanted.
So, we moved to an area that was relatively untouched by illegal immigration. Hint: one way you know who is in your school district is by looking up the percentage of children needing free and subsidized food at school. We moved DIAGONALLY ACROSS THE COUNTRY to provide our children with an education. In short, we bought ourselves out of the problem.
Not only did this cost a LOT OF MONEY it also caused a huge dislocation in all our lives. I have to say that my son Tim suffered the worst and I feel sorry about it to this day."

That is a sample of what you have to contend with, the experience of which you need to assuage actual and immediate consequences of unmonitored and unaccountable immigration. ... if you want to encourage the social and cultural acceptance necessary to change the law.

Ken from Ohio writes:

In response to Colocomment

The point you make is consistent with the big picture message that Prof. Borjas makes in his book.

Throughout his book he uses econometric models to estimate the cost and outcome of different assumptions.

But these models assume that the social institutions remain constant - unchanged.

In the end, however, he presents the very real prospect that large scale immigration would be very disruptive to domestic institutions. These disruptions are often intangible and impossible to build into a model.

But these disruptions are very real - as Colocomment illustrates

Steve Sailer writes:

"In April 1980, when Fidel Castro declared that Cubans wishing to emigrate could leave from the port of Mariel, 125,000 people accepted the offer and Miami's labor force suddenly grew by 7 percent. Yet, the trends in wages and unemployment rates in Miami between 1980 and 1985, including those of black workers, resembled those observed in comparable cities."

No, the problem with David Card's oft-cited study is that there were no cities comparable to Miami from 1980 to 1985: those were the years of the historic Cocaine Boom in Miami made famous in "Scarface" (1983) and "Miami Vice" (1984). Here's a 1981 Time magazine cover story on Miami:

http://content.time.com/time/magazine/article/0,9171,922693,00.html

POST A COMMENT




Return to top