Why I believe David Card’s results on immigration and wages

by on May 22, 2006 at 6:52 am in Economics | Permalink

As MR readers will know, a famous David Card paper shows that the presence of many immigrants in a city does not much lower wages, if at all.

The obvious rejoinder is that cities with growing wages might attract more immigrants.  The new immigrants will cause local wages to fall back down, resulting in a lack of regional correlation between wages and immigration.  Without the immigrants maybe those locales would have had higher wages.  So what does the Card paper really show?

Keep three points in mind:

1. The skeptical story does not consider all possible adjustments.  Had there been no new immigrants in the growing cities, American workers would have moved in to take advantage of the higher wages, thereby pushing wages back down again.  The U.S. has the most mobile labor supply of any developed country.  So the net wage depression effect of new immigrants — taking all supply adjustments into account — still would be zero or very small for many places.

Note that this point, while it responds to Card skeptics, also creates some problems for the Card paper.  It suggests that the labor market is defined at the level of the nation as a whole rather than the city or region.  It is then no surprise — no matter what your view of immigration — if local labor conditions do not much correlate with local wage levels. 

But invoking this point about the national scope of the labor market also blunts fears about how immigrants depress wages.  Suddenly the question is not how many Mexicans are pouring into Texas, California, and Arizona.  The question is rather how many Mexicans are pouring into the United States.  But the larger the relevant market size, the better a job we will do absorbing immigrants.  And the smaller the effect on domestic wages we should expect.  To run a contrasting thought experiment, just try putting them all in Geneva, or better yet Soglio.

2. Have I mentioned capital mobility?  Foreign capital flows into the U.S. all the time.  Even when the Chinese buy T-bills, this frees up domestic private capital to put more people to work.  Having more immigrants encourages more capital to flow in.  If both labor and capital enter the country, there is no reason to expect immigration to lower domestic wages.

3. Are rising wage levels the key factor in drawing Mexicans to a region?  El Paso appears to be one counterexample.  In many cases proximity to the border and clustering effects seem to be more important.  In that case the Card test has less of a problem with endogeneity.  Still, I do not know the formal evidence on this point, so in the comments please pass along your expertise…

David Hummels May 22, 2006 at 9:57 am

Trade economists focus on the Rybczynski effect as another channel through which increased supplies of unskilled labor can be absorbed without affecting relative wages. Simply, a rise in unskilled labor supply leads to a more than proportional increase in the output of unskilled labor intensive industries. The result is an increase unskilled labor demand that offsets the supply increase, leaving wages unchanged.

Huggy May 22, 2006 at 11:59 am

All this stuff is acadimic fluff. If you can’t turn your bright ideas into useful political messages then it will never be tried out.
“Profiles in (economic) courage” would be a good working title.

tom May 22, 2006 at 12:26 pm

“Without the immigrants maybe those locales would have had higher wages. So what does the Card paper really show?†

“1. The skeptical story does not consider all possible adjustments. Had there been no new immigrants in the growing cities, American workers would have moved in to take advantage of the higher wages, thereby pushing wages back down again.†

But American workers would have moved out of other area to take advantage of higher wages in the city, which would drive up wages in the area they have moved out from!

“2. Have I mentioned capital mobility? Foreign capital flows into the U.S. all the time. Even when the Chinese buy T-bills, this frees up domestic private capital to put more people to work. Having more immigrants encourages more capital to flow in.†
What increases capital investment is not increased immigrants but increased savings. In addition, do companies really make a decision to increase the amount of capital investments based on an increase in illegal aliens or immigration in general?! Certainly, if one is looking to invest where there is excess labor and a paucity of capital one could do better than invest in the US. Do you have any evidence supporting your claim that immigrants encourage increased capital investments?

“If both labor and capital enter the country, there is no reason to expect immigration to lower domestic wages.†
Maybe, depending upon the amount of capital and labor entering the country, but wages would be higher if less labor entered the country increasing the capital per worker ratio.
Your two points in particular do show that wages would be higher with less illegal immigration, which is another wage of saying that illegal aliens lower wages for US workers! Thanks for the information Tyler.

PrestoPundit May 22, 2006 at 12:55 pm

Card is doing the usual economist thing — “assume a can opener” — as the old joke has it. Card has no access to the alternative world where immigrants haven’t flooded into America. One of the effect of the flood in California is that millions of native born Americans have exited the state i.e. there is huge net native born emmigration from the Golden State. It should also be considered that a majority of the black population between 20 and 30 has simply left the job market.

The upshot is that there are no “closed economies” in the American labor market — assuming a “closed economy” being another classic economist joke, one that Card can’t help but tell.

save_the_rustbelt May 22, 2006 at 1:17 pm

The African-Americans who are being fired to make way for cheaper illegals don’t care much about what economists have to say, and they don’t care much about the national labor market.

Matt May 22, 2006 at 2:25 pm

Comments have started to get really embarassing – maybe it is time to reconsider policy given the heat/light ratio generated in response to immigration posts (which have been your most interesting ones of late)?

At least Sailer hasn’t come by yet and claimed that Card’s study doesn’t consider cost of living differences. That would be REALLY embarassing for the future of quality comments …

Steve Sailer May 22, 2006 at 3:30 pm

The most realistic model would fall in between Card’s purely local one and Borjas’s national one: without foreign immigration, American labor would flow from low wage to high wage cities, but of course it wouldn’t be a friction-free flow. American workers would require a wage premium to get them to move away from family and friends in their hometowns and off to some boomtown in the desert. But that wage premium gets hammered down by illegal immigration, so lots of Americans don’t find it worthwhile to move from their Rust Belt homes.

In contrast, in the 1950s and 1960s, moving to Southern California was almost a no-brainer decision for millions of average American Joes — the LA economy was booming, wages were relatively high because of immigration restrictions, and the cost of living was relatively low. There was a sizable increase in the welfare of the average American because Southern California was open to them. But, that’s no longer true.

From the Mexican illegal immigrant’s point of view, he has similar wishes — he too doesn’t want to move that far in distance, or in climate, and would like to live somewhere close to other Mexican immigrants. But, for him, the wage premium of sneaking across the border is so huge that he has already made up his mind to move, so of course he will go to the boom towns like Las Vegas rather than to the bust towns like Pittsburgh.

The other thing to keep in mind is that most of the American boomtowns in recent decades have been west or south of the Rust Belt — i.e., in the general direction of Mexico. This means that for Mexican illegal immigrants, there is less of an adjustment necessary in terms of climate, distance from home, and local demographics than if this process wasn’t going on. To help you understand this better, imagine that Quebec was the main source of illegal immigration. Then, the American boom towns would be located away from them. But, Mexicans are lucky in that the boom towns are coming towards them.

Foobarista May 22, 2006 at 3:53 pm

More on the “illegal jobs” – not all the aspects of an illegal job are necessarily bad for the employee; often part of a restaurant worker’s pay is room and board, with “board” meaning a bed in a crowded apartment near the restaurant. It may suck, but low-pay jobs suck generally and at least a diligent saver can save quite a lot of money working this way. So part of the answer may be in making it easier to do these sorts of arrangements legally without a ton of regulations and extra taxes getting in the way.

Also, in Silicon Valley at least, even illegal workers are usually paid more than the minimum wage, so it isn’t necessarily wage laws that drives the work underground.

Econonut May 22, 2006 at 4:06 pm

Even this novelist understand the basic principle here.

http://www.washingtonpost.com/wp-dyn/content/article/2006/05/19/AR2006051901524.html

“To assert as some have that illegal immigrants do not depress wages because they do the jobs Americans refuse is the kind of nonsense economists speak when they strain to be counterintuitive. It is similar to saying that cheap imports do not hold down prices. If employers paid higher than substandard wages, Americans (who famously do almost anything for money, including eating worms, shooting themselves from cannons and listening to Barbra Streisand sing) would take these jobs.”

Teller May 22, 2006 at 5:00 pm

You guys are hilarious!

1. The Ottoviani and Peri paper strongly CONFIRMS our arguments, and REFUTES yours and Cards!

What they do is to include capital, and also to have less of substitution between foreign and domestic workers. (if American unskilled and Mexican unskilled are less of substitutes the later will effect the wage of the former less, fair enough).

What do they find for unskilled? Gee, it seems the own elasticity is very similar to Evil racist Borjas, 0.3. On what basis do you call that “negligible†? Maybe it is to you, but not to poor Americans.

The effect on unskilled Americans in the 1990-2000 years alone was a drop in wages of 4.5% (other specification give even stronger results). Borjas get’s 7.2% dropp 1980-2000,. These are very similar figures, and both suggests that common sense and economic science is correct: Supply effects wages. Amazing no?

Now comes the funny part. Do you know why the effect on the low-skilled Americans have not been even stronger? Because immigration also includes High skill foreigners. In the long run the composition of the labor force is what determines relative wages for different groups, high skill workers pull up the wages of low skill, wheras the low-skill immigrations press downward the wages of low-skill, and help high skill.

So given the article you yourself cite, what do you think is smarter: the present policy of dramatically INCREASING extremely unskilled immigrants from Mexico, or instead doing what I, David Victor Hansen and Sailer propose, instead taking in more elite immigrants from Asian and Europe?

Economics is a science, it is not some sort of religion where you can refer to the tone of language used in the abstract and assume it gives your fait support.

Claiming Tyler has “won the battle† by referring to a paper that widens the scope, includes capital, reduces substitutability and still gets the exact opposite results as Card and Tyler are claiming is really completely pathetic.

2. If you want to understand how low economist has sunk just look at how NYT and Cowen explain away Hispanic crime:

controlling for background characteristics Hispanics commit fewer crimes (than blacks in practice). Not controlling they commit 3-4 times as much as whites, and are put in prison 3-4 times as much.

What this only means is that their extremely high crime rate can be explained by their traits (uneducated, low-income, broken homes)

Now here is a question from Econ 101:

Does explaining an effect by referring to background characteristic remove the effect?!? Are you stupid? As I wrote, when you are importing Mexicans you are importing their background characteristics, in this case leading to massively higher crime.

3. The endogenously effect has nothing to do with the US being one largely integrated labor market, which is also the result of this paper, in direct contradiction to Card.

(Furthermore this “instrument† only shifts back the question. Immigrants didn’t magically grow out of the ground in California, Nevada and Florida, the first groups moved to the fast growing sun belt, not to the coal country in West Virginia., not that it matters much)

4. By 2050 some 40% of the US population will be African American and Hispanics. If you don’t consider these groups underclass than you are a very optimistic person. (of course even today not all blacks and Mexicans are underclass, but they vote with the extremely high percentage of their ethnic group that are)

Matt May 22, 2006 at 5:18 pm

Teller I think you are confusing posts. My point was take Borjas’ estimate and adjust it for expansion of output in drop-out intensive industries and capital allocation and you get something closer to 1-2%, a point Borjas himself admits.

As for criminality, it can go both ways. It depends on who is being displaced from urban centers and what the effect this has on their rate of criminal behavior. The entire point is that Sampson claims the net effect is positive. You can’t just look at the static rate on the group in isolation.

And no you don’t have to be an optimist to refuse to count all or even an “extremely high percentage of” blacks and Latinos as the underclass. And since I vote along with them pretty frequently, I don’t really accept that as an appropriate metric either.

Matt May 22, 2006 at 5:45 pm

I also think it is hilarious, Teller, that you consider the Ottaviano paper to be on your side of this debate, considering they would never agree with that assessment. Read their paper – unskilled immigration has increased average wages, and the effect on native high school dropouts is less than 2% under their preferred estimates.

Steve Sailer May 22, 2006 at 5:54 pm

For a quick refutation of the NYT times op-ed by Sampson supposedly refuting the notion that illegal immigration raises crime rates, see:

http://www.vdare.com/Sailer/060312_sampson.htm

Teller May 22, 2006 at 6:35 pm

Matt my comment on your voting preference refers to prefrenses for expanding government and strengthening the left by increasing the underclass, not you being underclass personally.

Some examples of logical problems on your side:

· I say there will be massive costs of the using going to the left because of the explosion of the two ethic groups that compromise the pro-welfare state underclass. You say not all blacks and Hispanics are underclass. I reply that maybe not, but then tend to vote with their ethnic groups, even those who do well economically.

You responded that “no, I am a Democrat, and I am not underclass†.

A gives B does is hardly refuted by saying that “I am B, but not A†.

* They get -4.5% by including capital in estimates otherwise similar to Borjas. So clearly capital will not change this. (They get their “preferred† estimate of 2.2% by putting in parameter values they assume themselves. The ones with estimated ballpark elasticities is somewhere in the middle).

Even with their personally chosen parameter values they get a strong effect of wage elasticity of low-skilled to the increase of the share of low-skilled immigrants in the economy, in calculations that assume the country is a integrated labor market.

So here is the difference:

Card claims there are small effects from immigration on wages. He does this by looking at single cities. Tyler writes that no problem, let’s take in more unskilled Mexican, there are small effects.

Borjas AND Gianmarco and Peri don’t accept looking at single cities. They both look at the US nationally, the latter using capital and imperfect substitutability of foreign born to reduce the effect the former estimated. Yet BOTH get higher than Cards elasticities for low skill.

How does this prove Tyler right exactly?

It is the elasticity that is the key, not the historical experience of wages. Why? Because we are specifically discussing low skill immigration from Mexico (70% no high school degree, 4% college). The historical experience was one of bringing in both unskilled and high skilled. While the paper you refer to estimates a very strong downward pressure on unskilled American wages from unskilled forigners it also includes the upward pressure from high skill immigrants.

The last point is NOT relevant to this discussion, or actually it further strengthens the point. If you believe Gianmarco and Peri the US should bring in less Mexicans and more Europeans/Asians, not vice versa.

So when you claims “the additional effects they note back up Card’s observation that wages haven’t decreased much, if at all, for high school drop-outs.†

this is technically true because of the historical experience, but compactly irrelevant, since they also estimate elasticities that suggest Borjas is right to say unskilled Americans wages are sensitive to the number (really share) of unskilled workers. Card however lives in the liberal world of zero elasticities, nothing effects anything.

It is not the “that wages haven’t decreased† that matters most, it is how much WILL they change of the proposed policy of massive increase of unskilled immigration.

The question of crime is not “tangential†, because you have decided to make the discussion only about wages, whereas a good economist would consider all economic effects of immigration.

I personally think the effect of wages is there and become angry at people who lie and say it is not, but I also think it is secondary. It is possible to compensate the poor Americans for the lowering of their wages if you have a net increase, even if it is expensive.

But the additional effects of immigration, in welfare subsidies, crime and political distortions are massive.

The 1-2 estimated effect on OVERALL wages (that I have never denied will go up due to unskilled immigration) is less even than the DIRECT estimated welfare costs (equal to 3-4 trillion in economical costs, if you include the distoritionary costs of taxation).

Matt May 22, 2006 at 6:53 pm

Ok I’m prepared to declare victory and move on. While granting none of your objections to my points, I am happy that you are prepared to acknowledge a rise in overall average wages and a smaller (by half) decrease in wages to native high school drop outs than Borjas’ headline number. The gap between us is shrinking!

Since this was a discussion about wages and not crime, I’m not going to rush to familiarize myself with Sampson’s work in order to agree or disagree with you about that.

And I think it was fair (if unimportant overall) for me to assume that you were claiming that ’40% of the nation is going to become a part of the underclass’, not that ’40% of the nation will be of an ethnic group that historically votes for the liberal party that wants to increase the welfare state’. Since I assumed incorrectly, I apologize.

Steve Sailer May 22, 2006 at 7:05 pm

A quick way to get a sense of the impact of immigration on crime is to look at the hundreds of pictures on the Los Angles Police Department’s Most Wanted list:

http://www.lapdonline.org/all_most_wanted

Make sure to check out Vanessa Lanza Etorneau and Corrina Kowalski, while you are at it.

Teller May 22, 2006 at 8:18 pm

1. You keep saying this is a discussion about wages. No, it is a discussion about the economical costs and benefits of Mexican immigration, including wages, and also including crime, taxes, assimilation, welfare expenditure and intergenerational mobillity. All economic effect matter. The debate started because Tyler Cowen wrote:

“David Card and others have plenty of data on how well the second and third generations of Latinos do in assimilating and entering the mainstream of American life. I find the overall portrait a reassuring one. I will look for data on Mexicans per se and let you all know if I find anything useful.”

So far the effect has been, I think even most pro-immigration advocates agree, far from reassuring.

Secondly even if you only want to look at wages what matters in this sub-thread

* Is David Card right about wage elasticity and looking at single cities instead of the US?
* Is the expected future wage effects of massivly increasing lowskilled Mexican immigration on unskilled Americans negligible?

In both cases even if one accepts everything in the two (somewhat conflicting) Ottaviano/Peri papers you refer to the answer is NO!

2. Actually 2.4% is not the highest estimate, they have 1990-2000
-7% (fixed capital)
-5.5% (fixed capital, foreign workers perfect substitutes)
-0.2 to –2.4% with different substitutability parameters.

Note also that we are looking at two different version, they have lowered some of their parameter values for substitutability in the one you are citing. I don’t quite understand why in the previous version the perfect capital elasticity and substitute gave -4.5%, and in the later version -5.5%. What assumption did they change?
(I am also curious what their estimates are 1980-2000 like Borjas, instead of only 1990-2000)

2.You “declare victory† because I repeat something I wrote already a week ago? That wages go up, but not by far enough to compensate all the other effects? The only point that I am perfectly willing to grant is that Borjas overestimates the historical experience by not including Capital, although the effect may not be as straightforward as you think if capital is also a substitute for unskilled labour.

In the Borjas-Card debate of ELASTICITY, the question that matters most for future effects on wages, the Ottaviano/Peri work only strengthens Borjas.

3. You write: “I am happy that you are prepared to acknowledge a rise in overall average wages†
I wrote May 16:

“I do not doubt that there are direct economic gains from immigration, through lower prices for services for example.†
“[Keith] claim[s] that this data underestimates the economic gains, and point to the [Ottaviano/Peri] paper that estimates a (not very robust) average real wage of natives receives a positive effect between 1.1% and 1.2% from immigration in the period considered. But rather than overestimating the costs both this papers grossly underestimating the costs of unskilled immigration. Let me give you some examples:

· “Welfare dependency†¦”
· “Crime†¦”
· “Costs of worse economic policies†¦.†

4. There is no need to “rush† to understand that Sampson, whom you, (through Cowen) used as factual support to is full of it. Just read his very short NYT article and notice the little words “adjust for family and neighborhood background†

I repeat, Cowens own data shows Mexicans are imprisoned 4 times as much as whites and twice as much as all Americans. Sounds like a decrease in crime to you? It is further hilarious that Sampson writing that third generation immigrants commit 28% MORE crime than second generation is used as argument for immigration?

http://www.wjh.harvard.edu/soc/faculty/sampson/articles/2006_NYT_OpenDoors.pdf

Sure sounds “reassuring” to me. (although this also seems to be part of his idiotic calculations that “adjust for background charactristics, I pray to god the pure total effect does not look like this)

5. Yes it was fair to make that assumption since you had not read the previous parts of the debate.

I am still waiting for someone, anyone, especially pro-immigration libertarians, to make any counterargument to my main point in this debate during the last week, that Expanding the ethnic groups that constitute the Underclass from 20-25 to 40-45% of the population will have dramatic negative effects on economic policy. Obviously a Democrat like Matt wants this to happen, they are importing voters. But why do pro-market people support moving the US towards a European Welfare state?

jim May 22, 2006 at 9:05 pm

Teller,

Does the size and scope of government hand-outs in the U.S. mean that the term you used “pro-immigration libertarian” is acually an oxymoron or perhaps a contradiction in terms?

brian May 22, 2006 at 11:56 pm

Tyler,

Have you read Borjas QJE 2003? That paper considers the labor market to be national. Borjas exploits the variation in immigrant supply shocks across different education-experience groupings (such as high school dropouts with 5 years experience, and high school dropouts with 20 years experience). He finds significant but small negative effects of immigration on the wages of directly competing natives, defined by the education-experience grouping.

Still have to think about the implications for the “capital adjusts” argument in light of the finding. However, Borjas is only using contemporaneous immigrant supply shocks.

99 May 23, 2006 at 1:14 am

There are about 16 million people in the workforce nationally with no high-school diploma, of course importing 7 million additional Mexicans will impact their wages, even nationally.

Of course? That’s mighty overconfident of you. If the economy grows briskly enough, the demand for the skills of these (now) 23 million people without high-school diplomas might well bid up their wages — giving them increases in living standards. Of course, for such robust growth, an adequate supply of capital is needed. Mostly, getting this capital has not been problematic for the US economy, and mostly, real wages for American workers have tended to increase. American workers — even those at the bottom of the wage latter — were a lot better off in real terms in 1930 than they were fifty years previous, at the dawn of an immigration-induced workforce expansion significantly larger in scale than the one we’re witnessing now.

99 May 23, 2006 at 1:24 am

In contrast, in the 1950s and 1960s, moving to Southern California was almost a no-brainer decision for millions of average American Joes — the LA economy was booming, wages were relatively high because of immigration restrictions, and the cost of living was relatively low.

Highly dubious stuff here.

Of course, moving to Southern California is no longer the “no-brainer” it might have been in 1956. Things change over a half century. Manhattan’s problably no longer the no-brainer it was as a domestic migration destination in 1830, either.

And that’s because Atlanta, Charlotte, San Antonio and Tampa are the no-brainers of 2006. Indeed these cities are attracting lots of newcomers, from both domestic and international sources.

If it’s any consolation, as America gets more expensive, it will seem less attractive to foreigners, many of whom will have managed to narrow the wage gap between themselves and American workers.

Mark May 23, 2006 at 1:56 am

Steve wrote:

“One thing that’s clear is that illegal aliens are a substitute for investing in labor-saving technology, just as an ample supply of slaves was a major reason for the lack of technological progress in the Roman Empire.”

The point about the Roman Empire is a contentious one that many economic historians do not accept but that’s a whole other topic (in any case, slavery in the American South did not stop the cotton gin from being embraced by plantation owners). As for the general argument, you are confusing what economists call technology (ideas or techniques to combine labor and capital in more efficient ways) with what non-economists call technology (gadgets and machines that do cool things – or what economists call capital). The former is essential for economic growth but is also not affected by immigration (Intel does not stop producing microchips just because there are more Mexicans in Santa Clara). Adoption of labor-saving devices (capital accumulation) will be affected by immigration but that’s not what drives economic growth. The fact that immigrants wash your car instead of some $100,000+ machine does not, alone, affect the living standards of Americans.

Second of all, capital could be a complement rather than a substitute for labor in some sectors of the economy. In this case, a greater labor supply will make investment more profitable. I think some make this argument in regards to East Asia and its fertility bubble being a proximate cause of rapid capital accumulation and economic growth, but I’m not familiar with that literature.

If you want to show immigration is bad, stick to the traditional story: unskilled immigrants cost society more through welfare programs, crime, etc. than they add in economic benefits.

Teller May 23, 2006 at 3:08 am

Mark the non-economist Sailer seems to get the economics of this better than many trained economists:

1. Of course the “economical† definition of technology (“ideas or techniques to combine labor and capital in more efficient ways†) is also likely be be effected by the price of labour.

Are you seriously claiming firms do not take into consideration the demand for their products when they make investment in developing new ideas? Are entrepreneurs more or less likely to make labour saving devices if the price of labour is cheap?
Now this in itself does not mean growth is slowed by cheap labour, as I wrote in another post it is a question of how important you think externalities are (the more important the worse is illegal immigration) and how elastic the supply of research is (the more elastic the wrose illegal immigration.

2. What Sailer is saying is the question of SUBSTITUTABILITY. When you try to compare the costs and benefits of cheap labour in the US you are looking at a world where labour is cheap, and where labour saving technology has not been developed (or implemented, if otherwise available).

If the substitutability is high, as Sailer proposes it is, cheap labour is only marginally beneficial. The “country will stop without Latinos† argument works because many firms around, people tend to assume that’s the only way to do things.
In perfect markets this is not an important issue, the market will choice the cheapest way to do things.

But what if there are also costs associated with unskilled labour, but not it’s substitute capital?
Robotic car-washes may be slightly more expensive, but 21% of them do not receive Medicaid, they do not commit crime at 4 times the white-non Hispanic average, they do not vote for populists and leftist to raise taxes.

Now in the marketplace when firms determine what technology to implement they do not take these other costs into consideration. The carwash and the costumers benefits from cheap labour, while the taxpayers and community pay the cost. This is a classical problem in economics when you have incomplete markets, which is certainly the case regarding crime and the political system.

If the supply elasticity of capital is high and capital is a complement to unskilled labour the calculations of Borjas somewhat overestimate the negative impact of immigration on American workers. But if capital is elastic and a strong Substitute for unskilled labour we are likely to instead overestimate the BENEFITS of unskilled immigration!
This is in the end an empirical question, and one whose answer I have not seen.

But to the pro-immigration crowd: doesn’t it at least hurt your professional pride as economist that you need a journalist and Conservative movie critique to point this obvious fact out for you, albeit in non technical common sense terms?

Mitchell Young May 23, 2006 at 11:01 am

Mechanizing vine cultivation — not merely harvest.

Hans Gruber May 23, 2006 at 1:39 pm

“Adoption of labor-saving devices (capital accumulation) will be affected by immigration but that’s not what drives economic growth. The fact that immigrants wash your car instead of some $100,000+ machine does not, alone, affect the living standards of Americans.”

It’s been awhile since I studied growth modeling, but this sounds about the opposite of the truth. Increasing population (via immigration) reduces the amount of capital per worker and therefore lowers the amount of income per worker (which is a reasonable measure of the “quality of life”). See the relation between income and population growth across countries.

Further, the amount of capital per worker is NOT irrelevant to living standards; though long term economic GROWTH is, as you say, determined by increases in technology once the economy has reached its “steady state.” That is, at the steady state depreciation outpaces increases in the capital stock, bringing the level of capital back down to its equillibrium. But this “steady state” is determined by the savings rate, and the savings rate can be effected by investment demand. Clearly limiting immigration would increase the demand for certain kinds of capital, which would cause the savings rate to increase; thus shifting the “steady state” to a different level, a level with a higher capital to labor ratio and a higher standard of living.

Further, you seem to neglect the fact that fewer immigrants would increase the amount of technological innovation–”necessity is the mother of invention.” Today there isn’t a necessity because we have plenty of poor, uneducated immigrants working for peanuts. This could be holding back innovation, acting as a sort of developmental throwback. Also, I don’t see capital accumulation and technological progress being mutually exclusive; the more reliant we are on capital the more incentive there is to improve that capital. Like I said, it’s been a long while since I studied economic growth, so if I am in great error, please feel free to critique.

agm May 23, 2006 at 7:31 pm

Also it might be useful to recall that El Paso has a university fairly well respected south of the border (UTEP was rather proud of the fact that at one time most of the practitioners of a certain branch of engineering in Mexico were trained in the one place; the College of Engineering is still pretty good), as well as proximity to one of the major settlements in the territories once known as Northern Mexico. Juarez (at the time El Paso del Norte) was settled where it was because of the awe-inspiring agricultural fertility of the region at the time, especially in comparison to the desert one had to trek northwards across to reach the northern territories.

Accidents of history and geography are probably important in explaining why El Paso draws so many despite the fairly stagnant local economy.

wkwillis May 24, 2006 at 6:31 am

Teller
Half the population of the US is already Southern, Black, or Hispanic. And about
three quarters of the children. Deal with it.

FE May 24, 2006 at 7:32 pm

Sorry for veering off-topic, but I would like to see the immigrants-don’t-affect-wages crowd discuss today’s NYT article about lifting immigration limits for nurses. http://www.nytimes.com/2006/05/24/world/americas/24nurses.html?pagewanted=2&_r=1 How could this not affect wages of American nurses?

Anonymous October 14, 2008 at 1:33 am

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