Trillion-Dollar Bills on the Sidewalk: Why Don’t More Economists Study Emigration?

September 6, 2011

Economists who study globalization pay lots of attention to trade and capital flows. They have spent generations researching how much better off the world could be if there were fewer international obstacles to voluntary, mutually beneficial trade and investment. If there’s a twenty-dollar bill on the sidewalk—economists’ old catch-phrase meaning an opportunity for big gain at small cost—why not pick it up?

But according to the latest research, one of the biggest growth opportunities in the world economy lies not in the mobility of goods or capital, but in the mobility of labor. If we somehow wiped away all remaining policy barriers to international goods trade, and eliminated every last barrier to the international flow of capital, world income would rise by somewhere in the range of $3 trillion a year. That sounds like a lot until you compare it to the economic gains from even small reductions in the barriers to the international movement of the workers who make those goods and use that capital.

In a new paper in the Journal of Economic Perspectives, I discuss the latest research literature on this question. The bottom line: A modest increase in emigration out of low-income countries—just 5% of the people now living there—would expand the world economy by several trillion dollars every year. That’s a stunner, so I’ll say it again: Minor reductions in the barriers to labor mobility would add more value than the total, global elimination of all remaining policy barriers to goods trade and all barriers to capital flows, combined.

This creates the greatest single opportunity for global economic prosperity in our age: The gains to greater international labor mobility offer trillion-dollar bills on the sidewalk.

Why are the gains that colossal? One of the most remarkable facts about the world economy is that workers are more economically productive in some places than they are in other places. Vastly more. Take a male construction worker in the capital of Ghana. There isn’t much you could do to greatly raise his economic productivity in Ghana; access to better tools or training might make him modestly more productive. But if you let the exact same person emigrate to work at a construction site in any big U.S. city, his economic productivity would rise roughly 700% to 1,000%. When just a little movement is that valuable, it doesn’t take much movement before the positive effects can be felt in the national accounts.

Building the world economy is obviously not the only goal of policies like migration barriers, but it deserves weight, and perhaps greater weight when the world economy is sagging. Yet both policymakers and the economics profession know little about the economic opportunities in labor mobility because they are very little studied. My paper sketches a research agenda to fix that.