Is Migration Good for Development? How Could You Even Ask?

1. Is Migration Good for Development?How Could You Even Ask? Lant Pritchett Harvard Kennedy School Wellesley College April 30, 2008

2. Is Migration Good for Development? • Ideas and their evolution: Marx and Foucault • Spatial Based versus People Based thinking—why does dirt matter in theories of justice? • The movement of people leads to development gains orders of magnitude larger than anything else on the agenda • For some places mobility may be the only development agenda • Ideas and their evolution: Crazy, Crazy, Crazy, Obvious

3. The world that was lost in 1914 He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could dispatch his servant to the neighboring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. JM Keynes

4. The “second globalization” as farce Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as tragedy, the second time as farce. …Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past. The tradition of all dead generations weighs like a nightmare on the brains of the living. Karl Marx, remarks somewhere

5. Citations: A battle the French do win (finally) Source: my calculations with “Publish or Perish”

6. Deconstruction, the most powerful idea of your time… • There is no “reason” or “discourse” or “truth” there is just power • Power socially constructs reality such that the agenda is deeply controlled without explicit repressions—it is “common sense” • “Deconstruction” is the subversion of the socially constructions of established discourse • So, where do we look for overwhelming power? Not to controversy but for silence…what opposes the truly powerful is not controversial but just plain crazy

7. …has yet to tackle nationalism the most powerful idea of my time… • God is dead • All “..isms” are mortally wounded (e.g. racism, sexism, sexualism) • “Truth” and “Reason” have retreated into scare quotes And the “imagined communities” that are “nations” are all that is left to believe in

8. Simple economics—what is the “price equivalent” of a quota (say, for shoes) p*(1+τ) P* Supply Demand

9. Econometrics of wage gaps The wage gap between the average wage in USA (“a”) and the average wage in Peru (“d”) combines differences in average personal characteristics (X) and place based productivity

10. What is the wage gap of observationally equivalent workers? Compare workers born in Peru, educated for X years in Peru, working in Peru (d’) versus workers with the same characteristics (years of education, sex, age, residence) in the USA (c’). The Place Premium (first cut): Same worker, different wages

11. Simple arithmetic for 35 year old, male, urban, formal sector, 9 years of schooling: Wage in Haiti: 80 cents/hr Wage in USA (o.e.): $8.25 /hr Annual hours 8hrs/day, 22/days month, 12 months year: (8.25-.80)*(8*22*12)=$15,738 Average (of 42 countries): Wage in foreign: $2.53 Wage in USA: $9.83 Annual wage gap: $15,411 Estimated wage differences of observationally equivalent low skill workers is P$15,000 a year

12. Tricky problem: Peruvians in US are not here by chance, they are here by choice and are self-selected Around any given slice through the wage profiles on observables there is a distribution of wages based on unobserved (to the econometrician) characteristics that affect wages in the home country—if workers are “positively selected” then the mean-mean (peak to peak) comparison overstates the wage gain

13. Compares means India Could compare to other percentile of the home distribution of unobservables, e.g. 70th

14. Distribution of the unobserved component on wages (residuals) in home for migrants and non-migrants: Mexico Mean migrant at 53rd Percentile of non-migrants

15. The gain from a lifetime of micro credit is the same as 2.4 weeks working in the USA Total annual gain to Grameen Bank borrowers (around) $30 million If I get 3,000 additional Bangladeshi workers into the US, do I get a Nobel Peace Prize?

16. Total foregone payments due to HIPC debt relief in Africa—about 2.5 billion (in 2005) About 150,000 Africans to the US--.1 percent of the labor force, about 1 percent of monthly gross job growth, about one (good) months net job growth If a labor mobility activist accomplishes that do they get to sing at the Super Bowl? [Picture of Bono here] Debt Relief…

17. From the top of the cliff at the borders that faces labor you cannot see the gains from goods or capital

18. Stand the question on its head… Not “Is Migration Good for Development?” but, since labor mobility is so good for proper, people based, measures of development why is there so much talk about things that have gains that are so much smaller? (Hint: It has something to do with power)

19. Let’s talk justice, Rawlsian style Would anyone, behind a “veil of ignorance” about where they would be born agree to this distribution? …including the use of coercion to stop people from crossing borders to carry out mutually beneficial economic transactions?

20. Your (USA) tax dollars at work

21. Good thing we prevented that…

22. I have never heard that there are 1.3 million “missing Indians”

23. Gender gaps and nationality gaps Nationality gap, Pakistani boys versus Rich country girls Gender gap, Pakistani boys versus Pakistani girls

24. But what about its affect on “us(a)”? • Depends on how you view the sources of cross-national differences in productivity of workers with the same human capital? • Is it resources (e.g. Kuwait?) • Is it capital per worker? • Is it “A” (factor productivity)? • If it is A then it is possible that supply creates its own demand and the net impact on domestic workers is very small—consistent with all of the evidence

25. Who drove down worker wages?“When after all. It was you and me” Why am I shoveling own snow (with lots of capital?) Why am I ringing up my own purchases? (with lots of capital and technology?

26. Attitudes towards Interracial Marriage in the US 90 80 70 60 50 Percentage of Population 40 Percentage of Population 30 Approving 20 10 0 Year 1991 1978 1997 1968 1958 1972 1983 1994 2003 2002 2004 2007 (June) 2007 (Sept) 1963 MLK’s March on Washington 1992 LA riots spurred by tape of Rodney King beating Barack Obama runs for President of the United States MLK assassinated Shift in ideas, silly, controversial, progressive, then obvious 33% increase in approval over 4 years

27. Crazy, crazy, crazy…hero