Is Migration Good for Development?

How Could You Even Ask?Lant Pritchett

Harvard Kennedy SchoolWellesley College

April 30, 2008

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

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

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

Citations: A battle the French do win (finally)

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Pritchett

Source: my calculations with “Publish or Perish”

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

…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

Simple economics—what is the “price equivalent” of a quota (say, for shoes)

P*

p*(1+τ)

Demand

Supply

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

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

Estimated wage differences of observationally equivalent low skill workers

is P$15,000 a year

Simple arithmetic for 35 year old, male, urban, formal sector, 9 years of schooling:

Wage in Haiti: 80 cents/hrWage in USA (o.e.): $8.25 /hrAnnual hours 8hrs/day, 22/days

month, 12 months year:(8.25-.80)*(8*22*12)=$15,738Average (of 42 countries):Wage in foreign: $2.53Wage in USA: $9.83Annual wage gap: $15,411

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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

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IND born, USA res, USA educ IND born, USA res, IND educ

IndiaCompares means

Could compare to otherpercentile of the home distribution of unobservables,e.g. 70th

Distribution of the unobserved component on wages (residuals) in home for migrants and non-

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• 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?

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Monthly gain,migration

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Annual gain,migration

PPP

$

Debt Relief…

• 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]

From the top of the cliff at the borders that faces labor you cannot see the

gains from goods or capital

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Complete liberalizationlabor mobility

Complete equalizatoinMPK

Complete liberalizationof goods markets, todeveloping countries

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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)

Let’s talk justice, Rawlsian style

…including the use of coercion to stop people from crossing borders to carry out mutually beneficial economic transactions?

Would anyone, behind a “veil of ignorance” about where they would be born agree to this distribution?

Your (USA) tax dollars at work

Good thing we prevented that…

Total Number of births IMR

Annual excess deaths (over OECD IMR)

Developing Countries 122,266,000 51 5,624,236

Least Developed 29,076,000 84 2,297,004

India 27,119,000 54 1,328,831

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

Gender gaps and nationality gaps

Gender gap, Pakistani boysversus Pakistanigirls

Nationality gap, Pakistani boys versus Rich countrygirls

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

Who drove down worker wages?“When after all. It was you and me”

Why am I ringing up my own purchases? (with lots of capitaland technology?

Why am I shovelingown snow (with lots of capital?)

Attitudes towards Interracial Marriage in the US

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Shift in ideas, silly, controversial, progressive, then obvious

1992

LA riots spurred by tape of Rodney King beating

1963

MLK’s March on Washington

Barack Obama runs for President

of the United States

MLK assassinated

33% increase in approval over 4 years

Crazy, crazy, crazy…hero