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Brooks Wilson's Economics Blog: Cowen on Immigration

Wednesday, November 24, 2010

Cowen on Immigration

Tyler Cowen presents evidence that immigration has a net positive impact on the economy in “How Immigrants Create More Jobs.” 
Over all, it turns out that the continuing arrival of immigrants to American shores is encouraging business activity here, thereby producing more jobs, according to a new study. Its authors argue that the easier it is to find cheap immigrant labor at home, the less likely that production will relocate offshore.

The study, “Immigration, Offshoring and American Jobs,” was written by two economics professors — Gianmarco I. P. Ottaviano of Bocconi University in Italy and Giovanni Peri of the University of California, Davis — along with Greg C. Wright, a Ph.D. candidate at Davis.

The study notes that when companies move production offshore, they pull away not only low-wage jobs but also many related jobs, which can include high-skilled managers, tech repairmen and others. But hiring immigrants even for low-wage jobs helps keep many kinds of jobs in the United States, the authors say. In fact, when immigration is rising as a share of employment in an economic sector, offshoring tends to be falling, and vice versa, the study found.

In other words, immigrants may be competing more with offshored workers than with other laborers in America.
Cowen also presents evidence that immigration does not cause unemployment. 
We’re all worried about unemployment, but the problem is usually rooted in macroeconomic conditions, not in immigration or offshoring. (According to a Pew study, the number of illegal immigrants from the Caribbean and Latin America fell 22 percent from 2007 to 2009; their departure has not had much effect on the weak United States job market.) Remember, too, that each immigrant consumes products sold here, therefore also helping to create jobs.

When it comes to immigration, positive-sum thinking is too often absent in public discourse these days. Debates on immigration and labor markets reflect some common human cognitive failings — namely, that we are quicker to vilify groups of different “others” than we are to blame impersonal forces.
These results fall into the mainstream of economic thought.  Immigrants, both legal and illegal, are resources.  They expand the production possibilities frontier, what we as a nation can produce.  With a little time for adjustment, markets utilize resources.   

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