Migration as International Trade: The Economic Gains from the Liberalized Movement of Labor

Abstract:     
Although those who currently seek to reduce the level of employment-based and family-based immigration into the United States often advance the economic welfare of natives and distributive justice as reasons to restrict such immigration, neither objective provides a sound justification for reductions in such immigration. This article argues instead that the maximization of national economic welfare would more likely require levels of employment-based and family-based immigration that are higher than those allowed by current U.S. immigration laws. This article sheds light on this issue by taking economic principles commonly applied to international trade and applying them to trade in labor services.

This analysis derives the optimal immigration policy from the standpoint of national economic welfare, including both economic efficiency and distributive justice as objectives, and draws upon the latest empirical studies of the economic impact of immigration. In particular, this article describes the immigration policy that would maximize the welfare of natives. Trade principles indicate that the United States should eliminate its immigration quotas and other nontariff protectionist barriers and use immigration tariffs instead. A tariff could take the form of an income tax that discriminates between citizens and aliens. The optimal tariff is positive for immigrants with low incomes but is likely to be negative for immigrants with sufficiently high incomes. These results suggest that skilled immigration should be permitted (indeed encouraged) without quantitative or other protectionist restrictions and that unskilled immigration should be permitted without quantitative restrictions but subject to less generous fiscal policies than those applied to natives. The article concludes with proposals for liberalizing U.S. immigration laws. The article suggests that reciprocal concessions in international negotiations for liberalized trade in services can help overcome the political obstacles to the liberalized movement of labor into the United States.

JEL Classifications: J61

Working Paper Series