Analytical Nationalism vs. What Actually Happens

by Will Wilkinson on April 1, 2008

Krugman takes his point about immigration from Nolan McCarty, Keith T. Poole, and Howard Rosenthal’s Polarized America. Here’s how they put it:

The new immigrants are predominantly unskilled. They have contributed greatly to the economy by providing low-wage labor, especially in jobs that American citizens no longer find desirable. They also provide the domestic services that facilitate labor market participation by highly skilled people. On the other hand, immigrants have also increased inequality both directly, by occupying the lowest rungs of the economic ladder, and indirectly, though competition with citizens for low-wage jobs. Yet as noncitizens they lack the civic opportunities to secure the protections of the welfare state. Because these poor people cannot vote, there is less political support for policies that would lower inequality by redistribution.

This is just a terrific example of the distortions of analytical nationalism. If we assume a completely natural  and mundane moral perspective, in which the whole set of people involved is taken into account, what we see is a huge reduction in both poverty and inequality. If the question is “What happened to the people in this scenario?”, then the answer is “The poorest became considerably wealthier, narrowing the economic gap between them and the rest.” But what actually happened seems to be completely invisible to the authors, which certainly suggests that their analytical framework leaves something to be desired.

Here’s how it ought to go:

Immigration decreased inequality both directly, by sharply increasing the wages of low-skilled foreign-born workers, and indirectly, through remittance payments to low-income relatives at the immigrants’ places of origin. Because of American citizens’ opposition to liberalizing immigration,  large potential further reductions in poverty and inequality have not been realized.

Reading allegedly social-scientific accounts of inequality by celebrated economists and political scientists, one would simply not know that nation states are not in fact giant firms with profits (”national income”) to be divvied up into shares to various constituencies. But such a huge conceptual gaffe cannot be the basis of a scientific analysis of a society, which is not a set of people sharing a citizenship, or even the set of people inside some political boundaries, but the actual international system of cooperative interaction we act within every day.

Viewing 15 Comments

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    I'm loving these posts exposing the both explicit and implicit nationalism of the mainstream left.

    It's long been obvious that libertarians are despised by the right because they aren't nationalist enough. And by the left? Because...they aren't nationalist enough!
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    Me too, this whole set on watching the people not the countries has been great.

    The one argument you can make for lower inequality within one country is that it makes for a nicer place to live in, in some ways. For instance, highly unequal countries tend to have much worse problems with crime (as the payoff is more likely to be positive the poorer you are than the guy you rob). And, less concretely, they tend to have lots of unpleasant master/servant interactions.

    I guess I'm not really surprised not to see this said more often, it seems pretty selfish to want these for those luck enough to be living inside the border. But they are nice things, and I think that people are swayed by this in part, even if out loud they talk economic nonsense instead.
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    In theory, I agree with you, but again, theory ain't worth shit in terms of actual policy in this instance. It's nice to see Libertarians pat themselves on the back for not being simplistic nationalists but unfortunately you live in a nation where Presidential candidates get in trouble for not wearing flag lapel pins and try to jam 87 flags behind the podium when they speak.

    So, it's very nice that you have found a way to show off your moral superiority in regards to lifting people out of poverty. Now I would like you to translate this into actual policy and theorize as to how it would be received by our flag drenched public who do indeed think nation-states are giant firms with profits that they should get a share of.
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    KJ,

    Offer them abortions and/or miniature American flags?

    Seriously, though, your objection is misplaced. If Will intended to address that sort of question here, the post would have been filed under Filthy Non-theoretical Politics. From the fact that it wasn't so filed, we can deduce that Will is concerned here with addressing economists, political scientists, and other social scientists supposedly interested in The Truth, and not with convincing the rubes to change their voting patterns.
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    Is it better for Mexico and Mexicans to pick tomatoes in Pennsylvania or pick them in Mexico and ship them to Pennsylvania? What can be achieved by immigration that can't be achieved by trade? And if Bill Gates and Carlos Selim are free to collect rents that come with monopoly businesses, why can't low wage American workers collect the rents that come with American citizenship?
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    "Is it better for Mexico and Mexicans to pick tomatoes in Pennsylvania or pick them in Mexico and ship them to Pennsylvania? What can be achieved by immigration that can’t be achieved by trade?"

    Under immigration Mexican's can have more direct access to American capital. Also lots of jobs Mexicans get are local service jobs.
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    "What can be achieved by immigration that can’t be achieved by trade?"

    (1) Poverty and inequality are more quickly reduced. That's what this post was about. Are you in favor of poverty and inequality?
    (2) Productivity of low-skilled labor is higher in the U.S., due to a number of factors (better management, better institutions, etc), which helps explain the higher wages.
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    But institutions are correlated with culture. If the libertarian dream of open borders came about, and the existing US population was swamped by new immigrants, why do you think US institutions would survive?
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    Productivity is higher in the US because there is more capital in the US. So which is better, bringing the capital to Mexico or the Mexicans to capital? Maybe Mexico is hopelessly corrupt, and the best way to reduce poverty is one Mexican (Nigerian, Filipino, etc) at a time, so much the worse for lazy American workers.

    You haven't made that case though. There is a kind of moral blackmail here ("Are you in favor of poverty and inequality?") but the premise is an unstated chauvinism (the third world is hopelessly corrupt, let's perform an boatlift and save who we can). I don't happen to be as pessimistic as you are.

    Second, low skill immigration may simply subsidize uneconomic industries in high-wage nations. I wouldn't be as opposed to immigration is employers didn't offload their employment costs to the local taxpayer, like meat packing plants in Iowa overload small Iowa towns with high costs but profits are privatized. If employers had to cover every cost of their immigrant employees, then immigration would make more sense. But then immigration probably would not be the kind of low-skill immigration you're in favor of.
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    bjk,

    You help Mexicans faster and more reliably by allowing them in. It's just true!

    And how is this moral blackmail? Immigration JUST IS the best means to reduce poverty. Please check out Lant Pritchett's Let Their People Come. You are either for doing what works or you are against it. If you will the end, then you will the means. Etc.

    The direction of the subsidy depends on the moral baseline. I think the baseline is non-coercion, in which case free movement of labor is where we start from. Restriction needs a special justification. In that case, the natural way to look at it is that immigration restrictions subsidize citizens who benefit from the artificially reduced labor supply. To see immigration as a subsidy to business is backwards.

    FYI, My hometown in Iowa has a lot of Mexican immigration, and for the most part this is quite welcome, since the meat-packing plant might not survive without it. Productive taxpaying immigrants tend to pay for themselves. Not to say there aren't strains on the public schools, etc., but the natives tend to realize they need the newcomers.
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    Ok, I will check out Pritchett.

    So it helps "Mexicans"? Let's be clear on what the unit of analysis is. The Mexican immigrants, OK, but what about the 110 million Mexicans who aren't immigrants? You say the meat-packing plant would not survive without the immigrants, right? Where would that plant go, if not for the immigrants? Mexico?
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    "So it helps “Mexicans”? Let’s be clear on what the unit of analysis is. The Mexican immigrants, OK, but what about the 110 million Mexicans who aren’t immigrants? You say the meat-packing plant would not survive without the immigrants, right? Where would that plant go, if not for the immigrants? Mexico?"

    But capital can't just move around that easily. The U.S. has a gigantic established structure of capital, built up over the decades.

    As far as non-immigrant Mexicans go, the billions of dollars being sent back to Mexico from immigrants in the United States helps them, and also in part helps Mexico build up their own capital.
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    I'm reading Pritchett's book right now, and he addresses all these sorts of questions (and more!).

    The simplest and most intuitive response Pritchett gives for why free trade and free capital mobility are not (necessarily) substitutes for labor mobility is that we already have, and have had, relatively low restrictions on trade and capital movements for many, many years, and yet, far from seeing economic convergence, we see economic divergence, between the developed world and the developing world. The leading theory as to why this is the case is, as Will mentioned, differences in productivity most likely arising from differences in institutions.

    This is obviously not an explanation of the phenomenon, just an empirical observation that, for whatever reason, trade and capital have not been perfect substitutes for labor mobility.

    Now, as for the technical explanations, there are a few. JJ mentioned one: most of the jobs we are talking about are low-skill, non tradeable service jobs.

    Second, the economic model that predicts that free trade is a sufficient for factor price equalization (factor includes both labor and capital) depends on many restrictive assumptions, one of which is that the trading partners have sufficiently similar factor endowments, an empirical condition that may or may not be true. If the factor price equalization condition were true in this case, we would expect to see economic convergence, and as mentioned earlier, we don't see convergence.

    Third, there is some evidence from the late nineteenth and early twentieth centuries that trade was not only not a substitute for labor mobility, it was in fact a complement - that is, freer trade promoted more labor mobility, not less. One explanation for this this effect is that availability of "home-grown" goods (think ethnic supermarkets) and communication networks (to talk to relatives and send remittances) reduce the (psychic) costs of living in a foreign country and therefore make labor mobility easier and more likely.

    As for Pithlord's observation that institutions are correlated with culture, correlation is not identity; the quality of institutions are determined by lots of factors other than culture. And insofar as we include factors such as "respect for the rule of law" and the frequency, acceptability, and necessity of political corruption (i.e. bribery) in the category we labor "culture", maintaining a system of global apartheid would tend to weaken, not strengthen, the quality of U.S. culture, U.S. institutions, and U.S. productivity. As it happens, I don't believe that ending or at least lessening the system of global apartheid would have as large of an effect on culture/institutions, either positively or negatively, as people imagine, but it is important to recognize that insofar as changes would occur, there are changes in both directions. New immigrants' cultures are not as different from ours as immigrations restrictionists would like to believe, and what differences do remain tend to evaporate after a few generations. Further still, though the potential labor mobility that is likely to occur if we ended or lessened the system of global apartheid is indeed massive, it's not at all clear that we would be "swamped by new immigrants"; proximity and cost of travel are still major factors in deciding to emigrate; and, we are not only talking about the U.S. reducing its restrictions on immigration, but other countries doing the same. Further, even in the cases where a native country is "swamped by new immigrants", if measured as a ratio of foreign born to native born, we have good empirical evidence that there are many countries with huge ratios of immigrants to natives (mostly oil-rich middle eastern countries with a two-tiered system distinguishing native citizens who enjoy full political rights from temporary non-natives who come to work on conditional terms), and in these countries the existing institutions and culture remains just fine. And it just so happens that this two-tiered system is the sort of thing that both Prichett and Will recommend, at least as a second-best (indeed enormously better than the status-quo) compromise.

    bjk,

    but the premise is an unstated chauvinism (the third world is hopelessly corrupt, let’s perform an boatlift and save who we can). I don’t happen to be as pessimistic as you are.

    The chauvinism here is the paternalistic assumption that you know what's better for the potential third-world immigrant whose revealed preference is a desire to move here better than that immigrant herself. Who is the better judge of whether the third world is hopelessly corrupt (or in some other way a less desirable place to live than the alternative): you, a relatively wealthy first world citizen, or the relatively impoverished third world citizen who wants to move elsewhere?

    Incidentally, Pritchett address this objection to, which boggles his mind as much as it does mine; the false assumption that the world's poor are really not so poor, or that, measured by both money and nonmoney indicators of well-being, the third world is not a horrible place to live compared to the alternative. As Pritchett points out, both money and nonmoney indicators of well-being (child mortality, malnutrition, schooling, etc.) suggest that "the richest fifth of the population in poor countries has a much lower living standard than the poorest fifth in rich countries." The differences here are mind boggling, as are the attempts to deny or minimize those differences.

    You say the meat-packing plant would not survive without the immigrants, right? Where would that plant go, if not for the immigrants? Mexico?</blockquote?

    It would not be built at all, making the potential immigrant employees, the owners of the plant, and the potential consumers all worse off. Again, the facts are clear: the "gains from trade" that would result from loosing restrictions on labor mobility are enormous, totally dwarfing existing levels of foreign aid, and totally dwarfing potential gains from trade if all remaining trade restrictions were removed.
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    I think the question is, should political decisions by our government treat costs and benefits to citizens of other countries the same as our own?

    For immigration, if the residents and nonresidents are considered equally, there is reduction of inequality and improvement in result. If one only considers cost/benefit to our own citizens the result is greater inequality and losses to those at the bottom.

    Consider the decision to remove Saddam Hussain. If he had gotten control of our own country we would accept almost any cost/losses to remove him. There is little doubt in my mind that the losses we have sustained and will sustain would be considered totally acceptable if we treat the benefits/costs to Iraqis as equal to the costs we have sustained, yet if we only look at the cost/benefits to ourselves the decision seems to be wrong.

    If we are going to include costs/benefits to non-citizens in immigration calculations, I think we need to consider costs/benefits in other areas of policy making as well.
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    Perhaps this quibble will be found uninteresting here, but I would argue against the idea that Mexican illegal immigrants are "unskilled." I can't vouch for other industries, but in landscaping here in Colorado where Mexican immigrants are frequently employed, they are quite skilled, and capable of feats that increase their value compared to the American employees with whom they compete for work.
 

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