Economic freedom and mass migration: evidence from Israel.

AuthorPowell, Benjamin
PositionReport

The economic case for free immigration is nearly identical to the case for free trade. They both rely on a greater division of labor based on comparative advantage to ensure that allowing the free movement of goods and services or the free movement of people results in greater global wealth. Estimates of the global gains that could be achieved by the global adoption of an open immigration policy are massive, ranging from 50 to 150 percent of world GDP (Clemens 2011). Even a migration of just 5 percent of the world's poor to wealthier countries would boost world GDP by more than could be gained by completely eliminating all remaining trade barriers to goods, services, and capital flows (Clemens 2011).

How Free Immigration Could Impact Institutions and Culture

The case for free immigration is more complicated than the basic economic case for free trade because immigrants, unlike goods, can impact host countries' institutions and culture. Immigrants can protest, agitate for political change, promote ideas that can change native-born citizens' thinking, and, in some cases, participate directly in the political process, in ways that ultimately might change the institutional environment in their destination country.

Classical liberals have long recognized the benefits of free immigration but have also been concerned with how immigrants might impact institutional evolution. Ludwig von Mises (1927: 137) noted:

The liberal demands that every person have the right to live wherever he wants. This is not a "negative" demand. It belongs to the very essence of a society based on private ownership of the means of production that every man may work and dispose of his earnings where he thinks best. However, Mises recognized that immigrants might turn the machinery of the state against the natives. Thus, he concluded: "Only the adoption of the liberal program could make the problem of immigration, which today seems insoluble, completely disappear" (p. 142).

Fredrich Hayek shared similar concerns that a more open borders policy could result in political blowback that might lead to less free societies, but for him the worry was the potential backlash from the native-born population.

While I look forward, as an ultimate ideal, to a state of affairs in which national boundaries have ceased to be obstacles to the free movement of men, I believe that within any period with which we can now be concerned, any attempt to realize it would lead to a revival of strong nationalist sentiments and a retreat from positions already achieved [Hayek 1998: 58].

These fears have been rekindled in the latest debate among economists about the economic impact of immigration. George Borjas (2015: 961) asked: "What would happen to the institutions and social norms that govern economic exchanges in specific countries after the entry/exit of perhaps hundreds of millions of people?" He says, "We know little ... about how host societies would adapt to the entry of perhaps billions of new persons" (p. 967). He then discusses how varying degrees of importation of bad institutions could impact the projected global gain from unrestricted immigration. He concludes that "general equilibrium effects can easily turn a receiving country's expected (static) windfall from...

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