Monday, October 6, 2014

Give us your rich, mobile elites, yearning for a better deal

Frédéric Docquier, Çağlar Özden and Giovanni Peri have been making a list, checking it twice, and finding that the prevailing economic wisdom--that a rising tide lifts all boats--makes a lot of sense;
Educated people are job-creating and complement less educated workers in productive activities. Hence, higher immigration leads to more job creation and higher demand for people further down the job ladder. Less educated workers experienced particularly large wage and employment gains in countries whose immigration systems favour educated immigrants, like Australia and Canada. In other countries like Luxembourg, Ireland, the UK, and Switzerland, less educated natives gained between 2% and 5% in their wages.
The obverse is also true;
Even more interesting are the economic effects of emigration in OECD countries....which shows the percentage effects of emigration 1990–2000 on the wages of less educated native workers.... Those effects are quantitatively almost as large as (and of the opposite sign to) those from immigration. For example, in Cyprus, Ireland, and New Zealand during the 1990s, less educated workers suffered a wage decline of 3–6% due to emigration of their higher-skilled fellow citizens. The flight of highly skilled workers meant fewer job opportunities and lower demand for less educated ones – fewer entrepreneurs were left to employ manual workers, fewer households to demand cleaning, gardening, and personal services, and fewer engineers needing construction workers.
All else equal; make your country more attractive to high income earners. That is, if you want to help your poorest citizens.

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