There is ample evidence that migrants from India especially to advanced economies have a positive impact on India through means mentioned above. But what about second generation migrants who are born in advanced economies? It stands to reason that highly skilled parents provide better opportunities to their kids and consequently they are also reasonable skilled.
There was a recent report from Ministry of Foreign Affairs that they find it difficult to engage with second or third generation migrants. So above benefits which can largely be summed up as migrant's attachment with their home countries may not apply.
Noah, love your work, but cannot disagree more on this one for at least two reasons. One, progressive taxation means lot less capital available for investment at the national level. More critically, innovation is heavily concentrated in a handful of talented / hardworking / lucky individuals- if they leave your productivity growth plummets and you end up losing ground over time. And yes I do think you can see those effects at scale - Russia a prime example. You can also talk about third order effects of cultural composition - if emigrants are disproportionately from educated / liberal / open milieu, the society left behind becomes a lot more closed / zero sum / reactionary - turning the country into a less than productive member of the global community.
Aug 13, 2023·edited Aug 13, 2023Liked by Noah Smith
Great post! I'll definitely be sharing this with several people I've had discussions about this topic with.
I'd like to present a few counterpoints, though:
1) Many of the positive effects attributed to immigration, such as brain circulation and the motivation for locals to strive for education, hinge on the premise that the country has a sufficient number of young people and, generally, an excess of workers. While this holds true for many economically disadvantaged countries at the moment, it's certainly not the case for countries with average wealth, education levels, and technological development, such as Eastern European nations.
2) In your introductory examples (which I understand were meant to illustrate key principles only), some significant effects are omitted. Individuals within a country aren't isolated agents but rather integral parts of a solidarity-based community linked by taxes and welfare systems. Additionally, in such a community, the less productive or less educated individuals could become even less productive if their educated and productive co-workers, managers, and educators decide to leave.
3) The ability to simply leave a situation can sometimes diminish the incentive to advocate for policy changes at home. While leaving an unfavourable environment is be a prudent choice from an individual's perspective, it might not be advantageous for society as a whole. Nonetheless, it's worth noting that emigrants can also serve as a dissident base and introduce fresh ideas into their native society through re-immigration and continued contacts. Thus, this issue presents a double-edged sword.
It would be great if you could tackle some steelmanned arguments regarding negative effects on the emigration country in another post, since they tend to be quite persuasive from my experience!
I am a citizen of Bulgaria. The export of almost 1 million people out of a total of 9 million had a catastrophic effect on our country. Therefore, I argue that the game is not zero-sum. The benefits are primarily for the more developed countries. A modern type of colonialism.
One more effect you have not covered is complementarity. I.e. a Satya who remained in India would be less productive than Satya in the U.S. due to the presence of others with complementary skills here. This is a net add to the global GDP by improving productivity.
How would the Smallonia models change if a progressive tax policy is added? Intuitively at least in Model 1 the two poorer Dmallonians who are staying behind might struggle to keep their government services and infrastructure intact.
IMO, none of this matters though. Individuals matters, not countries. Maybe it's best for everyone to leave Smallonia and we can turn it into a wildlife refuge.
This is, of course, commonse & I've been trying, unsuccessfully, to explain this to Labour supporters etc when they close their ears to distinguishing between asylum seekers & economic migrants. They simply do not want to know that most of us are very open to employing talented immigrants while deploring our desire to block those that are here for the benefits or working illegally.
"If you think of Smallonia as just Mark and Sofia... their living standards are completely unchanged"
"If you think of Smallonia as Mia, Mark, and Sofia... their living standards are also unchanged"
If we think of Smallonia as a collective of "all citizens of Smallonia" (which is how most normal people think of their country), then the living standards of Mark and Sofia are seriously affected by the exit of their most productive (and likely consumptive) member. And for an economist, you're remarkably blasé about the 50% shrinkage in Smallonia's GDP. Also, skilled immigrants are rarely subsistence farmers.
"It’s very hard to know, on balance, which of these are happening, and how much."
That's why this is an issue that best decided by voters instead of economists.
I agree with you that America should import more skilled immigrants. And fewer unskilled ones. And especially fewer illegal ones. But it's because those are good policies for Americans. While I do care what happens to Smallonia in some abstract sense, I care what happens to America more.
So what you’re saying is that people overseas trying to immigrate to the US are like American kids trying to get really good at basketball so they can become an NBA star. Statistically, basically no one is going to make it into the NBA, but a lot of people are going to get really good at basketball.
Sitting in India, having considered emigrating once myself, and now planning the same option for my kids with every discretionary cent I have, I cannot disagree with the overall premise and conclusions of your article. India has seen plenty of hard benefits (largest recipient of inward remittance, booming IT sector, etc) and softer pluses (more professional work culture, less dominance of the traditionally 'business' castes in every sector, etc). Far from trying to plug people emigrating, policy makers have long switched to woo their services and investments actively when the diaspora visit India during their December break.
Having said that, need to point out a few nuances - this notion of 'big' and 'small' countries is simplistic. While India has a youthful population and 1.4B people in all, there is a very small cream that has the educational skills, the risk-taking mindset, the ability to work with uncertain policy, the ability to attract talent and all the other skills required to drive entrepreneurship and boost Indian GDP if they sit here. When these guys emigrate (and they do, in large numbers), the country loses much more than just their tax revenue.
As others have pointed out, the possibility of 'lemons' being left behind in the country is increased. While there are a few who have stayed back in the country for patriotic reasons, most others from the top universities only stayed back because they could not get the best universities or jobs in the first world. So the 'cream' was / is being lost. Punjab state is a great example of this.
A third fallout I have seen is creation of asset bubbles by the diaspora, especially in real estate. Too many ghost houses and societies have flats owned by non-residents who never show up.
In sum, over a longer period, I think these negatives get mitigated and the positives outweigh them. Yet, it maybe useful to think of specific countermeasures to the above problems - for e.g. a structured programme to bring back diaspora who have spent 10-25 years in the first world, to come back and setup a business back here.
I've always gotten the vibe that the "brain drain" argument in the US is mainly made by people who are opposed to immigration anyway (they do not agree with the gains from trade view) and are looking for a way to shame the pro-immigration folks. It reminds me of the NIMBYs who bemoan "gentrification" or climate deniers who lament the environmental impact of EV production.
BTW, there is another human capital argument that could be relevant. It might be that the poorer country has a comparative advantage in forming "early stage" human capital (say through high school/university which might mean a small loss to the source country, although this is hard to disentangle from the incentive effects of people in source countries "overinvesting" in education on the long shot of being able to emigrate which could be a benefit to the source country.
Trotsky whimsically predicted that America would be the location of a multiracial eugenics creating "a new breed of men – the first worthy of the name of Man". Though only after adopting communism:
Let's make the toy example from before a little more realistic. As before, Mia, Mark and Sofia have the following incomes:
Mia: 100
Mark: 60
Sofia: 50
Let's further assume that Mia is a software engineer that could work anywhere in the world for a similar salary, Sofia is a local farmer, and Mark is retired and the income is a government provided pension. Mark's pension is financed by taxing Mia 50 and Sofia 10. What happens when Mia moves from Greece to Switzerland is left as an exercise to the reader. But it's not pretty.
There is ample evidence that migrants from India especially to advanced economies have a positive impact on India through means mentioned above. But what about second generation migrants who are born in advanced economies? It stands to reason that highly skilled parents provide better opportunities to their kids and consequently they are also reasonable skilled.
There was a recent report from Ministry of Foreign Affairs that they find it difficult to engage with second or third generation migrants. So above benefits which can largely be summed up as migrant's attachment with their home countries may not apply.
Noah, love your work, but cannot disagree more on this one for at least two reasons. One, progressive taxation means lot less capital available for investment at the national level. More critically, innovation is heavily concentrated in a handful of talented / hardworking / lucky individuals- if they leave your productivity growth plummets and you end up losing ground over time. And yes I do think you can see those effects at scale - Russia a prime example. You can also talk about third order effects of cultural composition - if emigrants are disproportionately from educated / liberal / open milieu, the society left behind becomes a lot more closed / zero sum / reactionary - turning the country into a less than productive member of the global community.
Great post! I'll definitely be sharing this with several people I've had discussions about this topic with.
I'd like to present a few counterpoints, though:
1) Many of the positive effects attributed to immigration, such as brain circulation and the motivation for locals to strive for education, hinge on the premise that the country has a sufficient number of young people and, generally, an excess of workers. While this holds true for many economically disadvantaged countries at the moment, it's certainly not the case for countries with average wealth, education levels, and technological development, such as Eastern European nations.
2) In your introductory examples (which I understand were meant to illustrate key principles only), some significant effects are omitted. Individuals within a country aren't isolated agents but rather integral parts of a solidarity-based community linked by taxes and welfare systems. Additionally, in such a community, the less productive or less educated individuals could become even less productive if their educated and productive co-workers, managers, and educators decide to leave.
3) The ability to simply leave a situation can sometimes diminish the incentive to advocate for policy changes at home. While leaving an unfavourable environment is be a prudent choice from an individual's perspective, it might not be advantageous for society as a whole. Nonetheless, it's worth noting that emigrants can also serve as a dissident base and introduce fresh ideas into their native society through re-immigration and continued contacts. Thus, this issue presents a double-edged sword.
It would be great if you could tackle some steelmanned arguments regarding negative effects on the emigration country in another post, since they tend to be quite persuasive from my experience!
I am a citizen of Bulgaria. The export of almost 1 million people out of a total of 9 million had a catastrophic effect on our country. Therefore, I argue that the game is not zero-sum. The benefits are primarily for the more developed countries. A modern type of colonialism.
One more effect you have not covered is complementarity. I.e. a Satya who remained in India would be less productive than Satya in the U.S. due to the presence of others with complementary skills here. This is a net add to the global GDP by improving productivity.
How would the Smallonia models change if a progressive tax policy is added? Intuitively at least in Model 1 the two poorer Dmallonians who are staying behind might struggle to keep their government services and infrastructure intact.
IMO, none of this matters though. Individuals matters, not countries. Maybe it's best for everyone to leave Smallonia and we can turn it into a wildlife refuge.
Damn you got this up fast. Human capital formation is important.
"Brain gain" is a new concept for me. Thanks for introducing that appropriate phrase into my brain today, Noah.
This is, of course, commonse & I've been trying, unsuccessfully, to explain this to Labour supporters etc when they close their ears to distinguishing between asylum seekers & economic migrants. They simply do not want to know that most of us are very open to employing talented immigrants while deploring our desire to block those that are here for the benefits or working illegally.
"If you think of Smallonia as just Mark and Sofia... their living standards are completely unchanged"
"If you think of Smallonia as Mia, Mark, and Sofia... their living standards are also unchanged"
If we think of Smallonia as a collective of "all citizens of Smallonia" (which is how most normal people think of their country), then the living standards of Mark and Sofia are seriously affected by the exit of their most productive (and likely consumptive) member. And for an economist, you're remarkably blasé about the 50% shrinkage in Smallonia's GDP. Also, skilled immigrants are rarely subsistence farmers.
"It’s very hard to know, on balance, which of these are happening, and how much."
That's why this is an issue that best decided by voters instead of economists.
I agree with you that America should import more skilled immigrants. And fewer unskilled ones. And especially fewer illegal ones. But it's because those are good policies for Americans. While I do care what happens to Smallonia in some abstract sense, I care what happens to America more.
So what you’re saying is that people overseas trying to immigrate to the US are like American kids trying to get really good at basketball so they can become an NBA star. Statistically, basically no one is going to make it into the NBA, but a lot of people are going to get really good at basketball.
Sitting in India, having considered emigrating once myself, and now planning the same option for my kids with every discretionary cent I have, I cannot disagree with the overall premise and conclusions of your article. India has seen plenty of hard benefits (largest recipient of inward remittance, booming IT sector, etc) and softer pluses (more professional work culture, less dominance of the traditionally 'business' castes in every sector, etc). Far from trying to plug people emigrating, policy makers have long switched to woo their services and investments actively when the diaspora visit India during their December break.
Having said that, need to point out a few nuances - this notion of 'big' and 'small' countries is simplistic. While India has a youthful population and 1.4B people in all, there is a very small cream that has the educational skills, the risk-taking mindset, the ability to work with uncertain policy, the ability to attract talent and all the other skills required to drive entrepreneurship and boost Indian GDP if they sit here. When these guys emigrate (and they do, in large numbers), the country loses much more than just their tax revenue.
As others have pointed out, the possibility of 'lemons' being left behind in the country is increased. While there are a few who have stayed back in the country for patriotic reasons, most others from the top universities only stayed back because they could not get the best universities or jobs in the first world. So the 'cream' was / is being lost. Punjab state is a great example of this.
A third fallout I have seen is creation of asset bubbles by the diaspora, especially in real estate. Too many ghost houses and societies have flats owned by non-residents who never show up.
In sum, over a longer period, I think these negatives get mitigated and the positives outweigh them. Yet, it maybe useful to think of specific countermeasures to the above problems - for e.g. a structured programme to bring back diaspora who have spent 10-25 years in the first world, to come back and setup a business back here.
You ignore taxes. When the top earners leave those taxes also leave.
That does hurt "Smallonia".
I've always gotten the vibe that the "brain drain" argument in the US is mainly made by people who are opposed to immigration anyway (they do not agree with the gains from trade view) and are looking for a way to shame the pro-immigration folks. It reminds me of the NIMBYs who bemoan "gentrification" or climate deniers who lament the environmental impact of EV production.
BTW, there is another human capital argument that could be relevant. It might be that the poorer country has a comparative advantage in forming "early stage" human capital (say through high school/university which might mean a small loss to the source country, although this is hard to disentangle from the incentive effects of people in source countries "overinvesting" in education on the long shot of being able to emigrate which could be a benefit to the source country.
Trotsky whimsically predicted that America would be the location of a multiracial eugenics creating "a new breed of men – the first worthy of the name of Man". Though only after adopting communism:
https://www.marxists.org/archive/trotsky/1934/08/ame.htm
Let's make the toy example from before a little more realistic. As before, Mia, Mark and Sofia have the following incomes:
Mia: 100
Mark: 60
Sofia: 50
Let's further assume that Mia is a software engineer that could work anywhere in the world for a similar salary, Sofia is a local farmer, and Mark is retired and the income is a government provided pension. Mark's pension is financed by taxing Mia 50 and Sofia 10. What happens when Mia moves from Greece to Switzerland is left as an exercise to the reader. But it's not pretty.