Do Immigrants Decrease Economic Freedom?

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In my BYU Studies Quarterly article last year, I wrote,

Another objection [to increased immigration] is what is known as the “epidemiological case,” which argues that immigrants may bring with them foreign values that undermine the culture and institutions of the host country. In essence, immigrants transmit to rich countries those elements that make their source countries poor. What makes this rather prejudiced argument all the more jarring is the fact that it has virtually no supporting evidence. Unfortunately, very little empirical research has been conducted exploring the impact of immigrants on cultural, political, and economic institutions at all. However, the research that is available should calm fears and actually provide reasons for optimism. For example, there is no association between growth of total-factor productivity (TFP) in rich countries and the ratio of migrants from low-income countries, indicating that migrants do not “contaminate” their new homes with the low productivity of their source countries.

The Canada-based Fraser Institute publishes its oft-cited Economic Freedom of the World report annually. Its indicator—known as the Economic Freedom of the World (EFW) Index—defines economic freedom based on five major areas: (1) size of the government, (2) legal system and the security of property rights, (3) stability of the currency, (4) freedom to trade internationally, and (5) regulation of labor, credit, and business. According to the institute’s most recent report (which looks at data from 2015), countries with more economic freedom had considerably higher per-capita incomes and economic growth. Relying on this index, a 2015 study found that a larger immigration population marginally increases the economic freedom of the host country’s institutions. No negative impacts on economic freedom were found. Several authors from this study looked at Israel during the 1990s as a natural experiment in mass migration. During the 1990s, Israel’s population grew by 20 percent due to immigrants from the former Soviet Union. Yet, instead of experiencing decline, Israel shot up “from 15% below the global average [in economic freedom] to 12% above it and improv[ed] its ranking among countries by 47 places.” Similarly, a 2017 study found that higher diversity—measured by levels of ethnolinguistic and cultural fractionalization—predicts higher levels of economic freedom. While this particular study mainly discusses development economics, the correlation between high diversity and high economic freedom is an important aspect of the immigration debate. Barring members of different ethnolinguistic groups from entering the country may actually be holding back economic development (pg. 95-97).

Research on Jordan provides further evidence for the position above. Another 2018 study piles on. Overall, the authors’ 

results don’t show any strong relationship between increases in immigration and less economic freedom, nor do they show any strong relationship between an increase in the share of naturalized US citizens and less economic freedom. Therefore, our results indicate that, so far, Borjas’s concerns about a deterioration in the quality of institutions following an increase in immigration are not supported by the empirical results as they apply to the US states (pg. 394).

There were mixed results when it came to minimum wage legislation and union density. In the cases where the effects are slightly negative, the authors explain,

In states with larger immigrant population shares, are the increases in minimum wages and union densities the result of immigrants pushing for higher minimum wages and joining unions at higher rates than native-born individuals (because immigrants’ wages tend to be lower than natives’ wages)? Or are they the result of native-born individuals unionizing and pushing for higher minimum wages as a way of pricing out and restricting immigrant labor market supply?1 It could be explained either way and both explanations probably operate. However, our results don’t necessarily indicate whether the negative impact on labor market freedom is coming more from immigrants or more from native-born citizens. Therefore, when we study the relationship between immigration and economic freedom, the results don’t tell us much about the direct impact immigrants may have (pg. 376).

If you think the only way to “Make America Great Again” is by keeping out foreigners in the name of protecting our institutions, you need to chillax. 

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