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Immigration May HELP the Economy

Should we welcome them instead of putting up fences? - There is a lot of controversy going on about immigration right now, but some economists think that countries that restrict it might be missing out on a great economic development.

Economist Gustavo Ventura says, "Regulation of labor movements is one of the most severe distortions facing the world today." Ventura used data gathered from previous periods of largely unfettered immigration, such as the United States before World War I and, more recently, in Europe, as new countries joined the European Union. He then constructed a model to see how production and economic growth fared, as well as individual welfare.

What he found was that in the presence of differences in productivity across countries, economic output increased significantly upon the removal of restrictions to labor mobility. Applying those lessons to North America, he said that a removal of labor mobility restrictions would raise aggregate output by about 10.5% in North America within 50 years.

Economists know that capital follows labor. Where there are more people there are more workers, and where there are more workers, there is more investment and economic growth. "As more capital comes to the country, there is more need for labor, and it repeats itself," Ventura says. "But barriers only slow economic growth. If you were to build a wall around New York, no one would say that's a good thing for the US economy."

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Art credit: Dreamstime.com

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