2.4 Migration and Protectionism

2.4 Migration and Protectionism - Global Prosperity Final...

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Global Prosperity Final Exam Section 2, Question #4: “The recent economic crisis has stirred the global world in many ways. A retreat to protectionism was not (or maybe still is) an option discussed in the developed and developing countries alike. In light of this situation, some measures were adopted in this direction, for example in terms of restricting migration (see People Protectionism, The Economist , July 1 st , 2009- Reference 3). Is migration harmful to the economies of the developed world? Discuss.” The literature is split regarding the effects of migration in the developed world. Intuitively, it follows that the free movement of labor from poor to rich countries causes a convergence of wages, because the increased supply of labor in the rich country makes wages lower and more competitive, while in the poor country wages and living standards both increase with the decrease in supply. O’Rourke and Williamson, as well as Borjas, claim to see evidence of the lowering of real wages among certain, lower-level groups of workers in developed countries. Others, such as Ottaviano and Peri, find a much weaker, and almost negligible, effect of migration in developed countries. O’Rourke and Williamson (Chapter 8): -Theory: Migration causes convergence of wages and living standards between rich and poor countries -Labor flows from poor to rich countries, raising wages and living standards in poor and decreasing those in rich -Two views: -“Optimistic”: Migrants enter rapidly growing industries and alleviate short-run labor supply problems by taking employment in those industries. -“Pessimistic”: Migration increases employment in slow-growing industries,
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2.4 Migration and Protectionism - Global Prosperity Final...

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