Technological Superiority and the Losses From Migration

Two facts motivate this study. (1) The United States is the world’s most productive economy. (2) The US is the destination for a broad range of net factor inflows: unskilled labor, skilled labor, and capital. Indeed, these two facts may be strongly related: All factors seek to enter the US because of the US technological superiority. The literature on international factor flows rarely links these two phenomena, instead considering one-at-atime analyses that stress issues of relative factor abundance. This is unfortunate, since the welfare calculations differ markedly. In a simple Ricardian framework, a country that experiences immigration of factors motivated by technological differences always loses from this migration relative to a free trade baseline, while the other country gains. We provide simple calculations suggesting that the magnitude of the losses for US natives may be quite large– $72 billion dollars per year or 0.8 percent of GDP. We are grateful to Alan Deardorff and James Harrigan for helpful comments, to Joshua Greenfield for research assistance, and to the Center for Japanese Economy and Business for support.