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Global Migration

Jun 9, 2012 • Behavioral Economics, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic Thinkers, International Trade and Finance, Labor, Regulation, Thinking Economically, Uncategorized • 190 Views    No Comments

The most common state-to-state moves in the US are from California to Texas with New York to Florida next. Between 2008 and 2009 almost 7 million people moved from state to state. The most common reason? Employment.

What if labor could not move easily? A clothing maker might not have the designers nor the sewing staff in NY. Detroit car manufacturers and Silicon Valley start-ups could not get the expertise they needed. Like capital, for optimal economic growth, labor needs to migrate to its most efficient destination.

Economist Branko Milanovic says if you are pro market and pro Adam Smith, and I might add pro David Ricardo, then you also should support global labor migration. More than California to Texas, he says workers should be able to move from India to Texas. And yet, only 3% of all people in the world live in a different place from where they were born.

The Milanovic article took me to Lant Pritchett’s book on labor migration that you can download (free) here. Recognizing that immigration is a controversial issue, Pritchett explains why and then proposes changes that richer nations could accept. I recommend a look. It is interesting. It is also fascinating to consider US mobility in the US Census Geographical Mobility report.

Next idea? It all reminds me of the euro zone. Wasn’t labor mobility one reason that it was established?

And finally, labor’s mobility is limited by transaction costs. Whether it is selling your home, filling out forms, or plowing through the red tape that gets you the job and then facilitates the move, minimizing transaction costs helps to move workers wherever we need them.

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