November 23, 2009
A new paper by Anna Maria Mayda and Giovanni Facchini examines individual attitudes towards skilled immigrants.
It is commonly argued that skilled immigration benefits the destination country through several channels. Yet, only a small group of countries reports to have policies in place aimed at increasing the intake of skilled immigrants. Why? In this paper we analyze the factors that a direct measure of individual attitudes towards skilled migration, focusing on two main channels: the labor market and the welfare state. We find that more educated natives are less likely to favor skilled immigration - consistent with the labor-market channel – while richer people are more likely to do so – in accordance with the welfare state channel under the tax adjustment model. Our findings thus suggest that the labor market competition threat perceived by skilled natives in the host countries might be driving the observed cautious policies.
Why would more educate natives resist skilled immigration? They fear competition. They don’t want to be displaced.
October 12, 2009
Adolfo Barajas, Ralph Chami, Connel Fullenkamp, Michael Gapen and Peter J. Montiel have a new working paper for the IMF investigating if worker’s remittances promote economic growth:
Over the past decades, workers’ remittances have grown to become one of the largest sources of financial flows to developing countries, often dwarfing other widely-studied sources such as private capital and official aid flows. While it is undeniable that remittances have poverty-alleviating and consumption-smoothing effects on recipient households, a key empirical question is whether they also serve to promote long-run economic growth. This study tackles this question and addresses the main shortcomings of previous empirical work, focusing on the appropriate measurement, and incorporating an instrument that is both correlated with remittances and would only be expected to affect growth through its effect on remittances. The results show that, at best, workers’ remittances have no impact on economic growth.
September 10, 2009
Today, I learned of an excellent real-life example of perverse incentives. One of my younger siblings is employed at a restaurant. My sibling works shifts as both a maitre d’ and server. Because of the cash tips (largely tax-free as most go unreported), a shift worked in the server capacity is significantly more profitable. Unfortunately, my sibling is scheduled for a far greater amount of maitre d’ shifts than server shifts. My sibling wisely spoke to the manager and inquired as to the reason for this scheduling. The manager replied that my sibling is very good at the job and so is scheduled for more maitre d’ than server shifts. Having had many grueling conversations with me, my sibling replied to the manager “So, because I work hard I get paid less? Well then, I’ll have to start doing a bad job on my maitre d’ shifts.”
While I am proud of my sibling, it amazes me that such a successful restaurant is providing such perverse incentives for its employees. Unfortunately, many government programs operate in much the same way. For instance, welfare programs pay people when they don’t work, and our tax code raises the rate of taxation as they earn a higher income!
September 6, 2009
Earlier this week, The Economist released a report card on “child welfare in rich countries.” The report points out that governments often believe that the path to societal happiness lies with increased spending on the welfare of children. But according to an OECD report, this has not been the case. OECD researchers ranked countries based on six categories: material well-being, housing and environment, educational well-being, health and safety, risky behavior and quality of school life. According to the report, “Government spending per child varies a lot, as do outcomes; but the correlation is not strong.”
According to The Economist,
No country gets it all right, though some, like the Nordic ones, do better in general than others, notably America. America spends more than the average of $126,000 per child (excluding health) but its children fare worse than their European peers in areas like health, education and living standard, in part because the poorest American children are considerably more likely than are their European counterparts to stay poor.
July 27, 2009
The Club for Growth blog recently posted on Walter Williams’ classic PBS documentary ‘Good Intentions’ based on his 1982 book, The State Against Blacks. The documentary may have been produced nearly 30 years ago, but its economic principles have not changed – nor have the problems of minorities or the causes thereof (despite the government’s good intentions).
July 22, 2009
Thomas Sowell debates the dynamics of welfare with Pennsylvania Secretary of Welfare, Helen O’Banion (1980):