Efficiency and distributional implications of global restrictions on labour mobility: Calculations and policy implications

In this paper a procedure for calculating the annual efficiency gains from various alternative changes in existing global immigration restrictions is presented, along with an evaluation of impacts of wage rate changes on non-migrating labour. A simple methodology uses data on U.S. dollar GNP/capita across countries to infer differences in the marginal productivity of labour both between countries and across major world trading areas. Two key assumptions used are that the worldwide labour supply is fixed and full employment occurs in all regions. Differences occuring in labour's marginal product across regions are assumed to arise because of barriers to inward mobility of labour in high wage countries. When these are removed, labour reallocates and efficiency gains occur. While the calculations are based on contentious assumptions, a striking feature is the size of the annual worldwide gains. In some cases, annual gains can easily exceed existing worldwide GNP generated in the presence of labour mobility restrictions. While all gains do not accrue to LDC's, the size of the gains nonetheless suggests that this issue may be much more important to these countries than other issues raised thus far in the North-South debate. The losses to labour already employed in high wage countries dramatize the incentives for labour unions in the developed world to oppose liberalization.