Daily Archives: October 9, 2008

Economics of free labor mobility!

Ever wonder what would happen if humans moved freely across borders as against just goods and capital? Jess Benhabib and Boyan Jovanovic of the NYU have something interesting to say on this. They ask what level of migration would maximize world welfare. Welfare is assumed to be a weighted average of the utilities of the world’s various citizens. Using a calibrated one-sector model they find that unless the weights are heavily biased towards the rich, the extent of migration that would be optimal far exceeds the levels observed today. The claim remains true in a two-sector extension of the model.

Of course, political considerations and constraints are paramount in formulating an immigration policy; be it allowing in geeks or non-geeks! Notwithstanding this, the Benhabib-Jovanovic paper is definitely an interesting thought and simulation exercise in a relatively unexplored area of modeling and policy analysis.

Click here to read the article.

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