tv Key Capitol Hill Hearings CSPAN September 2, 2016 2:30pm-4:31pm EDT
the contributions of immigrants in the us workforce is because while we do know from what we have seen this morning there do not seem to be negative impacts in the long run we have also seen work that says increases in productivity, how those increases could be within firm increases especially with immigrants with complementary skills to those working in those firms, another way immigrants can contribute to the us economy in particular is in particular these high skilled entrepreneurs through job creation, through their own startup companies. this is going to be the focus of my talk today. look at business ownership, look at startups, defining
entrepreneurship, more finely than self-employment, look at people who have found incorporated firms or non-incorporated firms like partnerships, these might be individuals who have several employees. those who are nonemployee or self-employed, those individuals may be doing freelance work working with independent contractors and we will talk more about this in a moment. many of those individuals especially after the great recession were not necessarily choosing to be entrepreneurs but were doing so out of necessity even among college graduates. we know college-educated immigrants are more likely to start businesses, especially
more likely to start high-tech businesses, so if we assume one of our goals is to increase us employment rates and the level of employment to stimulate economic growth or entrepreneurship, whether it is all immigrants, or a subgroup among immigrants who may be more or less likely to contribute towards these ends. just as some background i will be using the word immigrants a little differently than some speakers have used it today. the distinction, speaking of foreign-born, those who are not native us citizens by birth, and immigrants, i will be referring to legal permanent residents,
and naturalized citizenship. for those on temporary resident visas, relatively few options for them to participate in entrepreneurship, there was a new rule proposed last weekend. and the specialty occupations, individuals, in stem fields. and the prospect of entrepreneur to use, and the separation between the employer, to the visa. and a company that has a board, fired them, the owner, and there
would need to be enough separation, the employer who is petitioning for the visa is separated from the person who would be employed on that visa. that is a difficult route to go, this does require substantial financial investment up front so that may preclude people from participating, only for individuals from certain countries under the treaties so some of the countries that are not eligible for that opportunity include india and china which are the countries that send us the most people who become entrepreneurs. this is another problem. we heard students become entrepreneurs, there has been
focus on that in the last couple years, we want to extend startup visas to people who graduate from higher education programs. optional practice in training for extended time to remain in the us for two years. those individuals can in fact self-employed, choose to become self-employed but when we look at the data among college educated residents and specifically those who found businesses only 4% are on student visas. the growth rate of entrepreneurship among immigrants has been positive for several years. in 2013 immigrants were twice as likely to start businesses, and has shown when in four new
entrepreneurs or immigrants, additional work showing fairly large fraction of high growth in high-tech firms had one member, and moreover those who had one foreign-born member tended to perform better. looking also adventure companies that go on to be public, that were high growth and contribute to us gdp in larger ways, went public in 2006-2012 were also immigrants. others have looked in the past particularly at some papers by jenny hunt looking at the gap between college-educated native us citizens and foreign-born for other activities and self-employment and a great deal
of the difference can be explained in their fields of study. people with engineering degrees are more likely to become self-employed and become business owners and in addition those who are foreign-born are more likely to take degrees, it only makes sense the foreign-born, to become business owners or self-employed. a fairly large residual that we have not explained. some of the discussion specifically looking at students who came here to study and graduate, a way to do a startup company, in my research i was interested to look and see whether we find differences
among foreign-born degrees, there is prior evidence suggesting in the us, do contribute more than those abroad as opposed to those who were trained abroad to be commercialized. a lot of high-tech firms, foreign-born founders and us trained, there is a downside, and say let's have as many students as possible, and to be entrepreneurs, what we want to focus. increasing foreign student visas
may have unintended consequences for participation of women in stem fields. this is an area to think about more. and hold all else equal. we need to consider downstream effects. in order to parse the rest of the region, and beyond fields of study, engaging in entrepreneurship and demographic things to look at looking at whether they trained in the us or training abroad, i suggest one additional one. i will ask you to do this a little backwards and look at this chart from right to left. some of these will be surprising. one of the things we expect,
entrepreneurs stereotypically are more risk tolerance or taking risks by definition. foreign-born who come to the us are more risk tolerant if they should be coming specifically for educational work reasons. it was unsurprising, and they are more risk tolerant looking at 2012 general survey data but business owners are more risk tolerant then regularly employed for native us citizens, we see unsurprisingly sitting with our vision what an entrepreneur is,
business owners tend to value economy, personal freedom and greater degree of independence, and again foreign-born, this is even more pronounced among foreign-born business owners. the final piece that will lead into the analysis i am about to show you was looking at the bars that are furthest to the left. one of the questions the survey asks is to what extent a person says their preference is they find success is very important to them, they want to be recognized for their achievement. the thing that is interesting is regular citizens, not statistically significantly different, business owners not significant a statistically different from regular employed but foreign-born business owners are more likely than this other
group, half of them say they wish to be recognized for their achievements. this is going to bring us to our research question. we want to know why college-educated foreign-born workers have higher rates of entrepreneurship than similarly educated citizens, what explains the remaining gap, why is it some groups of foreign-born workers have greater propensity to business ownership or entrepreneurship than others do. we are looking to see whether cultural support for entrepreneurship in their country of origin relative to the us matters in once they come to the us are likely to become entrepreneur bloops -- i wasn't into the weeds on the estimation here but we are seeing a survey
by logistical progression with two different outcomes. one is business ownership versus other types of employment and then we will predict specifically business ownership in some businesses to science, technology, engineering and math which tend to be the higher growth of high-tech firms we were discussing earlier and looking at all the other stem occupations to model the choice individuals trained in stem are likely to be making. explanatory variables are citizenship and visa status, whether somebody immigrated as a child or an adult and whether it was for higher education or work or some other reason and whether they are on foreign or temporary resident visa. we are looking at several variables and country of origin characteristics.
all of these have interaction terms involving testing whether there are any statistics across groups and explanatory variables. the data from the national science foundation, this is nationally representative data. i have 86,000 observations in my data set of residents with bachelors or higher degrees combining national survey of college graduates and oversampling on us trained phds to give more detail on those individuals. for the cultural support variables those come from the global entrepreneurship monitors conducted in 100 countries typically when conducted in the country in a given year there
are 2000 or more individuals responding in each country and the questions we are looking at, to what extent the country is supportive of entrepreneurship and those who agree with the statements. number one, in my country, conducting this in france they would ask in france is it true that most people consider starting a new business the career choice, and if it true though successful at starting a new business have a high level of respect? this gets to the idea of wanting more recognition and overall descriptively, one of the things we notice when looking at college-educated us residents in the workforce i am building up the bar, starting at the bottom the darkest part at the bottom, business owners who aren't necessarily high-growth startups
and above them the hybrid startups and looking at foreign temporary residents who are very unlikely to be business owners, extremely unlikely to be self-employed for the reasons we were discussing earlier with respect to the visas but if they do start a company it is more likely to be one of these high-growth startup ventures. we also know that foreign temporary residents and immigrants trained abroad have a higher rate of employment in startup firms and this is another topic i will come back to in a little bit. we are trying to grow these companies, not just to is going to found them but who will take the financial risk of starting the business and who will work for them or be part of the founding team even if they don't have ownership interest, who will take that risk to their own
employment of startup companies. so whereas the previous slide was showing you as you add up the percentages, showing you among those who immigrated as children what percentage are business owners and what percentage work for startup ventures, in this one we are looking at comparing the fool sample and what shares fall into each of these categories, looking at business owners so overall the foreign-born which is the entire height of that bar, the foreign-born are a bit under 20% of college educated workforce in our fool sample but among business owners it is exclusive to 20% and a lot of that is driven by those who
immigrated as adults for work and a little bit but not very much difference between those who immigrated as adults for higher education versus the general population. where we see higher education come out is in the final column looking at stem business owners. there is a high share, 10% versus 5% of the population, 10% of those are individuals who immigrated to the united states as adults, probably as young adults to pursue higher education degrees. the other thing we want to look at is treaty mechanism of those who would not be eligible for those mechanisms was one of the things we observed is if we look at employees of established organizations in the united
states, 85% of those immigrants are from 92 treaty countries but a higher share of business owners, are from 92 treaty countries. when we look at foreign temporary residents, they have very few mechanisms become self-employed. as we would expect only 27% of business owners from these 92 treaty countries even though if they do found a business it tends to be very high growth. these are results from the regression model. i'm predicting the probability in the first column of someone being a business model and all of these looking at the changes
in probability for us citizens so if someone immigrated as a child they have 6 percentage points higher probability of bonus who are similar looking at demographics looking at what their degrees were, 20 explanatory variables and interactions in the model. as we expect, from these countries, they are much less likely than other groups to be participating. another interesting thing, looking at those who immigrated as children, they are more likely to become business owners, for a country that, what country they came from, the middle column, they are no different than native citizens in their rate of participation.
the main differences, looking at all business owners, we find those who immigrated as adults for higher education are more likely to be in stem business owners in particular for other demographic characteristics in contrast with statistics saying there are demographic characteristics and other things controlled for them, looked like those who were trading at a lower rate. it does become a robust result of higher education advantage for adult demographics. now this lack of cultural support. the main thing we are looking at, the black line horizontally across, the rate of business ownership among native us citizens, we do see the strong
positive ingredients, saying it lacks cultural support for entrepreneurship, the home country is less supportive than the united states. negative numbers coming from a country like australia where there is a higher degree of support for entrepreneurship and the interesting thing when you come from a country with very low cultural support you are more likely to become a business owner when you come to the united states. the flip side of this is if you chose to immigrate to the united states from one of these countries you are actually less likely than a native us citizen to become an entrepreneur so the people who choose to come from
those countries are selecting to come based on not having a desire to be entrepreneurs. to wrap up, we know college-educated workers, among college-educated workers immigrants who come to the us as adults are more likely to become business owners and we also know the probability of business ownership is higher for immigrants from these countries that have relatively lower cultural support for entrepreneurship but among these different immigrants we find those who came to the us for higher education are most likely to become stem business owners, to have entrepreneurial ventures and once we control for demographic and other characteristics become business owners more broadly. we don't know if this is selection or causality. we don't know whether immigrants come to the us for higher
education -- just seeing that effective. or if there is something about the us higher education system that is making them become more entrepreneurial. we can't tell that from these analyses but from a policy perspective it doesn't matter. we can't randomize people to go to us higher education programs or force people to go to higher education programs but we can decide whether we want to admit more people and allow them to have student visas. that is the student policy to we have available and for whatever reason seems more likely to engage in entrepreneurship. the next thing i will leave you with is we were talking about business owners, one of the things we need to have these businesses grow our people who are willing to be employees of these new ventures.
disproportionately immigrants who have degrees from foreign institutions who come to the us with graduate degrees they are disproportionately becoming employees of the startup companies. at the same time it is difficult for startup companies to get visas. they are searching for candidates and application process favoring larger firms and probably the next challenge we will face is the startup visa. [applause] >> thank you very much. time for questions. for magnus. the reasons we expect foreign-born people to be more likely to be self-employed or start new businesses but the idea that the percentage has been rising over time was new to
me and i don't really, doesn't immediately -- seem obvious to me why that would be the case and in particular why they converge after the great recession. if you can imagine deteriorating economic conditions pushing people out of jobs and into consulting gigs or some kind of necessity entrepreneurship but why are native borns less likely to be self-employed since the great recession while foreign-borns have continued to rise? >> that is the big question. disappointing when you look at -- cautious. what we know is with the great recession there were big changes to the economy, the structure of the economy changed in certain sectors that were impacted by the great recession and many of those jobs went away and some of
those are factors with a good number of self-employed workers. to what extent that is going on is unclear. from my perspective, you take the step and look at some statistics, not particularly satisfactory because you don't have good answers to what goes on but with these numbers, to show what is going on, what it does, to say there is something here we are not sure what is going on and hopeful i will draw more information on that issue. i don't know to what extent on the immigrant side the competition will affect the immigrant population staying here or coming here, how is that playing out, it is to me what it shows is we ought to take a much closer look at these changes.
i am behind you, i would like to learn more about that as well. >> given your research into why high skill do the things they do and are more likely to do those things than nativeborn folks, what are the implications for public policy? can you come up with one policy change that would be best calculated to bring in more with the entrepreneurs? what policy levers are most likely to generate the biggest bang for the buck in terms of bumping high skilled entrepreneurship? >> there are a few pieces to this. we know that for entrepreneurship in general, more likely to start a company and start a successful company when you have four years
experience and in a lot of cases that experience specifically working for another startup company working in the startup company will prepare you to have a successful company and a lot of startup visa conversations were around extending visas to people who had just finished their schooling who had not yet had that experience so if you want successful entrepreneurs, having some mechanism where they can spend time actually apprenticeing effectively in another startup company, having that experience, gaining that human capital seems like it would be really important. some of that maybe could happen with f 10 p but 10 years is not a long time so maybe what we need to consider, getting back to the last slide is how we make it easier for foreign-born individuals, whether they were
trained in the us or not to get that experience so they can be more likely to be successful. .. so i have not read it through in detail yet. the main things that i did note, just skimming over it, a few days ago, was that is there is this, one of the things that is have been talked about, that they did go ahead with, if you manage to attract fund to go your company, that's one of the
rules, you have to attract funding, some of the previous mechanisms, for green cards, and, you have to show revenues and for high-tech companies that wasn't practical. attracting venture capital is one of the things that has been done, it is to encourage those high-tech companies, to stay here in the united states and to grow here in the united states. >> your mick is coming. >> fred, this question is for doctor. you're saying from low companies, that come to set up businesses and it would just paint more of a picture. which are those countries,
russia and south africa, and, they startup businesses here. >> which countries have low and which have high? >> so, two of them in particular, higher than the united states, and so, maybe we can think about learning something from, that i came across before, canada and australia. canada with our neighbor, and english speaking. but, we might look to those countries and see what they might be doing differently. given that they do seem to have this higher level of cultural support, as a career path. the lower ones, there's a of them. u.s. is high, i believe the rate of support, was on the order of 80% which is why you saw the scale going to negative 20. the ones where there's a big gap, one is 1kwr57 pan.
they have considerably lisa sport. but, i would have to, i can point to you the data afterwards and you can get the full list there. >> so since india and china are such high sources, where do they fit in there. >> they were definitely further away from the zero point. >> time for one more question right here. thank you very much. peter, from cornell, the question i have, and i'm directing it at both of the panelists. whether or not there's any evidence of differences between native born startup, and foreign born startups, and, in terms of where they access their captain. in particular, are there any
constraints that are unique to foreign born in terms of accessing financing from conventional sources such as bank? >> i think, if i'm recalling, i haven't looked at that time myself. but, you can looking at the work of rob and, to be fairly, and we have some people from kaufman. if i recall, i think that we all come in with a notion that there would be big differences, they did not see strong evidence, of disincheses, in the sources used for funding. i'm sure there's also great things across the groups in terms of that. but there is research that has looked at that particular issue. >> my answer would be pretty much the same. it seems there shouldn't be any difference for naturallized citizens, and residents to get access.
bank being less likely to lent to it. but, rob has a paper that was looking at this issue, and, my recollection is the same as his, there isn't seem to be any real difference for native foreign born in terms of the financial capital, that they were bringing to the enterprise. >> with that we'll wrap up this panel. and, thank you and i believe there's a break coming up now before the next panel. [applause]
>> they will wrap up on how it affects institutions, that along with the other discussion's immigration and real estate, and illegal immigration and labor and wages will all be available starting later today. on our website. this news story from the hill about 90 minutes ago. the f.b.i. release eddie tailed report, into hillary clinton use of a private e-mail solver including the summary of the 3 hour interview with the secretary of state. it totals 58 pages, large sections have been redacted, in july, james momentky announced that he did not recommend
indicting her and he called the secretary of state extremely careless for using the server. he said no reasonable prosecutor would be such a case. >> it has been a hot commodity. and they have pushed comey, for the messages. again that story, coming a short time ago in the hill. house speaker paul ryan without with a statement on the e-mails that says, these documents demonstrate hillary clinton's reckless and dangerous handling of classified information during her ten your. they cast further doubt on the justice department's decision, to avoid prosecution from a clear violation of the law. >> this immigration conference,
reconvening in 15 minutes on the affect that it has on institutions. during the break here, we'll show you a portion of one of this morning's panels, focusing on illegal immigration. >> well, thank you so much, my name is phillip, and i'm the managing director, at the center for american progress. i'm excited to be moderating this discussion with two notch scholars. the question of border security of whether we do or do not have a secure border and how we measure what border security would mean, sits at the heart of every debate over immigration policy, in this country and it's what we'll be talking about today with two very different perspectives. the u.s. now employs over 21,000
border pal trol agents and we spend more each year on immigration enforcement than on all other federal law. on top of that, apprehensions -- a stat which scholars use as rough problemsy trying to cross the border without status. they are near 40 year lows. for all we know, how many agents we have, and how much technology, etcetera, actually measuring what we know to be a secure border, has been both il lousive and dif guysive. the unauthorrized population peaked at 12 million and has dropped ever since. >> there are 10.9 million unauthorized immigrants.
so, unauthorized immigration is declining, and for mexico it is net negative. but why? >> without jumping too far ahead of the one of the cu questions we'll be debating is whether border security has played a role in that decline, or frankly, whether they have been largely ineffective or has missed its targets. i have to say the answer to this question is more than academic. and, how we define border security, whether, border security deters, on migration, it will be one of the key questions in any fine of conversation or anytime in the future. if it is effective. then the question becomes what types are more effective than others. and toward, building a wall or maybe putting more boots on the
ground or, something else, entirely. >> if border security is not effective. should we be putting this money in resources elsewhere. are there parts of border security that are less effective than others. so here to bring some clarity to this issue, and, the scholars of the question. >> douglas is the professor of so see on guy, and, co-director of the mexican project. and an annual survey, which has been on documented, migration, and, focus over the past decade, on quantitative immigration. he has worked in the institute for defense, and the consulting firm, and, nathan associate yes, sir and he was the assistant director, at the office of program analysis, and, he
previously worked, in the policy, and science and technology, as a e conmist. he holds a ba and a phd in economics. so, please, join me in welcoming our panel iftd. >> it's at pleasure to be here today. i've been studying mexican immigration for a long time now. one thing i have learn said that when congress makes immigration policy it doesn't make policy with any knowledge of immigration, and it is not trying to achieve anything in the management of immigration. politicians are responding to political things.
how can i use immigration as a tool to mobilize voters, and, gain resources or, support a cause i like? >> when you look at american immigration policy, it tells you more about america's hopes and aspirations, and its fears and apprehensions than anything else. and, to understand where we are we have to go back into the 1960s, and, with the civil rights era. and the era was more about hopes and aspirations, rioting past wrong, and, public policies that have been rather than shallized. and so, what i'm going to do is give you a short history lesson and talk about where we are now and present some data. what you see on the screen is a summary of immigration flows from mexico
over the past 60 years. in the late -- we have three lines there. the blueline, here, is legal immigration. the red-line is temporary worker immigration. and the green line here, is undocumented migration and that's border apprehensions, divided by the number of officers. if you have more officers you will get more. and distinguishing it, you get a rough problemsy for, i'm not saying this is the actual number of undocumented entries, but this is the trend over time. consistent with a lot of other data sources. so you see back in the 1950s, the united states was importing
about 3450,000 guest workers. legal immigration was 50,000 a year. half a million mexicans coming to the united states each year, 450,000 were circulating back-and-forth, and, studies see this even among as de factor permanent thing. and, so a circular flow. 1965 comes along and it's hope and aspirations. and the voting act passes in 1965, and congress amends the immigration nationality act not as a tool to achieve any objective for immigration but to
de racialize and de prejudice a system that was put in place for the 1920s. and, set up quotas to favor it, and discriminate against southern and eastern immigrants. and, reduce the overall number of immigrant. so, by the 1960s, and, he's in charge of it. they're bent out of shape, and how they talked about it. so i am im me grations reform is about civil rights and redressing past wrong, and it was debated very much, the southerners were against it. it would change the composition and one of the things, if you change the system, we want to put a limit on limit. because that's where brown people are.
so, in 1965, congress rewrote the immigration nationality act and created a as many that gave them to relatives already in the united states, a smaller segment, to labor needs and this was used it allocate visas, and, initially. the western emmiss fear had no limits. >> they could do it. >> they capped the hemisphere at 120,000 visas, and, had ramped down the quotas to 20,000 per countries, per-year and that's the global quota system, and, the cap of 29 50,000 visas. >> also in, 1965, midnight, between 1964, congress let the legislation expired.
so, in 1965 there was a dramatic break. congress, if you read the debates they didn't talk about half million people coming in, how is this going to effect things. it was more about, are there going to be a lot of asians. and those were the concerns at the time. and so what happened in 1965, is there was a massive break in the system. and, you see it there. and that's the genesis of the contemporary era. you go suddenly from a system where you have half a million people with legal visas, to a new system where the temporary worker program is gone and the legal visas are capped at 20,000. the flows have been established over the past two decades.
all the migrants are connected to employers in the united states, and it was expectations, and practice's both sides of the border, and, as you can see with the green line. it expands from 1965 to 1979 and 1980, and then stops growing and begins fluctuating. so, during this 1970s, the labor flows that prevail were reestablished. only now a vast harnlgty were circulating and that created a new dynamic whereby, since they're illegal by definition, they must be criminals. this gives rise to a new threat narrative. where latinos, in general, and mexicans are portrayed as a grave threat, and, a series have
met take force are brought out to explain this to the public, where, the illegal migrants are going to flood, and inundate society, but, the one that won out was the marshall being invaded, and, its territory was being occupied, and migrants were launching it, at the border. they were trying to hold the line against the people, and, these are terms that were used. you can see this in the figure here, i did a content analysis of leading newspapers, the washington post, and, l.a. times, and, looked at references to mexican immigration as a flood crisis or invasion, in leading newspapers, and you can see that it paralevels the rise.
and, they peak about the same time, that it peaks, and then begin to fluctuate and there's another piece of anti immigrant policy that is enacted. what this did was set off a dynamic, and you had this effect, from outside the system, where, there was as massive change in policy, and suddenly -- >> thank you for coming back from the break. i want to begin by saying, just, heartfelt thank you to all the presenters so far who have done a wonderful job. it's the start of the academic year and this took time off before a 3-day weekend, to fly across the country, and, thank you very much for your performance so far. we're now at the last panel of the day. one of the lessons i think we can take away so far. is that the findings, in economics, whether on the wages
and labor market front, the impact on real estate are fairly positive for the united states, due to immigration. there's not a lot of that you can point to, where the effects are negative. if they are, it's for a fairly small group of people. but, they are large, for americans and especially for the immigrants, them selves. >> what we'll be talking about today on this lafayette panel is one of the ways in which immigration could become a negative. a few facts, a lot, the majority of immigrants come from countries a lot poorer than the united states, for example, and, in the literature there are several reasons given for why they are poorer than others. some of them focus on institutions. a fancy term for the rules of
the game, both informal and formal. being the laws of the government and, state, property rights and contract rights and trade, and monetary policy. these type of things, matter, in terms of their outcome on economic growth and the wealth of society. >> different institutions, same language, same culture, split down the middle, with very different outcomes, and, cultural issues that are raised by many people, and, ser things that are incentake fiefd, and,.
>> since there are other factors that could influence t. it's possible that will if there were enough, and they brought with them, these other ideas, or fundamentals, that the positive economic effect, that you have seen, could turn negative in the long run, if they undermine the institutions of the united states or other wealthy countries which are some of the foundations for economic growth here. so, i think today, we are fortunate, therefore, to have about half of the scholars in the world who do work on how i am make grants impact the fundamentals of growth on the panel today. so, very fortunate, first we'll have michael clemens, give his first presentation. he's a senior fellow, where he leads the migration development.
his research focuses on the effects on im international migration, and evaluation for projects. he serves as c.g.d.'s research manager. the research community, and peer review, and research seminars. >> the institute for the labor and an afill yate for the access for new york city. he joined the center of a completing his phd at harvard, and, and economic history, they have focused on the effects of foreign aid, and the effects of tariff policy in the 19th century and the system expansion.
following michael we'll have ryan murphy. assistant professor at the o'neill and he received it, and, he has published, widely, journals, and, if you ever to want look at his cv online, how quickly he publishes, so many different venues,. then we'll end with benjamin powell, who is the director of the free market institute. and, the college of business administration, at texas tech. and, he's a north americaned today tor, and, past president of the association of private enterprise education and a senior fellow, and, he is the author of out of poverty.
and he had today tor of making poor nations rich. co-editor of housing america, and he had today tor, market based approaches, and, public policy. >> more than 50 officers. and, economic development and public choice. and, b.s. in economy, and, ma and phd. so without further ado, michael clemens. [applause] >> thank you for being here. two economy mists, one, american, and one british, are discussing the reasons, that they support a large government intern vention to restrict immigration.
two big reasons. wages, and institutions. the american economists says it is obvious that competition must reduce wages, and his british counterpart agrees with you. nothing can be more, than the attempts to make out. but not just that, there's a second reason they support this intervention, and its institutions, maybe a bigger question of the effect of immigration on the culture and institutions, that under pin the entire economy. such an add mixture of people would be the degradation, without any improvement of the and his british man responds only a temporary good and a permanent harm is done to man kind.
they are around al the time. i want to point out a few things, the first is, it is happening in 1869 between the biggest of the big shots, american is henry george, and, british was jon stewart mill. the second, and the policy intervention they're discussing is a total and complete shutdown of immigration by ethicny chinese people to the united states. the second thing they got what they wanted. 13overs later there was a total shutdown of immigration to the united states, by chinese people, and it lasted 70 years. the fourth thing is there wasn't
any evidence then or now, that that policy achieved the goals that these very smart people claimed for it. there's no evidence that chinese exclusion raised american wages, and proper functioning of the u.s. economic institutions, depended upon it. now, these conversations have continued, it's 147 years later, many of you are here to hear about the latest research on wages from a few of its top promoney negligents. but, what i find remarkable although the wage conversation came back in the 1980's, and continues, the second conversation about the bigger effects on the entire economy, through the channel of economic and other institutions, only came back pretty recently.
we were just talking about what fraction of research is on its effect on relative price's wages and how much on these broader questions about the wealth of nations. it's something like 98 or 99-1. very little. so, a few years ago i wrote a paper called dollar bills, trying to nudge them to look more that the other and more neglected question of the effect on might go grietion the broader wealth of nations. it just says, look, now that we have pretty good evidence that the productivity of a worker depends on location, that is, the economic productivity of exactly the same worker, even performing the same task can vary by an order of magnitude.
that has as remarkable invitation, which is that policy barriers, between countries, could be costly. there are estimates that, barriers to the movement of just 5% of the current population of developing countries to developed countries, costs the world economy, trillions of dollars a year, very large effects. there has been a response to these claims, in thelitera sure and it's what we call the new economic case for migration restrictions and it focuses on these exact same arguments, in the second point that, george and mill, were talking about, in 1869. it's been the subject of
discussion by another british and another american, many, many generations later, so, the idea is that, people from poor countries when they might go grate don't just experience higher productivity, they reduce the productivity, around them by spreading bad productivity to those people. for that reason, i'm not making this up, it's called the model, fernandez has a hand book chapter and that's what she called it. it is there. here is paul colier, making this case. i don't want to -- i want you to know i'm not mischaracterizing, it. migrants are escaping, from countries with dysfunction. poor societies along with their institutions and organizations,
stand suspected of being the primary cause of their poverty. they bring their culture with them, with the potential risk that the social model, will become blended in such a way that damaging dilutes its functionality. so, an american economist, reviewing this book last year, puts together a little model of how the model might bring about the result of the games to the simple games to migration, and the fraction, low total fracture. if they were equal to.75, 75% of the bad total factor, from poor
countries, the net gains to global labor become negative. because now the entire world's workforce is operating on the inefficient institeutions. but now they have spilled over to the north. he concludes, with this diamond of rhetoric. be aware of social engineers who promise the existence of trillion dollar bills on a mythical sidewalk at the end of the rainbow. those promises are often based on flimsy modeling and inadequate evidence. >> i'm not sure which researcher, referring to. it sounds like quite a diluted and naive person who must be a pa that the tech figure. but, what makes this even more remarkable. he doesn't orr any evidence.
>> it's a conjecture that it might happen. stepping back from maybe unfortunate rhetoric like this, we can't rule this out. it is plausible, there must be some very large stock of migrants from poor countries, that would be associated we had a change of institutions. that's not im blawsable or impossible. the question is, where would that -- rate lie exactly? and, it's remarkable to see a evidence free discussion of that, and then, a evidence flee discussion continue 146 years later as if nothing from which we could learn anything had happened in between. so, what we do, is say, well, what's the simplest way we could look at the evidence. there is quite a variance, in
the stock of poor country migrants, there, is there an association between that, and lower levels or lower growth of factor productivity. and, what you see here, on the fraction of a country's population that's made up of my grants, from countries, less than productivity. >> poor countries, and, on the total, over a 20-year period. there's no relationship here. now, this is just, if you were here this morning, this is an international version of what they showed you about the relationship between areas of the united states with very large fox or growth in number of international migrants and the productivity of labor. we don't see any evidence in.
across the stocks that we observe. of the relationship between those stocks and lower growth. however, it is again not inconceivable, somewhere, way out to the right, in regions we don't observe at high levels of migration there would be such an effect. so what we do, is put together a model of the things that would determine that effect, and, use data, on migration that we know about, to calibrate that model and ask what would be efficient migration. that would be so high that it would just offset the pure economic gains from allocation of labor.
so, i won't go through the model. it depend's three things, that are not difficult to imagine, the first we call transmission. this is the fraction of low productivity, with migrants and second assimilation is the rate at which that transmitted low factor productivity, once you arrive. and, what we say as congestion is not many in transition. that is it could be at very high stocks of flows of migration, it is higher. now, before just talking about a couple of results, i want to talk more about what we should expect. what they mean. so, before thinking about the plus a ability of very high
transmission of productivity, you want to do something, which they don't, which dig into the development and growth literature for what they know about what total factor productivity is. lance and i, you you can do it,e class a guyed it, the differences between the wealth of nations, and, aside from factor stocks.in five strands. total factor, as knowledge. how do you build a 747? you could envision it as capabilities. what are the local clusters of goods and services that must be available in order to enact any specific set of knowledge. i could give you the plans for a 747 and all the instructions.
but you couldn't make it there because of a lack of -- of the abilities to do it for that production. a third strand, is management somehow. or the allocation of assets and productive capacity within firms across firms and across sectors and this is associated with them and a fourth is that total factor productivity,embodies, productivity and, differences in culture. norms of interpersonal trusts. now, there isn't time to get into detail billion these. it's very clear that they are not transmissible with migrants, no matter how many came to the
united states, that would not decrease knowledge in the united states about how to make a 747. it would not decrease the capabilities of clusters to provide the goods and serviceses in. i would say the same for management techniques. institution os culture, are transmissible. here's what i want to talk about, assimilation. institutions, an intaketution is a phenomenal in a group of people. it is not something that can be embodied, in a human. it's not something that the individual can have, in a way that he has blondes hair or has a university degree. the clearest way, is the institution of what side of the road you drive on. now, if you are a native
left-hand driver, and that's what you have been doing, that day you come to the united states it's in your interest to drive on the right hafntd side. if you don't, immediately, it doesn't matter, you'll be dead. ap institution is the set of expectations, about people's expectations that exist win a group of people. it's not something that's transmissible by an individual who he arrives. finally, congestion, this is something we don't know much about. it is correct to say, they know very little about the consequences of high levels of immigration. but there's not no information at all. you have singapore, and vancouver with 40%.
and, canada with about half the population foreign born. they are not experiencing low levels. it is possible that will other places could be different and much higher levels, things could be different. so, here's what we do in the paper, with just a few minutes that i have left. put together a very simple one sector, two factor molgtd, and ask for a given rate of transmission of total factor productiontorty, from low countries, and asim mill lacing and congestion, and, benching of the transmission curve. do a few pages and fee is you can come up with up with good pressing, for what it offsets
the global game. that's the expressing for it. it's, it depends on asim mill lacing. you could have more migration. the more poor countries come with migrants, the lower the efficient rate would be. it depends, negatively on congestion. >> the lower the efficient migration rate would be. we gathered the he have we have on the parameters of this model. for migrants in the u.s. there are nine very low countries that have large enough samples of foreign born in the census data, to establish a relationship
between the earnings of those people and compared to how those earnings evolve over time. guana born people, where the axis is the years since immigration and the line is the earnings of a u.s. native with the same simple characteristics of education level and gender. and the black line, with the 95%, is the earning of a guana born person. we just give everything to the model and say, the hit, in earnings that you're seeing not long or at arrival, and for years after, is entirely due to bringing low productivity with you, and this dissipates at the rate you see there.
we estimate a half life of that effect. here's what it looks like, a lower hit upfront and slower asim mill lacing. you would expect. that's the flavor of where we're getting it, for congestion, are there things, of immigration, that is graph that's similar to the one he showed this morning when, i believe it was immake grant -- changes in the stock of immigrants across cities of the united states, on the -- on what he showed and changes in earnings, you saw a positive relationship. this is just the similar graph levels across census areas. so these are public use micro datas, of the u.s. census.
the divisions of the united states. it is a fraction, and floor few of them with very high stocks. 60, 70, 80%. and it is simply earnings of average workers. you do see, with a simple moving average there, that there is a little bit of a curve down. we don't try to explain that. it could be because there are other characteristics of the workers there, that they have lower education. but we just give everything again to the model and say, let's set the congestion per ram mitter below it.
things get worse at a faster rate. put those together, and, you get this graph, which will take a minute to explain. on the access, is what you might assume about an asim make lacing rate and, transition rate. those bluelines are the relationships between what would you would expect for a given level of migration, all of this at, you can see, assuming that congestion is.5. why do they slope up, because if there's more transmission of bad stuff, you would need there to be faster asim mill lacing for a given level of migration to be optimal. that m. equals zero line is zero mo grations. that dotted line is the
immigration we have, which is.3% of the population per-year. the line is 1% of the population for a year. and, then, high rates of 5% of the population per-year. and the dots you see are the data for transmission, and asim mill lacing for the nine, for people from the very -- from the nine very low countries that you saw in the census data. you can see that, all nine of them are to the right of the 1% line and 7 are to the right of the 3% line. that means that, if this -- if this effect were to bite, and be capable of erasing the economic gains to migration it would happen at a level that's over an order of magnitude, higher than the levels we see.
that doesn't mean that we recommend, these levels of migration. just if this is a real effect, ask when would it, to occur. at levels of migrations so high that they are just irrelevant to discussions. now, here's, this discussion is very old. here's a cartoon that i like a lot. those guys on the left-hand side have bandana, that say anarchists and uncle sam as many experiencing a danger. clearly, the new economic case for migration is not new. we also argue that it's not a case either. the case has not been made and, case awaits, maybe -- data or reasoning or evidence, that
i'm here to talk about a paper that i did with ben alex, and a few other people that was published last year on immigration, and its effects on economic freedom. i'm guess that go most of the people, are relatively open to the idea that it is important for peace and prosperity. and, what what do, we think of it as a institution. the important one. we use data, from a stat that i use, and many other people use, called economic freedom of the world report. i assist in putting together,
and it's important to say what we're talking about. so, the report, it's an index from seer tro ten and it scores countries based on five areas of variables, besides the government legal systems, and, regulation, and it's a question of whether or not it's going to increase or decrease economic freedom. whether it is going to hurt or help institutions. so, first, just to give you more flavor of what's going on here, first area is, just three measures of government spending and two measures of the top tax rate combined into one. then the legal system and property rights which is a combination of expert judgments, and questions, and, studies, one
measures how difficult it is. and then, money and stuff like inflation, and gives you information on regulation's whether or not you can own foreign currency bank account. trade internationally, tariffs and other regulations, and capital controls and, a whole thing of different vary ables, with credit market regulations, labor market and business regulations. so there's bunch of different arguments, that relate to what he was just talking about. so how might immigration affect economic freedom. conservatives might say they will come, and increase demand for public services public health and public schools and that's going for increase the
size of the welfare state. and increase the size of government. and decrease t. the social democrats, make the opposite argument, which is that if you bring in immigrants, it's going to reduce social trust, and reduce the willingness to pay for the welfare state and get a smaller welfare state. that's supported. now to become more topical, make an argument that immigrants will import their bad ideas and socialism, and, you can imagine there being similar arguments, and so on, to this effect. but then you can just make the opposite argument which is that, immigrants self select and they come to the places where they like the iron taketutions and
they want to be part of that. they will support it, that they see the country representing. and, this is third time that we cited, and this is just slightly a distant from where, the case quotation. but this is just to establish this american nationalist argument is a thing and it's not just a carrick sure or something. so what we do, our core strategy was to look at the levels the immigrants, percentage of the population in the world in, 1990s, and see how that relates,
to the level of economic freedom in 2011. those years might sound a little happen hazard but it's just what we had to choose, and, the fact that we wanted to give it enough time to play out, have an effect. and, in all of our results, controlling for economic freedom, in 1990. so you have a level of economic freedom and immigrants. what do they say about the future of economic freedom? and then as well we start adding in control variables and we control, the first only gp and capture the effects of immigrants are attracted to, places that are wealthy, and, or they see that they expect the place to become wealthier, and;
so if you are just looking at immigrants as a percentage of the population, in 1990 and you control for economic freedom in 1990, countries that we have for the right so 1.130. what that means is a one percent increase in the percentage of the population that is foreign-born. in 1990, it corresponds to a 0.113 units of economic freedom in 2011 which is positive, not negative. the star next to it, i will explain. that's what it basically means is a borderline result and you can't trust it completely but if you look down to the next slide and we start controlling more things we reach to start which is the conventional way of defining this in the academic literature and you see not only that but when you go down the line further that the size of the coefficient, that continues to be positive
and is larger and achieve a level of physical significance. now to split it up a little bit differently and say okay, we have the level of immigrants so maybe what we should care about is the level of immigrants from rich countries versus countries that are poor that may not share the institutions or culture that rich countries already have and what's interesting is that if you look at these oecd countries the effects we have our positive from immigrants from them but they are not significant and dissipate when you add the controls. but for non-oecd immigrants come into the country, that's where the physical evidence is coming from and it's just before it shows the previous pattern of increasing the
size of the coefficient, more and more statistical significance as you have more control. now what matters is not the level in 1990 but the rate at which they arrived to the country as a percentage of the population. so we can do that too. that flow from 1990 till 2010 on economic freedom in 2011 and once again you get the same pattern. maybe it's smaller but you get positive effects that are increasing and the physical significance increases as you go. the same exact pattern. now what happens if you say okay, i take that level and the matter and put them both in there the same time, you still have positive effects
with statistical significance because these two things are related and when you put two things related in a regression that doesn't have observation it becomes difficult to distinguish between them. this is going to be the last table. this is before the level and the inflow but work is also in interaction between them so by that i mean maybe it's all right to have a lot of immigrants and maybe it's okay to have a significant inflow but maybe something else happens when you have a lot of bow and low and behold, we actually have a negative side area so that's what that laceration there when you have all the control put in, you have positive effects from the foreign-born population and the inflow but then you have the negative sign on the interaction but there are caveats to attach to this. those first two columns are less than one and because the interaction, you multiply them by each other so that
last column, the data itself is a very small number. when you start inputting numbers into data into this, what it would be is coming what you don't get is negative signs way out. when you have a lot of bow, you have diminishing returns and i think that's the correct interpretation of this as diminishing returns of immigrants to economic freedom. so just to summarize and state clearly what this means, further analysis shows that with that, the same types of regressions i just showed you but replace overall economic freedom with the different areas you got that i was telling you before that are on the legal system and so on, and the results that we found that were statistically significant were the net immigrants inflow from 1990 and 2010
related to smaller government in 2011 which also reflects the social democratic party that i mentioned before that increasing the number of immigrants will actually reduce the size of the welfare state because of reducing social trust. fortunately we don't see other negative impacts and economic freedom from social trust which are also possible in any case, the large population, the levels in 1990, that seems to actually have better property braver enforcement and legal system and in 2011 and possibly fewer regulations although that resulted a bit more from , that the bulk of the paper but i want to make one more point that i've noticed since this paper was done, and that's, i came across this data from cue. this is data on support for the free market system and there's various advanced
countries and developing countries and among the advanced countries, you see the united states there, 70 percent say we agree with the free markets and only 25 percent we disagree with free markets which is good, i guess, that the net 45 percent. but if you look over to those emerging markets, and i want to draw your attention specifically tochina and india , both of those are next 58 percent which seems to suggest that their ideologies is better than what we have here. and another reason why that's interesting is because if we're looking at the current trends of immigration and where it looks like it's probably head is that i guess china or india may be among the biggest immigrants from a country of origin among any
country in the world going forward and so that should also inform what we are thinkingof . so to conclude, i use conventional econometric measures, nothing that fancy, just what does the data say when you look at and we can't really find evidence that immigration hurts countries institutions as measured by economic freedom and in fact in many specifications we find evidence that they seem to help them. this creates to the views i performed earlier, the possible theories of how it might bepositive . and obviously, more social clients can be done. we can throw in ulcers of control variables, come up with higher tech empirical methodologies to try to look at the question another way but the fact is that the
immigrant skeptics haven't really done this themselves credibly in any way and that's where we are at this point so it ball is in their court. [applause] >> i think alex has done a great job putting on this continent today with one caveat state that he obviously made is that he made me the last speaker between all leading this room and going to a beer and wine reception and he knows how much i like beer and wine so it's a great plantation that i would think you now and conclude but i just finished this paper literally on monday so it's a very interested to actually present and get feedback on it and also increases the chance i could say something incredibly stupid since i don't have much time to get feedback on it this week.
however, it means commentsand suggestions that come in will be useful that going to reside in the paper . i've already written three things down during michael's talk that i want to add. so where this paper comes from is, i put new in quotations for the debate, immigrations impact on institutions and it comes after i wrote the paper with ryan, alex and my other co-authors that ryan suggested because i sent back to george and he sent me a polite email back and it said well, that's an interesting study, i'm paraphrasing here, but your paper has all the costs and benefits of cross-country conversion and i'm not sure how much extrapolating from today's stocks and closing may come under system but that's about what it would be like in overall open borders. which sure enough, it certainly does but in the literature, what do we know about immigrants impacts on institution?
we will read nothing. we start from knowing nothing, the initial line to something which we can start to use to extrapolate a figure so fair enough but i'd like to see a natural experiment with a large shock caused by an inflow of immigrants and what that does to host countries institution. as i was reading the email i knew which paper i was reading immediately but in the 1990s with the fall of the soviet union is a massive inflow of immigration, let's take a look at what happened to the institutions in that decade. the paper is written up as a response or a continued response along with the paper ryan presented or arson colliers latest claims but i do think this is more than just responding to an assertion essentially made by them in the literature that immigrants could have this effect. it's also a common theory, for over a decade i've given public talk for immigration and i think the most important objection that classic liberals and sometimes conservatives have
is that immigrants might come here and destroy our institutions, they're going to ring and some bad ideas that undermine american values and determine our political system, at economic and that will make us worse off. this assertion is made in the literature that the common fear of any knowledgeable and sympathetic people including, maybe i'll be the first person to say i don't or something i earlier, i have migration conference but i had reservations about it and so while i look forward to the ultimate appeal to the state of affairs in which national boundaries has he become barriers, i believe in any period in which we can now be concerned, any attempt to realize a review revitalized strong national sentiment will decrease from a position that achieves, basically that nato blowback of nationalism if you have more immigrants that must might result in more state policy. similarly, the liberal demands of every person has a
right to sit wherever you want. this is not a negative demand, it belongs to the essence of a society based on private ownership as a means of production that every man may work and dispose of his earnings as he thinks best. the ultimate ideal should be free immigration but the key word is the immigrants if we don't have a free society that we come to, if we have a mixed decided like we have here that they might use the machinery of the state against the native population area so basically only after you adopt a liberal system do all of these problems of immigration the way. so while the paper is being presented here are in response to this new literature which really is quite new, michael is right it's 98 or 99 percent of all papers on immigration are not looking at the long-term growth affects or specifically institutional part of it but this is a common and i think important fear that needs to be talked about. i will read through the statement, is boring enough for me but it is worth pointing out that i'm kind of
putting out anecdotes and little stories about offering that evidence without any institutional effect that occurs and more of these situations are exactly that, their simulations and they might bring some of their vacuum in capital impacts, our measure productivity in united states but we read nothing about it but now i'm going to run six simulations all in the same direction which seems odd if we read nothing about it but all in the same direction and then it could erase the trillion dollar bills on the sidewalk so i view this paper, this case study that i'm doing, not definitive cause based on the study in israel, you don't have to worry about the subjection. it's more just the puzzle of trying to gather some empirical evidence for things that are empirical claims that people are making but without anyevidence so i appreciate , i view the paper that ryan presented and all these elements, trying to get
an idea of different ways we measure, different methodologies to arrive at empirical analysis, now that is going to be an equal one case. but all these things start pointing in the same direction, that tells you you we should be discounting some of the assertions people are making without any evidence michael is charitable in his paper to despite the quote also got $1 trillion bill on the sidewalk, to measure that he uses their simulation and transmission is really getting like the absolute best case for them after we admit that, he goes through the five different channels that you might find that comes down to culture and institutions of where they could actually spell it over on to us but the measure, he's right on the page,. immigrants, this is a thought experiment. just when it comes. he's going to be less sturdy than the american, over time he will supplant his earnings, that's not measuring the spillover of
culture and institutions that write good human capital. these are the things might have no negative externalities at all, even if their wages are low then what american wages are when they get here, in the meantime, the fact that they have good institutional spillover as ryan pointed to in terms of their ideology or how it impacts institutions, then there is no negative timeline or assimilation problem at all and in fact michael's other paper, the trillion dollar bill on the sidewalk should have a parentheses after it, parentheses and more because there's a favorable productivity impact of the immigrants coming in . so with that in mind, i will go through the israel is a natural experiment here. what happened is just before the fall of the soviet union the police, the soviets released their immigration that people should leave and the subsequent class of the country people were free to go. and as a natural experiment is because israel has a long return so the law overturned
as a complete open borders policy or worldwide use and in fact the particularly strong version of open doors policy that comes to the ability to test the country's institutions because not only is it open borders that they can come in but as soon asyou lead you have instant citizenship, whole voting rights, all access to the welfare state . and in response, the relaxation of the immigration systems inthe soviet union , you had about 20 percent surge in the population of israelduring the decade of the 1990s . all due to soviet immigration and you can see it was caught by migration of jews from the former soviet union and you see in the beginning of this. the annual flows of migrants coming in , based in the former soviet union country, you see 64 percent in one year came in. that townhouse already, a 20 percent change in the population in a 10 year period and 20 percent change in your voting population, that's a big jump.
it has these criteria of being a natural experiment but israel did not change its immigration policy. they always have this policy. it wasn't like they had a more favorable situation, about then changed their policy. the soviets changed the policy to make up the natural experiment so how good is israel is a case study? i'm also appear on the powerpoint, but i guess i saw some of this first. how good is it as a case study? i want to go into a couple points . one, this is migrants coming from the former soviet union so they have a 70 year history of lack of political freedoms and lack of economic freedom and a lot of anti-capitalist propaganda. does it seem like people coming from a totally factory productivity country and with an ideology, a history of ideology against western values of political and economic freedom and because
they have the legal ability through the voting spectrum to impact institutions, these are things that would make a fairly good case study for the claims made by collier. there's an obvious objection to that, it's israel. that's different and it might be open borders open borders to worldwide jews so they come in and religiously, hoping genius lay in the population so we couldn't expect the type of problems we should having other migration. it's a fair enough objection but when we look at the immigrants and their values, it doesn't hold water so the law overturned isn't just for religious jews, it's for jews , non-jews spouses of jews, non-jewish children and grandchildren of jews and their non-jewish spouses so when you actually look at the jews from the former soviet union that came to israel, it wasn't part of the zionist project. they were mostly nonreligious people. 74 percent surveyed after arriving identified as secular, 25 percent traditional and 1.4 were
religious. 49 percent didn't even want to go to israel, they just went there because it was the only way they could go easily and that would accept them. only 14.2 percent of soviet jews claimed the jewish language as their first language. only five percent at their second language. 97 percent spoke fluent russian so it's not linguistically homogeneous either and that's what you see is a widespread russian media rise up in israel during the 1990s in response to demands from migrants. 88 percent when they were surveyed thought it was important for their children to learn russian culture. 90.6 percent of them learn the russian language and the sociologists who looked at them report that many are nostalgic for russian culture and they feel a superiority of their culture over the israeli one so this to me is that yes, there is something unique about it but these are
all religiously linguistically, ethnically homogeneous populations they are going into. despite the fact by the way the israeli population, at least most of the ruling part of the israeli population was pro-migration. they wanted this wave of migrants to come in to help balance more jewish people from european descent with middle eastern jews and arab population in the country. but with all these immigrants, the main motivations for coming were thought to be europe's project push motors of going for a better economic opportunity for themselves and their children. there was one unique aspect that makes it different from mass migration. many of the immigrants that came at high human capital skills area privately human capital area they were professionally trained although often they couldn't use that professional training in the same profession in israel but looking out occupations and how they work it would be wrong to characterize many of them as more of the middle class. so institutional determination then.
what we start with is the point of power balance between the left-leaning labour party and the right leaning look at party, they form a coalition government in backing before, the coalition broke down. they had a balance of power with migration waves when you start happening. the 1992 election, when we observe how they reacted to the russian immigrants, lucas propaganda was the labor is all lots of calmness, a bunch of socialists, don't open them, you're going to get your lousy social movement back. they change colors in the park party, stop using red as part of their material in an effort to court the soviet boat so people, the politicians there responding to the immigrants are clearly signaling that they don't think these immigrants are bringing their quote, commie human capital and they will pollute the institutions. they end up voting majority
for the labor candidate but the evidence of the sociologists is that it's mostly not about ideologically favoring labor over the right party but is more that the right party was in power before, they didn't feel a transition was going well so they did to punish the prime minister who was in power and what you see then is actually a continuation of the prime minister through the decade of flipping whoever is in power because they are dissatisfied with them. people who were commenting on this are clearly noting that the russian boat is enough to flip the election. they also established their own political parties first in the 1992 race although none of them receive enough votes to get into the parliament area it's a proportional representation system where you both for your party list.new parties were formed in 1996 election. one of those parties is israel and elliott on seven seats out of 120 and became actually part of the ruling coalition government with the lucas party to help determine policy for the remainder of the decade. the 1999 election at the end
of the decade, to russian party on 10 seats in the parliament so what we see here is they became politically active as both informing their own parties and the other parties responding by trying to court their vote. from the substance of this in general, the new immigrants tended to back right-wing parties and as the 90s dress, voting power was palpable and had both the right and the left wing can't have become dependent on the immigrants which allow them to up their anti-political bargaining to easily shift allegiance from one camp to another and i should say when it comes to economic policy, even the left-leaning labour party had become pro-privatization and labor market more than they ever had in their history by 1990. it was consensus between both parties that they need to become more market oriented israel. it wouldn't be a consensus between those two parties that 20 percent of the electorate is russian ringing
human capital when you have such competition between the two groups. this would have been the time to defect if you wanted to do that. the very fact that labor didn't tells us thatrussians work demanding bad institutions from their home country so what the empirical results? political institutions, this is using the free measure, they have one of the problems of scale . so israel has strong democratic institutions before the migration, after the migration they maintain a strong democratic institution. economic wise, what we see is economic freedom in israel over the course of the decade. improved by 45 percent over the decade area 45 percent is a big change. that's going from 15 percent below the overall global average to 12 percent of all. going from 90 245 in the index. this is a substantial improvement and that jumps in the index rankings a time when the rest of the world is becoming more economically free. break it down to individual areas, four out of five individual areas improved economic freedom significantly over the course of the decade. one exception is size of
government, that declined during the course of the decade which when you look at the component, its transfers went up. if you have a large migration of 20 percent of the population that comes with the welfare state and israeli culture with the idea that we are responsible for taking on and taking care of these immigrants, they will get the type of nato blowback reaction that's common in literature and the european social democrats. but what we find is by 2005 it had recovered to 97 percent with the level it had been so while it initially took ahead, it returned to before. the other ones that you see a substantial improvement in property rights where people's visions of how secure they are in their property rights , this speaks a little bit too the way that property rights measures instructed is a lot of surveys of people with how secure they feel about their contract, how impartial
reports are, things like that but it also speaks a little bit to the cultural part of this , the social trust breaking bounds that you wouldn't see property rights increasing over the decade although one of my ideas for this paper was now that we get the trust data for this ad, we have culture as well as institutions. israel had a history of high inflation, they got it under control in the course of the decade so at a minimum resort to printing presses for demands on the welfare state of the new arrivals. freedom to trade goes up 25 percent over the decade, freedom from regulation increases 40 percent over the decade. what we are seeing is this is a large influx of immigration that's pretty much across the board economically. it shifts from one area where it may not necessarily have an economic impact and they are actually improving, getting better. so punchline on this, i think there's a reasonable case study, there's nothing specifically jewish or
zionist about this immigration that's unique that can't speak anything to the rest of the world. i think we have to have all the usual cautions that we do with any case study. the fact that israel had been immigration and improved institution equal a bunch of nigerians moving to the united states would have a similarly good impact but when we are starting with the literature that has no evidence for the claim, that has no evidence for the claim , then we start by saying if we grant the assumption that some of their private human capital will also be the public capital they assimilate, they still have a case to restructure. if we look at existing trends stocks across hundred and 10 countries and not only know deterioration, we find an improvement in most of the immigration, here's another alternative methodology, case study as a natural experiment where there was a large stock of people with history and human capital and again, there's an improvement. when you start putting these pieces together to balance
that against no evidence for a claim, it makes a skeptical that until any evidence is brought to bear the immigrants to have an institutional impact on the country's that we should be more pro-immigration and classical liberals and people who otherwise embrace them in markets and egypt embraces freighter greater freedom and immigration, one because freedom is a value in and of itself into, is probably greatest thing we can do for poor people in around the world in terms of their welfare and for that matter increasing global incomes, thank you. [applause] >> thank you very much. all of you, we're going to open it up now for people in the panel to ask questions of each other if they have any such questions on the research were presented so michael,you have a question you wanted ask . >> these were fascinating just on the no evidence point. i can't hold back from saying
jeffrey williamson, tim and other historians have studied historical migration and at the time that my german ancestors came in 1840s, low skill male wages in germany are about a third of what they are here about maybe a four and there were places in the united states where lots of them congregated including dayton ohio which is where mine ended up and they all brought their low productivity or all their quote, dysfunctional social model, "with them. so in our paper, we mention the no evidence points and pushed back on it. not to distract at all from the evidence that you are providing . there isn't none but we need a lot more and this is excellent. the question is, that comes to my mind is whether we can expect different effects on economic freedom.
more diverse versus less diverse information. what i have in mind is jefferson and talking about the success of the virginia declaration of rights argued that it was, when you have lots and lots of little religious groups, collectively they were in favor of religious freedom because they were concerned about domination by larger groups and you might not expect that dynamic if it were one big group versus another big group trying to dominate each other