Open Borders

John Kennan

NBER Working Paper No. 18307
Issued in August 2012
NBER Program(s):   EFG   ITI   LS

There is a large body of evidence indicating that cross-country differences in income levels are associated with differences in productivity. If workers are much more productive in one country than in another, restrictions on immigration lead to large efficiency losses. The paper quantifies these losses, using a model in which efficiency differences are labor-augmenting, and free trade in product markets leads to factor price equalization, so that wages are equal across countries when measured in efficiency units of labor. The estimated gains from removing immigration restrictions are huge. Using a simple static model of migration costs, the estimated net gains from open borders are about the same as the gains from a growth miracle that more than doubles the income level in less-developed countries.

Published: John Kennan, 2013. "Open Borders," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages L1-L13, April.

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Acknowledgments

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