Immigration is a necessary component of a realistic utopia

In The Law of Peoples, one of his last works, John Rawls sketches a normative theory of international relations amongst decent and liberal nations. He does not discuss immigration and defends his omission by saying that it would not be relevant in an ideal society:

There are numerous causes of immigration. I mention several and suggest that they would disappear in the Society of liberal and decent Peoples. One is the persecution of religious and ethnic minorities, the denial of their human rights. Another is political oppression… Often people are simply fleeing from starvation… Yet famines are often themselves in large part caused by political failures and the absence of decent government. The last cause I mention is population pressure in the home territory, and among its complex of causes is the inequality and subjection of women. Once that inequality and subjection are overcome, and women are granted equal political participation with men and assured education, these problems can be resolved… The problem of immigration is not, then, simply left aside, but is eliminated as a serious problem in a realistic utopia.

I find this passage deeply unsatisfying. Neglecting discussion of immigration by saying that it would not be relevant if the entire world were a decent (or ideal!) society strikes me as manifestly unhelpful. Even if the long-run steady state of ideal societies might result in little concern for immigration policy, immigration between decent and indecent societies would likely be a significant determinant of the transition dynamics to the realistic utopia. Surely liberal societies ought to have concern for immigration policy in this context.

But such thought experiments and omissions might be entirely appropriate in political philosophy. It’s not my field, so I do not know its assumptions and techniques. For the sake of argument, concede everything that Rawls says above and contemplate the “realistic utopia” condition. Rawls is still wrong.

Why? Economic geography! In a world of increasing returns and agglomeration economies, it makes no sense to keep people trapped within historically-produced arbitrary boundaries. It massively decreases human welfare. We want people to be free to gather in densely populated areas and reap the gains of more complex and frequent human interaction. We also want them to move freely to respond to geographically idiosyncratic shocks. People are a resource and borders impose transaction costs that impede allocative efficiency.

For thoughts along these lines, see Lant Pritchett’s “Boom Towns and Ghost Countries.” With labor mobility, there are countries that would become “ghost countries” akin to ghost towns. But due to immigration barriers, there are instead “zombie countries” populated by “human beings, who through no action or fault of their own, are trapped in economically non-viable regions.” Ghost countries are preferable to zombie countries, even in a world governed by “liberal and decent Peoples.”

Acemoglu, Johnson, and Robinson (2001) according to Tim Harford

In a review of Economic Gangsters, Tim Harford dedicates four paragraphs to describing AJR’s “The Colonial Origins of Comparative Development: An Empirical Investigation”  (AER, 2001). An objection and a compliment:

  • Harford uses language like “Acemoglu’s study” and “Acemoglu observes.” But he’s not describing Acemoglu’s large body of work; he’s just talking about one particular paper coauthored with two other economists. Such presentation of the research is rather unfair to Simon Johnson and James Robinson.
  • Instrumental variables are quite difficult to explain to non-economist audiences, but I think that Harford’s summary does a good job of communicating that colonial history is an instrument rather than “the root of the variance in income levels around the world” (though AJR’s paper itself may blur that distinction). His narrative emphasises that institutions shape economic growth and appropriately confines the discussion of settler mortality to its effect on institutions.

I doubt the Olympic effect

Andrew Rose describes his new paper with Mark Spiegel:

Trade is around 30% higher for countries that have hosted the Olympics… It turns out that unsuccessful bids to host the Olympics also have an impact on trade, one every bit as big as the effect of actually hosting the games. That is, the Olympic effect on trade is attributable to the signal a country sends when bidding to host the games, rather than the act of actually holding a mega-event. A country that wishes to liberalise its trade may want to signal this by bidding to host a mega-event…

Rome was awarded the 1960 games in 1955, the same year that Italy started to move towards currency convertibility, joined the UN, and, most importantly, began the negotiations that lead two years later to the Treaty of Rome and the creation of the European Economic Community. The Tokyo games of 1964 coincided with Japanese entry into the IMF and the OECD. Barcelona was awarded the 1992 games in 1986, the same year Spain joined the EEC…

Our empirical findings suggest that bidding for the Olympics is a costly policy signal that is followed by future liberalisation. For a country pursuing a trade-oriented development strategy, such an outcome would clearly be attractive.

So they are saying that trade liberalization signaled by an Olympic bid is more effective than regular liberalization?

At first glance, I don’t buy it. Their strategy is to measure the permanent effect of bidding for the Olympics by a dummy variable. So, for example, the Olympics dummy is turned on for all British observations from 1948 (when London hosted) through the end of the sample. Why should I believe that there is a causal signaling effect rather than mere correlation?

I turn to the robustness checks section of the paper and find this (p.18):

We next use a treatment methodology, comparing exports for either hosts or candidate countries with exports for matched counterparts. This allows us to better handle the problem that candidate and host countries for the Olympic games are not randomly selected from our sample. We match observations using a stratification technique. Our variables used for matching country-pair*year observations include the logs of: distance, exporter and importer populations, exporter and importer real GDPs per capita; and dummy variables for sharing a common language or border.

As best I can tell, this approach controls for some characteristics that result in bidding for the Olympics, but potentially important variables — like trade policy — are not included. In fact, the only variable in the entire paper that describes trade policy is a regional trade agreement dummy that appears in the gravity regressions. As Spiegel and Rose explain in footnote 3:

We focus our attention on the effects of mega-events on trade rather than trade policy since the latter is difficult to measure. We have experimented with the Wacziarg-Welch measure of trade liberalization, and find that it is significantly and positively correlated with past Olympic hosting or candidacy, taking into account time- and country-effects and controlling for country size and income. This result is quite consistent with the model we develop below. However, we do not consider this avenue of research to be worth pursuing until we have better empirical measures and models of trade liberalization.

If I read this right, while it’s true that their signaling model makes the prediction that trade liberalization and past Olympic hosting will be correlated, it also suggests to me that you ought to control for trade policy before evaluating the Olympics’ effect on trade. If their story is that bidding for such an event makes forthcoming trade liberalization more credible and causes it to have a greater effect, then shouldn’t we use something like a measure of trade policy plus the interaction of the Olympics dummy and the policy variable?

The authors have clearly put a fair amount of work into this paper, but I hold my prior fairly strongly – I suspect that, while bidding to host the Olympics may often coincide with major trade liberalization episodes, Olympic bids have no meaningful causal impact on trade flows. At present, I don’t understand how their identification strategy would produce evidence that shows otherwise. What am I missing?

Where does Dambisa Moyo get her poverty rate data?

Columbia’s John McArthur says that Dambisa Moyo has claimed that “in the 1970s 10 percent of the population [in Africa] was living in dire poverty. That number is now over 70 percent.” She’s been quoted by Bloomberg as saying that Africa’s “poverty rate doubled between 1981 and 2002.” Niall Ferguson’s foreword to her book says “between 1970 and 1998, when aid flows to Africa were at their peak, the poverty rate in Africa actually rose from 11 per cent to a staggering 66 per cent.” (One review subsequently misquoted this as 1970-78.)

World Bank numbers (from Shaohua Chen and Martin Ravallion) say the African poverty rate was 50% in both 1981 and 2005 (the rate rose during the 1980s and fell in more recent years). That contrasts starkly with the Bloomberg quotation.

I’m having trouble finding any estimates of the poverty rate prior to 1981. Please leave suggestions in the comments. But if Africa’s poverty rate jumped from 10% to 50% during the 1970s, that would be a story worth a book of its own.

Counting the poor is not an easy task, but at first glance, something appears seriously wrong with Moyo’s poverty statistics.