NCPA - National Center for Policy Analysis


March 9, 2007

To encourage the residents of rich countries to accept a higher level of immigration, the government could provide innovative economic incentives to residents, says the National Bureau of Economic Research.

For example:

  • Countries with a queue of immigrants like the United States could auction off visas for immigration to the highest bidders. 
  • They could charge new immigrants a sizable fee -- maybe as much as $50,000 apiece -- or add a surcharge to incomes taxes, and use these "admission fees" to benefit existing citizens and gain their support for higher levels of immigration.

According to Richard Freeman, such "radically economic policies" may represent a possible way to ameliorate one problem arising from "globalization": the fact that the flow of people across international borders in the form of immigration, movement of international students, business travel, and tourism is smaller than the rising flows of trade and capital.  As a result, there are huge differences in pay between the labor markets of well-to-do countries and those in poor nations for people of similar skills.  This implies that policies giving workers in developing countries greater access to advanced country labor markets could raise global economic wellbeing considerably.  The economic problem, though, is that immigrants -- not the citizens of immigrant-receiving countries -- benefit most from immigration.  Imposing charges on immigrants could spread a portion of those benefits to the citizens:

  • Looking at what a visa for entry into the United States might be worth for a person from a country with wages only 20 percent of U.S. wages in purchasing power, Freeman calculates that the immigrant could be $100,000 better off over a working lifetime.
  • If the person pays $50,000 for that visa, then a million additional immigrants would produce $50 billion in tax receipts for use of all Americans.

Source: David R. Francis, "Spreading the Gains from Immigration," NBER Digest, February 2007; based upon: Richard B. Freeman, "People Flows in Globalization," National Bureau of Economic Research, Working Paper No. 12315, June 2006.

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