Thursday, April 19, 2007

Immigration and Capital

Samwick writes,

In the current environment, I would expect to see capital going south across the border with Mexico, drawn by the high returns available due to the large amount of low-wage labor. But that's not what we are seeing. We are seeing the labor cross the border--at considerable personal cost--to take the low-wage jobs and then send remittances back to Mexico.


In many ways this is much more natural. I think a lot of economists are still look at world through the lens of Solow Convergence. They believe that low wage countries countries will naturally grow faster than high wage countries because capital earns a higher return. Yet, this leaves open entirely the question of why some countries are low wage to begin with.

Shouldn't we expect that low wage countries are low wage for a reason? That for some reason technology is not employed, capital is accumulated or education is retarded. A priori, I don't think there is any reason to presume that investment will earn a higher return in low wage countries than in high wage countries.

14 comments:

Chris said...

I would agree, but I don't know how useful this assertion is. The reason why you can't say a low-wage country would be better than a high-wage country for investment is the fact that there is no reason to believe that capital has not saturated low-wage countries to the optimal degree. Still, this conception of the low-wage environment is dependent on the market properly accessing the level of profitable investment.

This may be the case in Mexico now, but it has not been the case in the past for many of these low wage countries.

happyjuggler0 said...

There is more than low wages or a dearth of capital to consider when opening up shop somewhere:

Inability to profit from sweatshops in Namibia

The problem is that it's still costly to manufacture in Africa. The headaches across much of the continent include red tape, corruption, political instability, unreliable electricity and ports, and an inexperienced labor force that leads to low productivity and quality. The anti-sweatshop movement isn't a prime obstacle, but it's one more reason not to manufacture in Africa.

What I find amusing/sad is the commentary to the article. Doesn't anyone know how to read anymore? "Elana" seems to think that the author is missing that ending bribery would help, but that is covered in the partial list I quoted above, namely "corruption". It is also not clear to me how multinationals are supposed to go about ending bribery anyway. Seems like a local problem that can only be solved locally.

YouNotSneaky! said...

But remember that in Solow convergence is conditional - given same technology, saving rates, etc. You relax that assumption you can easily explain why returns to capital in poor countries are low. Of course the trick is to explain what "technology" is exactly - ideas, institutions, social norms, etc.

Anonymous said...

government records -
governmentregistry -
government registry -
green diy energy -
healthy urban kitchen -
highest pay surveys -
holo think -
homemadeenergy -
home made energy -
i want a teaching job -
joyful tomato -
keyword elite -
learn photoshop videos -
lmt forex formula -
lower body make over -
macro virus -
malware bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
microcap millionaires -
moles warts removal -
money siphon system -
muscle gaining secrets -
my list strategy -
my phone riches -
natural cancer treatments -
online tv pc -
panic away -
pdf creator -
peel away ads -
pips leader -
ppc web spy -
prevent sweating -

Anonymous said...

privacy control -
publicrecordspro -
public records pro -
questions for couples -
quick article pro -
quick paid surveys -
quit smoking today -
reg defense -
registry winner -
reg tool -
reverse mobile -
richard mackenzie direct -
rocket german -
rotator cuff training -
rss feeds submit -
satellite pc box -
save the marriage -
spy no more -
spyware stop -
super seduction power -
surefire trading challenge -
tattoo me now -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
the dog food conspiracy -
the mini site formula -
tmj help -
tonsil stones remedies -
truth about abs -
twitter trick -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -

Anonymous said...

wedding speech 4u -
win clear -
xbox 360 red light fix -
xp repair pro -
500 love making tips -
acid alkaline diet -
advanced defrag -
alpha male system -
amazing cover letters -
anti spyware -
anti spyware bot -
article rewriter -
art of approaching -
auto cash system -
burnthefat -
burn the fat -
bv cures -
calling men -
camera dollars -
carb rotation diet -
cash making power sites -
cb mall -
combat the fat -
conversationalhypnosis -
conversational hypnosis -
credit secrets bible -
destroy hemorrhoids -
dirty talking guide -
dotcom income secrets -
duplicate file cleaner -
dvd copy pro -
earth4energy -
earth 4 energy -
easy launcher -

Anonymous said...

easy system cleaner -
eatstopeat -
eat stop eat -
eczema free forever -
end your tinnitus -
error nuker -
fatburningfurnace -
fat burning furnace -
fat loss 4 idiots -
final sync -
firewall gold -
fitness model program -
fit over 40 -
fit yummy yummy -
flattenyourabs -
flatten your abs -
forex candlesticks made easy -
forex killer -
forex megadroid -
get rid of your cellulite -
g money pro -
google shadow -
governmentregistry -
government registry -
gov resources -
health biz in a box -
homemadeenergy -
home made energy -
hybrid water power -
i software tv -
joyful tomato -
keyword spy pro -
kingdom of pets -
macro virus -

Anonymous said...

malware bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
microcap millionaires -
moles warts removal -
mole wart removal -
muscle gaining secrets -
natural cure for yeast infection -
paid surveys etc -
panic away -
pdf creator -
public records pro -
quick article pro -
quick income blueprint -
quit smoking today -
ranking loophole -
reg clean -
reg defense -
regi cleanse -
registry easy -
registry genius -
registry winner -
reg sweep -
reg tool -
reverse mobile -
richard mackenzie direct -
rig worker -
rocket chinese -
rocket french -
rocket german -
rotator cuff training -
rss feeds submit -
save the marriage -

Anonymous said...

site builder elite -
six figure yearly 2009 -
sleep tracks -
sold in 21 days -
spyware stop -
stop being tired -
stop your hair loss -
the bad breath report -
thedietsolutionprogram -
the diet solution program -
tonsil stones remedies -
top secret magic code -
truth about abs -
turbulence training -
turn your photos into cash -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
win clear -
xbox 360 red light fix -
xp repair pro -
1st promotion -
3 redlight fix -
500 love making tips -
acid alkaline diet -
advanced defrag -
anti spyware -
anti spyware bot -
art of approaching -
banish rosacea -
blog lock down -
brad yates -
building a chicken coop -

Anonymous said...

burnthefat -
burn the fat -
carb rotation diet -
combat the fat -
conversationalhypnosis -
conversational hypnosis -
copy n profit -
credit secrets bible -
cure angular cheilitis -
cure morning sickness -
dirty talking guide -
domain tweak system -
dotcom income secrets -
duplicate file cleaner -
earth4energy -
earth 4 energy -
easy launcher -
easy system cleaner -
eatstopeat -
eat stop eat -
eczema free forever -
email finder -
energy 2 green -
error nuker -
evidence smart -
fat burning furnace -
fat loss 4 idiots -
final sync -
fitness model program -
fit yummy yummy -
flattenyourabs -
forex enterprise -
governmentregistry -
government registry -

Anonymous said...

home job stop -
homemadeenergy -
home made energy -
how do i get him back -
hyper vre -
keyword spy pro -
kingdom of pets -
mafia war secrets -
malware bot -
master cleanse secrets -
maternityacupressure -
maternity acupressure -
maximum paid surveys -
meet your sweet -
mobile tv pro -
musclegainingsecrets -
muscle gaining secrets -
my dish biz -
one minute cure -
paid surveys online -
panic away -
pc tv 4 me -
pdf creator -
perfect optimizer -
pick the gender of your baby -
plr wholesaler -
private niche empire -
project quick cash -
public records pro -
pull your ex back -
quick article pro -
quit smoking today -
reality creation secrets -
reg clean -

Anonymous said...

regi cleanse -
registry easy -
registry fix -
registry winner -
reg sweep -
reg tool -
reverse mobile -
reverse phone detective -
richard mackenzie direct -
rich garbage man -
rocket chinese -
rocket french -
seize cars -
shop until you drop -
six figure yearly 2009 -
sleep tracks -
spyware nuker -
spyware stop -
sunshine 4u -
the bad breath report -
the cash1234 system -
thedietsolutionprogram -
the diet solution program -
the free car -
the lazy marketer -
tonsil stones remedies -
truth about abs -
truth about diets -
turbulence training -
vincedelmontefitness -
vince del monte fitness -
violin master pro -
warp speed fat loss -
wedding speech 4u -

Anonymous said...

xp repair pro -
yeast infection no more -
2ip hosting -
10 minute forex wealth builder -
30 minute back links -
500 love making tips -
acid alkaline diet -
advanced defrag -
affiliate jackpot -
anti spyware -
art of approaching -
battery reconditioning -
blogging to the bank -
burnthefat -
burn the fat -
carb rotation diet -
carp evolution -
cb bonus domination -
combat the fat -
content website builder -
conversationalhypnosis -
conversational hypnosis -
cure angular cheilitis -
cure morning sickness -
dirty talking guide -
driver robot -
earth4energy -
earth 4 energy -
easy launcher -
easy system cleaner -
eatstopeat -
eat stop eat -
error smart -
evidence eraser -

Anonymous said...

evidence smart -
fatburningfurnace -
fat loss 4 idiots -
fitness model program -
fit yummy yummy -
flattenyourabs -
flatten your abs -
forex trading machine -
forex trading made ez -
get your exgirlfriend back -
google snatch -
governmentregistry -
government registry -
grow taller 4 idiots -
guy gets girl -
hcg recipes -
homemadeenergy -
home made energy -
how to break 80 -
hyper vre -
instant domain cash -
i software tv -
jamo rama acoustic -
linden method -
lose the back pain -
magni work -
maternityacupressure -
maternity acupressure -
musclegainingsecrets -
muscle gaining secrets -
negative calorie diet -
one minute cure -
one week marketing -
only 4 gamers -