SMU economist and colleagues use model to predict East Asia and sub-Saharan Africa will become global productivity leaders

 DALLAS (SMU) – Relaxing migration restrictions globally could deliver a threefold increase in global GDP, according to prize-winning research by SMU economist Klaus Desmet. In contrast, areas like the United States and Europe that restrict migration will see productivity decline over the long term, according to a new economic model developed by Desmet and research colleagues.

“What we find is that the population-dense places, by virtue of having dense and large markets, will eventually start innovating. Once their productivity takes off, they will enter in a virtuous circle of innovation and density,” says Desmet, the Ruth and Kent Altshuler Centennial Interdisciplinary Professor of Economics.

“Many of today’s population-dense places are in East Asia and sub-Saharan Africa. With current migration restrictions prohibiting movement elsewhere, these will remain the densest places. Hence, eventually they will take off, and in the very long run, several centuries from now, they will become the world’s productivity leaders.

“This is already happening in some areas, such as China,” Desmet says. “In contrast, the U.S. and Europe will lose out. They can stop this reversal of fortune from happening by adopting freer migration policies.”

Desmet, David Krisztian Nagy and Esteban Rossi-Hansberg received the Robert E. Lucas Jr. Prize for this research, “The Geography of Development,” published in the Journal of Political Economy. The Lucas Prize is awarded biannually for the most interesting paper published in the Journal of Political Economy.

Most existing research has focused on the short-run effects of liberalizing migration restrictions, Desmet says.

“Our research is taking into account the long-run effects,” Desmet says. “Initially, when migrants arrive, there are adjustment and integration costs, and the benefits may be elusive. In the longer run, however, migrants contribute tremendously to productivity and innovation. Unfortunately, the current debate on migration is hopelessly focused on very short-run issues, and completely fails to take into account its long-run importance.”

The costs of limiting migration will be difficult to see over the next ten to 20 years, Desmet says. “But the world is slowly moving in the direction of a productivity reversal.”

To conduct the migration research, the team developed an economic model that looks at economic growth on a global scale, but at a fine level of geographic resolution, using income, population, land-use, roads, railroads, rivers and ocean data for the entire globe, Desmet says.

“What is innovative about the model is that it gives predictions, not just for the localities directly impacted by a particular shock, but also for the rest of the world.”

The researchers tested the model by running it backwards, 150 years in the past, then compared the predictions to actual data. They found the model compared well with actual events, lending credibility to its ability to predict the future.

For the migration study, the model predicted several centuries into the future, critical for studying migration in particular, Desmet says.

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