Cato is making use of a neoclassical [free trade] general equilibrium model to promote immigration reform.
As this is Cato, and Gen Eq with all of its flawed assumptions, it bears some scrutiny. I am witholding cynical comments until I get tome to read this. I would like to see some other critiques. I find it a difficult issue as immigrants can be used to discipline the domestic labor force, and illegal status does provide opportunity for extremes in labor exploitation. I do believe the U.S. labor unions can benefit from legalizing immigrant labor and organizing immigrants and international. I am just getting back into this field of economics after a long detour. August 13, 2009 Trade Policy Analysis no. 40 Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform by Peter B. Dixon and Maureen T. Rimmer * Peter Dixon is the Sir John Monash Distinguished Professor and Maureen Rimmer is a Senior Research Fellow at the Centre of Policy Studies at Monash University in Australia. Their USAGE model of the U.S. economy has been used by the U.S. Departments of Commerce, Agriculture, and Homeland Security, and the U.S. International Trade Commission.***** *Executive Summary* By the latest estimates, 8.3 million workers in the United States are illegal immigrants. Proposed policy responses range from more restrictive border and workplace enforcement to legalization of workers who are already here and the admission of new workers through a temporary visa program. Policy choices made by Congress and the president could have a major economic impact on the welfare of U.S. households. This study uses the U.S. Applied General Equilibrium model that has been developed for the U.S. International Trade Commission and other U.S. government agencies to estimate the welfare impact of seven different scenarios, which include increased enforcement at the border and in the workplace, and several different legalization options, including a visa program that allows more low-skilled workers to enter the U.S. workforce legally. For each scenario, the USAGE model weighs the impact on such factors as public revenues and expenditures, the occupational mix and total employment of U.S. workers, the amount of capital owned by U.S. households, and price levels for imports and exports. This study finds that increased enforcement and reduced low-skilled immigration have a significant negative impact on the income of U.S. households. Modest savings in public expenditures would be more than offset by losses in economic output and job opportunities for more skilled American workers. A policy that reduces the number of low-skilled immigrant workers by 28.6 percent compared to projected levels would reduce U.S. household welfare by about 0.5 percent, or $80 billion. In contrast, legalization of low-skilled immigrant workers would yield significant income gains for American workers and households. Legalization would eliminate smugglers’ fees and other costs faced by illegal immigrants. It would also allow immigrants to have higher productivity and create more openings for Americans in higherskilled occupations. The positive impact for U.S. households of legalization under an optimal visa tax would be 1.27 percent of GDP or $180 billion. Text of Trade Policy Analysis No. 40 (PDF, 24 pgs, 686 kb)<http://www.freetrade.org/files/pubs/pas/tpa-040.pdf> http://www.freetrade.org/files/pubs/pas/tpa-040.pdf
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