US votes on trade and migration

Paola Conconi, Giovanni Facchini, Max Friedrich Steinhardt, Maurizio Zanardi 07 January 2013

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In the recent US presidential election, Latino voters rewarded President Obama and punished Republicans for their positions on immigration. In reaction, the Republican House Leader announced that he was ready for a “comprehensive approach” to immigration reform and that he was confident that Congress and President Obama could find “common ground to take care of this issue once and for all” (The New York Times, 2012).

It’s about time. As The Economist wrote, “The economic case for migration is similar to that for free trade. Trade benefits countries by letting workers specialise in activities in which they are relatively more productive, raising output. And the larger market created by trade spreads the fixed costs of innovation more thinly, encouraging the development of new goods and ideas” (17 November 2012).

New research

In recent decades the US has become increasingly integrated in the world economy. Trade flows have surged well above the growth rate of GDP for most of this period (see Figure 1); there has also been a steady increase in the stock of foreign born nationals (see Figure 2)1.

Figure 1. US imports and exports

Figure 2. Immigrants to the US

These developments have been made possible by Congress’s broadly open stance on trade and migration over this period. In a recent paper, we examine the determinants of these policies by looking at congress members' votes on trade and migration reform, in particular at the role of economic factors that work through a constituency’s labour market (Conconi, Facchini, Steinhardt, and Zanardi 2012). Our paper represents the first attempt to systematically investigate and compare the drivers of legislators’ decisions on trade and migration policy2.

Empirical approach

We guide our empirical work with a textbook two-country, two-good Heckscher-Ohlin model, but with a twist. In the original model there are two countries, Home and Foreign; two goods, food and cloth; and two factors of production, labour and land. On the whole, Home (representing the US) is skilled-labour abundant, whereas Foreign (representing the rest of the world) is unskilled-labour abundant. However, Home is subdivided in to electoral districts which have different endowments of skilled and unskilled labour. Each district is represented by an elected politician, who supports a policy reform if it increases the wellbeing of voters in his constituency.

Alternative policy scenarios

We consider two alternative policy scenarios:

  • Trade liberalisation; and
  • The liberalisation of inflows of unskilled migrants.

The model predicts that, as long as factor endowment differences between Home and Foreign are not too large, a legislator should be more likely to support both trade and migration liberalisation the more skilled-labour abundant his district is3.

To assess the empirical predictions of this model, we use a novel dataset that combines final passage votes on all trade liberalisation and immigration reforms introduced since the early 1970s. The focus is on the behaviour of the US House Representatives, matching their votes to a wealth of individual- and district-level characteristics that capture both economic and non-economic drivers.

  • Trade reforms considered in the analysis include the implementation of multilateral trade agreements (Tokyo and Uruguay Round rounds of the GATT) and preferential trade agreements (e.g. CUSFTA and NAFTA) negotiated in this period, as well as the votes on the conferral and extension of fast track trade negotiating authority to the President, which makes it easier to negotiate trade agreements (see Conconi, Facchini and Zanardi 2012a,b).
  • Migration reforms, including all bills concerning general immigration and illegal migration that have a direct (positive or negative) impact on the size of the unskilled labour force in the US (see also Facchini and Steinhardt 2011).

Findings

Our analysis suggests that, despite significant differences in representatives' voting behaviour on trade and migration policy, important similarities between the two should not be overlooked. In particular, economic drivers that work through the labour market do play an important role in shaping legislators’ voting behaviour on both types of policies.

  • Consistently with the model’s predictions, representatives from more skilled-labour abundant districts are more likely to support both trade liberalisation and a more open stance vis-à-vis unskilled immigration.

In terms of magnitudes, the effects are sizeable; a one percentage point increase in the share of skilled individuals in a congressional district leads approximately to a one percentage point increase in the probability that the district’s representative supports trade liberalisation and to a 1.6 percentage point increase in the probability that they support the liberalisation of unskilled immigration.

The results also confirm important differences in the drivers of trade and migration policy, which can help to explain why politicians are often more reluctant to lower barriers to low-skilled migrants than to goods, notwithstanding the large potential gains from further migration liberalisation4

  • Welfare state considerations play an important role in shaping the support for immigration, whereas this is not true when it comes to trade liberalisation; representatives of richer constituencies are more likely to oppose opening borders to unskilled migrants.

There are also significant ideological differences:

  • In line with the recent debate between Obama and Romney on the ‘Dream Act’, which is meant to give a path to citizenship to illegal immigrants who were brought to the US as children, Democratic legislators are systematically more likely to support the liberalisation of migration policies than their Republican counterparts; the opposite is true when it comes to trade policy.

Finally, non-economic factors that work through immigrant networks have an impact on legislators’ support for migration, but not on their support for trade.

Conclusions

Many observers have emphasised differences in politicians’ stance on trade and migration5. While there is no denying that trade and migration do elicit different political responses, our work shows that there are systematic factors linking the two. The basic intuition that flows from a simple Heckscher-Ohlin framework does help explain policy stances by elected officials on both trade and migration.

This column was based on a paper produced as part of the CEPR project "Temporary Migration, Integration and the role of Policies" (TEMPO), funded by the NORFACE Research Programme: "Migration in Europe - Social, Economic, Cultural and Policy Dynamics".

References

Collins, W J, K O’Rourke, and J G Williamson (1999), “Were Trade and Factor Mobility Substitutes in History?” in R Faini, J de Melo, and K F Zimmermann (eds.), Migration: The Controversies and the Evidence, 227-260, Cambridge, Cambridge University Press.

Conconi, P, G Facchini, and M Zanardi (2012a), “Fast Track Authority and International Trade Negotiations”, American Economic Journal, Economic Policy, 4, 146-89.

Conconi, P, G Facchini, and M Zanardi (2012b), “Policymakers’ Horizon and Trade Reforms: The Protectionist Effect of Elections”, CEPR Discussion Paper no. 8561. 

Conconi, P, G Facchini, M F Steinhardt, and M Zanardi (2012), “The Political Economy of Trade and Migration: Evidence from the US Congress”, CEPR, Discussion Paper no. 9270.

Dustmann, C, and I Preston (2007), “Racial and Economic Factors in Attitudes to Immigration”, The B.E. Journal of Economic Analysis & Policy, 7, 62.

Facchini, G, and M F Steinhardt (2011), “What Drives US Immigration Policy?”, Evidence from Congressional Roll Call Votes”, Journal of Public Economics, 95, 734-743.

Faini, R., J de Melo, and K. F Zimmermann (1999), “Trade and Migration: an Introduction”, in R Faini, J de Melo, and K F Zimmermann (eds.), Migration: The Controversies and the Evidence, 1-20, Cambridge, Cambridge University Press.

Greenaway, D, and D R Nelson (2006), “The Distinct Political Economies of Trade and Migration Policy: Through the Window of Endogenous Policy Models, with a Focus on North America”, In R Langhammer and F. Fodors (eds.), Labor Mobility and the World Economy, 295-327, Berlin, Springer.

Hanson, G H, K Scheve, and M J Slaugther (2007), “Public Finance and Individual Preferences over Globalization Strategies,” Economics and Politics 19, 1-33.

Hatton, T J, and J G Williamson (2007), “A Dual Policy Paradox: Why Have Trade and Immigration Policies Always Differed in Labor-scarce Countries? in T J Hatton, K H O’Rourke, and A M Taylor (eds.), The New Comparative Economic History, 217-240, Boston, MIT Press.

Mayda, A (2008), “Why are People more pro Trade than pro Migration?”, Economics Letters 101, 160-163.

Mayda, A M (2006), “Who is Against Immigration? A Cross-Country Investigation of Individual Attitudes Toward Immigrants”, Review of Economics and Statistics, 88, 510-530.

Mundell, R, (1957), “International Trade and Factor Mobility”, American Economic Review, 47, 321-335.

The New York Times (2012), “Republicans Reconsider Positions on Immigration”, 9 November.

Rodrik, D (2002), “Comments at the Conference on Immigration Policy and the Welfare State”, in Boeri, T, G H Hanson, and B McCormick (eds.), Immigration Policy and the Welfare System, Oxford University Press.


1 According to the latest figures released by the US Census bureau, the stock of foreign-born residents has reached almost 40 million, or 13% of the total population, in 2010. For a historical perspective on trade and migration policies, see Faini, de Melo, and Zimmermann (1999) and Hatton and Williamson (2007).

2 Previous studies trying to understand differences between trade and migration policies have used surveys of individuals’ opinions on these issues (e.g., Hanson, Scheve and Slaughter, 2007; Mayda, 2008).

3 This is in line with the general idea that in standard trade models commodity trade and labour mobility are substitutes, as first argued by Mundell (1957).

4 As pointed out by Rodrik (2002), “the gains from liberalizing labour movements across countries are enormous, and much larger than the likely benefits from further liberalization in the traditional areas of goods and capital. If international policymakers were really interested in maximizing worldwide efficiency, they would spend little of their energies on a new trade round or on the international financial architecture. They would all be busy at work liberalizing immigration restrictions” (p. 314).

5 For instance, looking at the experience of the New World between 1860 and 1930, Collins, O’Rourke, and Williamson (1999) suggest that “policy did not behave as if New World politicians and voters thought trade and immigration were substitutes” (p. 252). In a recent survey, Greenaway and Nelson (2006) argue that “the domestic politics of international trade seems to differ in fundamental ways from the domestic politics of immigration...” (p. 295) and suggest that, while material interests are paramount in explaining the formation of trade policy, non-economic considerations are key to understand migration policy. The important role played by non-economic drivers has also been emphasised by the literature on the determinants of public opinion towards immigration (e.g. Mayda 2006; Dustmann and Preston 2007).

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Topics:  International trade Labour markets Migration

Tags:  US, trade, migration, skilled labour, unskilled labour

Associate Professor at ECARES and CEPR Research Affiliate

Giovanni Facchini

Professor of Economics, University of Nottingham and University of Milan and CEPR Research Fellow.

Senior economist, Hamburg Institute of International Economics

Reader in Economics, Lancaster University Management School