For the migrants themselves, the dangers are great but the average gain is high. A migrant risks disease or victimization by others, and may fail to find a better income in the country of destination. Many migrants return home unsuccessful and disillusioned. Yet, on the average, they experience great gains, as we might expect from so risky an activity. In some cases political and physical freedom itself is a large gain, as in the case of refugees from repressive regimes. In other cases, the economic gains stand out. Doctors, engineers, and other highly trained personnel from lower income countries such as India and Pakistan have multiplied their incomes severalfold by migrating to North America, Australasia, Britain, and the Persian Gulf. Mexican craftsmen and campesinos earn enough in Texas or California to retire early (if they wish) in comfortable Mexican homes and to support their children generously, Turkish "guestworkers" in West Germany also assure themselves a very comfortable living and a quantum jump up the income ranks. If this were not so, they would not choose to migrate, either temporarily or permanently.

Yet politicians worth their salt know that the migration issue is a hot potato they should avoid picking up. To get reelected, they try to speak on both sides of the issue and to direct more attention to other issues (unless they can ride the waves of hatred in a particularly anti-immigrant district). The landmark passage of the U.S. Immigration Reform and Control Act in 1986 is one of those exceptions that helps prove the rule. That act (earlier known as the Simpson-Mazzoli bill) had been in and out of Congress for more than a decade before it finally passed as a complicated compromise. Its long history testifies to the reluctance of politicians to confront the immigration issue. Why the reluctance?

Part of the answer lies in the objective costs to some people of having other people migrate. In the sending countries, having some people emigrate can wound national pride and bring economic losses to some who remain behind. Thus promoting emigration is not politically popular, even in countries like Mexico where the overall economic gains are unmistakable. In the receiving countries, ethnic prejudice, general xenophobia, and the direct economic stake of subgroups who fear competition from immigrants keep the issue especially sensitive. Wherever the concentration of immigrants swells suddenly, violent backlash threatens. Lightfooted politicians know better than to campaign on a slogan of free migration.

Behind these pressures lies the other explanation of why migration is such a hot potato: in any political arena, the migrating minority is "them," not "us." To migrate or request help in migrating is to lose voting rights. In a sending country, potential emigrants who speak up on behalf of their right to leave are signaling that they do not plan to be a part of that country's political future. The majority is unlikely to respond with best wishes and full freedom, especially if the issue of national pride surfaces. In the receiving country, the interests of possible future immigrants command few or no votes. Only lobbying by employers and church groups represents their cause. The gains they would make by migrating, as opposed to their future employers' gains, have almost no vote.

How do all these opposing forces balance out? What are the net economic gains to nations and the world, and how do they stack up against the less-economic side effects of migration?

The gains for receiving countries and losses for sending countries pose what might be called average-income paradoxes. That is, they clash with some intuitions we might have about the effects of migration on that crude standard measure of welfare, national income per capita or "average income." Intuition might lead us to ask these two questions:

a. If the immigrants have a lower income than others in the new country, won't their arrival lower average income in this country? How can this be reconciled with the receiving-country gains?

b. If the same migrants had lower-than-average income in the sending country, won't their departure raise average income in that country? How can this be reconciled with the sending-country losses?

What is here imagined about average incomes is likely to be true—yet there is no contradiction. The logical consistency of the usual results is shown with a numerical example in Figure 23.2, an example based on the 1983 population and income levels of the United States and Mexico. Each country is divided into the same three groups featured in our discussion of the welfare effects: the migrants themselves, competing permanent-resident workers whose job markets the migrants affect, and a group consisting of employers and others benefiting from extra labor supply and population.

The example in Figure 23.2 starts from a realistic premise about the position of typical migrants: their income would be closer to the average in the sending country than in the receiving country. Numerous studies have found that international migrants are typically average or almost average in their earning power in the home country before they emigrate. They are usually not from the ranks of the poorest. The lowest income groups in the low-income countries lack the hope, the money, and the information to migrate internationally in large numbers. The international migrants tend to be venturesome individuals from more middling backgrounds. To underline

our paradoxes, however, let's assume the Mexican migrants in this example have initially below-average incomes in Mexico.

If 2 million adults of working age were to migrate from Mexico to the United States, the movement of their labor supply would probably have effects like those shown in Figure 23.2. The "net change" row at the bottom shows two average income paradoxes: the United States loses average income yet gains total income, whereas Mexico gains in average income yet loses total income. There's more: within the United States, there is a net gain for the 157 million permanent residents as well as for the migrants, but the U.S. average income declines; within Mexico there is a net income loss for all permanent residents, but Mexico's average income rises!

The key to all the paradoxes is that the migrants and their incomes are counted in the calculation of Mexico's average income before they migrate but counted in the calculation of U.S. average income afterwards. Let's look first at the receiving country, the United States. Migration had all the effects on separate Northern groups. Competing permanent-resident workers, especially unskilled workers, tend to lose income because of extra competition from immigrants. Although some authors have optimistically asserted that there is no such income loss for native U.S. workers because the immigrants take only jobs the natives refused to take, the most balanced judgment is that there is indeed some net job competition. Employers, landowners, and others tend to gain income from the arrival of the immigrants—from their labor, and from their demand for housing and other products. If they did not gain, we would have a hard time explaining why so many employers in California, Texas, and Florida spend a lot of dollars on lobbying against laws to cut immigration. Furthermore, Figure 23.2 realistically imagine that the gain to native employers and others outweighs the gain to competing workers, so that U.S. natives as a whole receive a slight gain from the immigrants' arrival. The migrants receive greater percentage gains. The seeming drop in U.S. average income is a mirage caused by inconsistently redefining the working-age population of the United States as excluding the migrants before they arrive but including them after. If we carefully define the United States either with the migrants both before and after or without them both before and after, then we come to the correct conclusion:

average income rises for either definition of the United States, the receiving country.

The paradox for the sending country can be unraveled in the same way. If we carefully define Mexico as excluding the migrants both before and after they leave, Mexico loses average income. If we take the broader consistent definition of Mexico, one including the migrants both before and after they leave, then Mexico, as thus defined, gains.

PUBLIC-FINANCE EFFECTS

Thus far our analysis has ignored the effects of migrants on taxes and public spending. Figure 23.1 implicitly assumed that everybody breaks even on the public-finance side effects of migration, both on the average and at all the relevant margins. Yet this dimension of the migration issue is rightly controversial and deserves a fuller treatment.

There are many possible effects. Migrants don't have to pay taxes in their countries of origin, but they face new taxes at their destination. These include income taxes, sales taxes, property taxes (either directly or through rents), social security payments, and liability to military draft. Migrants also switch from one set of public goods to another. They benefit from the new nation's national defense, police protection, natural scenery, and public schools, while giving up the same services in the old country. They also switch from old to new rights to such transfer payments as unemployment insurance, social security payments, and ordinary welfare payments. How are all these possible effects likely to net out?

For the migrants themselves, it is not clear whether the net gain on public goods minus taxes rises or falls with the move. By changing countries they may forfeit some accumulated entitlements, such as public pensions and social insurance, without being entitled to the same in the new country. On the other hand, migrants generally drift toward higher income countries, and public goods and services as a whole may be a better bargain there. The net public-finance effect for the migrants themselves is not clear. (Its unknown positive or negative value is buried within c, the perceived non-market cost of working in the new country.)

IN THE SENDING COUNTRY

For the sending country, the loss of future tax contributions (and military service) from the emigrants is likely to outweigh the relief from having to share public goods and services with them. Many public-expenditure items are true "public goods" in the welfare-economics sense of being equally enjoyable to each party regardless of how many enjoy them. Having some leave does not greatly raise the others' enjoyment of such public goods as national defense or flood-control levees. The likelihood of a net fiscal drain from emigration is raised by the life-cycle patterns of public goods and migration. People tend to migrate in early adulthood. This means that emigrants tend to be concentrated in the age group that has just received some public schooling at taxpayer expense, yet the migrants will not be around to pay taxes from their adult earnings.

The sending country, then, may very well suffer a net public-finance loss from having people migrate. We can think up hypothetical counterexamples in which the sending country gets all of its chronically unemployed, its welfare recipients, and its felons to leave, relieving itself of a net fiscal burden through emigration. But actual migrations almost never take such a form. As mentioned earlier, emigrants tend to be from the more energetic and productive middle-income ranks that probably would be net taxpayers. One possible policy response is to block their escape or their transfer of assets abroad.

Jagdish Bhagwati and other economists have proposed a more defensible and workable policy response to emigration: a tax on outward-bound persons roughly equal to the net tax contribution society has made to them through public schools and the like. Specifically, Bhagwati has proposed a "brain-drain" tax on highly skilled emigrants. To the extent that the tax compensates the sending country for its public goods-inputs, it is a reasonable proposal.

In judging the sending country's stake in the emigration issue, one must note the flows of voluntary remittances sent back to relatives and friends in the home country. These are often very large, as Italian and Mexican experiences have shown. In fact, a country (defined as including the back-home family and friends) might reap a handsome rate of return from letting people leave. Do migrants' remittances back to their home country represent a loss to the country they have moved to? The first instinct might be to say yes, it's a drain on the new country's balance of payments. But one must reflect further on the meaning of the remittances and just who is "the country." Migrants' remittances are a voluntary gift on their part, and do not represent a loss to the migrants themselves, any more than voluntarily giving to a charity makes one worse off. One could say the migrants are buying psychic satisfaction with their remittances to family and friends in the home country. And if importing this psychic satisfaction from the old country is not a clear welfare loss to them, it is not a welfare loss to their new country, because the payment is being made only by the migrants from money they earned.

Yet the economist is still likely to see the merits of a brain-drain tax on the outflow of human capital, letting the prospective migrants decide whether the remaining gains to themselves and their back-home family and friends are large enough to outweigh this justified compensation for public schooling and the like.

IN THE RECEIVING COUNTRY

It is common knowledge that immigrants are a fiscal burden, swelling welfare rolls, using public schools, and raising police costs more than they pay back in taxes. But this common knowledge is probably wrong, to judge from the best recent information. Immigrants probably pay more in taxes than their arrival takes from other taxpayers.

To see why, reconsider the arguments just made about the financial stake of the sending country, inverting them for the receiving country. The life-cycle effect reappears: immigrants tend to arrive with an age distribution tilted toward young adults, who are entering the taxpaying prime of life, having received some schooling at foreign expense. They face these taxes even if they are low-paid workers in fields and factories, in the form of sales and excise taxes, payroll taxes and social security deductions, and property taxes that make housing more expensive. Young adult immigrants are also not extraordinarily heavy claimants on social welfare programs. They do not have extraordinarily high unemployment, and they will not draw old-age benefits for many years. Indeed, it would have been odd if the same immigrants who are suspected of taking jobs away from native residents were also prone to claim above-average amounts of unemployment relief, as some also suspect. It is hard to take others' jobs away while being unemployed. and many immigrants do neither (by taking jobs that natives decline to fill).

To be sure, one could choose to focus on some particular groups of immigrants who are likely to pose net financial burdens. Political refugees fleeing countries with very different languages and economies often take a few years' help at public (or philanthropic) expense before assimilating. Yet others, such as highly skilled personnel already speaking the new country's language, are likely to be heavy net taxpayers.

Oddly enough, illegal aliens, such as the numerous Mexican illegals in the United States, are also on the net taxpaying side of the ledger. As illegals, they have very little access to public goods and services, yet they still pay payroll taxes, sales taxes, and so forth. On balance, immigrants taken as a whole are likely to bring a slight net benefit to other residents through public finances. This net benefit reinforces the receiving country's net gain shown in Figure 23.1 above (area b).

In the long run, after a couple of generations, the net fiscal impact of immigrants fades away, as their age distribution and their other characteristics converge to those of the long-native population."

EXTERNAL COSTS AND BENEFITS

Other possible effects of migration elude both the labor-market analysis and our rough fiscal accounting. Migration may generate external costs and benefits outside of the private and public-fiscal marketplaces. Three kinds of possible externalities merit mention here:

1. Knowledge benefits. People carry knowledge with them, and much of that knowledge has economic value, be it tricks of the trade, food recipes,

artistic talent, farming practices, or advanced technology. American examples include Samuel Slater, Andrew Carnegie, Albert Einstein, and many virtuosi of classical music. Often only part of the economic benefits of this knowledge accrues to the migrant and those he sells his services to. Part often spills over to others, especially others in the same country. Migration may thus transfer external benefits of knowledge from the sending to the receiving country.

2. Congestion costs. Immigration, like any other source of population growth, may bring external costs associated with crowding—extra noise, conflict, and crime. If so, then this is a partial offset to the gains of the receiving country and the losses of the sending country. This effect is probably small, however, if the migration flow is gradual.

3. Social friction. Immigrants are often greeted with bigotry and harassment, often even from native groups that would benefit from the immigration. Although the most appropriate form of social response to this kind of cost is to work on changing the prevailing attitudes themselves, policy makers must also weigh these frictions in the balance when judging how much immigration and what kind of immigration to allow. Indeed, the importance of this point might be easy to underestimate. Arguments of purported economic costs of immigration are facades for deep-seated bigotry. And long-lasting restrictions on the freedom to migrate, such as American discrimination against Asian immigrants at the turn of the century, the sweeping restrictions during the U.S. red scares of the early 1920s, and Britain's revocation of many Commonwealth passport privileges since the 1960s, have been motivated largely by simple dislike for the immigrating nationalities. In a flawed world policy makers must be prepared to consider immigration restrictions as one way to avoid social scars.

GRADUALISM AND SELECTIVITY

Thus far, only the arguments about congestion and social friction seem to weigh against liberal immigration policies. The objectives of these two arguments can be reduced greatly by the expedient of gradualism, that is, forcing gross immigration to be a low enough share of population each year to allow a peaceful transition. Within this constraint, there is a strong economic case for welcoming immigrants.

There is at least indirect support for the idea that admitting immigrants only gradually would go far to removing social frictions. The United States experienced its worst surge of anti-immigrant feeling in the early 1920s, when the immigration rate was jumping back up to the all-time historical peak rate it had reached just before World War I. The immigration rate was higher then, just before and after World War I, than it is today, even if we add reasonable estimates of the number of unrecorded illegal aliens. Even though some of the historical reasons for the anti-immigrant sentiment of that time (e.g., the Bolshevik Revolution) transcend economics, the high rate of immigration itself must have contributed to the fears and resentments of those Americans whose families migrated earlier.

Most receiving countries have come to see the merits of being selective in the kinds of immigrants they let in. They tend to twist immigration codes toward welcoming the highly skilled brain-drain migrants while shutting out most of the unskilled, who are more prone to unemployment and ghetto-related frictions. Far from welcoming "the wretched refuse of your teeming shore," the Statue of Liberty holds her lamp aloft for physicians, engineers, and computer scientists. Canada, Britain, Australia, and other high-income countries also select in favor of skilled groups. This makes excellent sense from a national standpoint, just as exclusive high-income zoning shields rich suburbs. But encouraging the brain drain imposes obvious costs on other countries, and shutting out the unskilled keeps more of the world's labor force locked into less-productive economies.

The welfare analysis of migration flows is able to identify the main stakes involved and to quantify some of them. The main winners and losers from migration are the ones intuition would suggest: the migrants, their new employers, and workers who stay in the sending country all gain; competing workers in the new country and employers in the old country lose. Yet, the net effects on nations, defined as excluding the migrants themselves, may clash with intuition. The receiving country is a net gainer, not only through standard labor-market effects but also through public-budget effects. The sending country loses on both fronts. A case can be made for a brain-drain tax that compensates the sending country for its public investments in the emigrants.