The Political Economy of

World Mass Migration

 THE HENRY WENDT LECTURE SERIES

The Henry Wendt Lecture is delivered annually at the American

Enterprise Institute by a scholar who has made major contributions
to our understanding of the modern phenomenon of globalization
and its consequences for social welfare, government policy, and
the expansion of liberal political institutions. The lecture series is
part of AEI’s Wendt Program in Global Political Economy, estab-
lished through the generosity of the SmithKline Beecham pharma-
ceutical company (now GlaxoSmithKline) and Mr. Henry Wendt,
former chairman and chief executive officer of SmithKline Beecham
and trustee emeritus of AEI.

GROWTH AND INTERACTION IN THE WORLD ECONOMY:

THE ROOTS OF MODERNITY
Angus Maddison, 2001

IN DEFENSE OF EMPIRES
Deepak Lal, 2002

THE POLITICAL ECONOMY OF WORLD MASS MIGRATION:

COMPARING TWO GLOBAL CENTURIES
Jeffrey G. Williamson, 2004
 The Political Economy of
World Mass Migration
Comparing Two Global Centuries

Jeffrey G. Williamson

The AEI Press

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Library of Congress Cataloging-in-Publication Data

Williamson, Jeffrey G.
The political economy of world mass migration / Jeffrey G. Williamson.
p. cm.
Includes bibliographical references and index.
ISBN 0-8447-7181-3 (alk. paper)
1. Alien labor—Economic aspects. 2. Emigration and immigration—
Government policy. 3. Globalization. I. Title.

HD6300.W55 2004
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2004019234

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© 2005 by the American Enterprise Institute for Public Policy Research,

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 Contents

LIST OF ILLUSTRATIONS vi
ACKNOWLEDGMENTS vii
THE POLITICAL ECONOMY OF WORLD MASS MIGRATION 1
Immigrants during Two Global Centuries:
Rising Quantity and Falling Quality 1
A Framework 8
Looking at Local Labor Markets 11
Immigration Shocks and Labor Market
Absorption: Two Modern Examples 19
Immigrants, Wages, and Inequality: The Global
Centuries Compared 23
Policy and the Demise of Mass Migration in the
First Global Century 25
Population and Labor Force Impact of the
Quotas 33
Did the Absence of Immigrants Contribute to
the Great Income Leveling in America? 36
Explaining Immigration Policy before the 1930s:
Political Debate and Backlash 43
Summing Up 48
NOTES 51
REFERENCES 53
ABOUT THE AUTHOR 59

v
 Illustrations

TABLES
1 The Migrant Stock around the World, 1965–2000 3
2 Source-Area Composition of U.S. Immigrants,
1951–2000 4
3 Education of Those Staying in the Sending Country
and Its Emigrants in Host Countries, c. 1990 7
4 Estimated Effects of Immigration on Wages and
Employment of Natives 12–13
5 Net U.S. Immigration by Region of Origin,
1910–1939 28
6 U.S. Labor Force Growth, 1910–1940: Some
Counterfactuals 35
FIGURES
1 The Economic Effects of Immigration 10
2 Immigration to Israel, 1980–2000 20
3 Labor Supply and the Real Wage in Israel,
1980–2000 21
4 Emigration from Europe, 1871–1939 27
5 Immigration into Chief New World Destinations,
1881–1939 27
6 Initial Labor Scarcity and Distribution Trends in the
Greater Atlantic Economy, 1870–1913 39
7 Initial Labor Scarcity and Distribution Trends in the
Greater Atlantic Economy, 1921–1938 39
8 Labor Supply and the Skill Premium in the United
States, 1820–1973 40
9 American Inequality Trends, 1890–1965 41

vi
 Acknowledgments

This lecture draws heavily on recent collaborative work with

Timothy J. Hatton, especially on our joint forthcoming book,
World Mass Migration: Two Centuries of Policy and Performance. I also
acknowledge with pleasure financial support from the National
Science Foundation SES-0001362, and the work environment at
the University of Wisconsin Economics Department, where this
was written while I was on leave from Harvard.

vii
 The Political Economy of
World Mass Migration
Jeffrey G. Williamson

Immigrants during Two Global Centuries:

Rising Quantity and Falling Quality

The first global century took place between about 1820 and World
War I, characterized by falling barriers to trade and to the flows of
labor and capital. All three boomed. Since about 1950, the second
global century has tried to reintegrate these three markets in the
wake of the interwar autarchic retreat. This paper is about the polit-
ical economy of immigration in both global centuries.
Annual immigration to North America and Oceania rose gradu-
ally to the mid-1970s before surging to a million per year in the
1990s. The absolute numbers by then were similar to those reached
during the age of mass migration about a century earlier, but they
were smaller relative to the destination country populations that had
to absorb them. The U.S. annual immigration rate fell from 11.6
immigrants per thousand in the 1900s to 0.4 immigrant per thou-
sand in the 1940s, before rising again to 4 immigrants per thousand
in the 1990s. The proportion of the U.S. population born in a foreign
land had fallen from a 1910 peak of 15 percent to an all-century low
of 4.7 percent in 1970. The postwar immigration boom increased the
foreign-born share to more than 8 percent in 1990 and more than 10
percent in 2000. Thus, the United States has come two-thirds of
the way back to reclaiming the title “a nation of immigrants” after a

1
2 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

half-century retreat. While the immigration rate is now only a third

that achieved at its peak in the first decade of the twentieth century,
the contribution of immigration to population and labor force growth
is similar, because the rate of natural increase has also declined.
What happened to the United States after World War II also
happened worldwide. Table 1 reports trends in the foreign born
around the world over the thirty-five years since the mid-1960s.
The data are based on country censuses, sources that are likely to
be of higher quality than those that report annual immigrant flows,
and they deal with unambiguous net permanent moves. The most
revealing entries appear in the last three rows of the table. There
we see that the foreign-born share in the total population increased
by about one third in Oceania between 1965 and 2000 (from 14.4
to 19.1 percent), more than doubled in North America (from 6 to
13 percent), and more than tripled in Europe (from 2.2 to 7.7 per-
cent). North America is defined to exclude emigrating Mexico, so in
this case we are talking exclusively about a high-wage immigrant-
absorbing region. The same is not true of Europe, since it is defined
to include Eastern Europe and the former Soviet Union, two net emi-
grating regions and, increasingly, a significant source of migrants for
the European Union (EU). The foreign-born share in Western Europe
rose much more dramatically than it did for Europe as a whole.
While the Organisation for Economic Co-operation and Develop-
ment (OECD) immigration has surged, the labor market quality of
these immigrants has declined. For example, U.S. immigrant men
earned 4.1 percent more than native-born men in 1960, but they
earned 16.3 percent less in 1990 (Borjas 1999, 1724). Some of this
was due to the decline in immigrant educational attainment, but
when we control for this effect, the adjusted relative wage still fell by
13.3 percent over these thirty years. Recent immigrants always suffer
an earnings disadvantage before they assimilate, and that was even
true in 1960. But their initial wage relative to the native born deteri-
orated by 24 percentage points over those thirty years.
Most of this decline in immigrant “quality” is due to changes
in the source-area composition of U.S. immigrants (table 2). The cur-
rent debate over the impact of shifting immigrant source on the labor
 JEFFREY G. WILLIAMSON 3

TABLE 1
THE MIGRANT STOCK AROUND THE WORLD, 1965–2000

Year 1965 1975 1985 1990a 1990b 2000

Migrant Stock (millions)
World 75.2 84.5 105.2 119.8 154.0 174.9
Africa 8.0 11.2 12.5 15.6 16.2 16.3
Asia 31.4 29.7 38.7 43.0 50.0 50.0
Latin America/ 5.9 5.9 6.4 7.5 7.1 5.9
Caribbean
North America 12.7 15.0 20.5 23.9 27.6 40.8
Europe 14.7 19.5 23.0 25.1 48.4 56.1
Oceania 2.5 3.3 4.1 4.6 4.8 5.8

Percentage of World Migrant Stock

World 100.0 100.0 100.0 100.0 100.0 100.0
Africa 10.6 13.2 11.9 13.1 10.5 9.3
Asia 41.8 35.1 36.8 35.9 32.4 28.6
Latin America/ 7.9 6.8 6.1 6.2 4.6 3.4
Caribbean
North America 16.9 17.8 19.5 20.0 17.9 23.3
Europe 19.6 23.1 21.8 20.9 31.4 32.1
Oceania 3.3 3.9 3.9 3.9 3.1 3.3

Migrant Stock as a Percentage of Population

World 2.3 2.1 2.2 2.3 2.9 2.9
Africa 2.5 2.7 2.3 2.5 2.6 2.1
Asia 1.7 1.3 1.4 1.4 1.6 1.4
Latin America/ 2.4 1.8 1.6 1.7 1.6 1.1
Caribbean
North America 6.0 6.3 7.8 8.6 9.8 13.0
Europe 2.2 2.7 3.0 3.2 6.7 7.7
Oceania 14.4 15.6 16.9 17.8 18.0 19.1
SOURCE: Hatton and Williamson 2004, table 10.1.
NOTE: There are differences of definition in the figures for 1965–1990a and 1990b–2000,
mainly involving the breakup of the Soviet Union.
4 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

TABLE 2
SOURCE-AREA COMPOSITION OF U.S. IMMIGRANTS, 1951–2000
(percent of total)

Region of Origin 1951–60 1961–70 1971–80 1981–90 1991–2000

Europe 52.7 33.8 17.8 10.3 14.9

West 47.1 30.2 14.5 7.2 5.6
East 5.6 3.6 3.3 3.1 9.4
Asia 6.1 12.9 35.3 37.3 30.7
Americas 39.6 51.7 44.1 49.3 49.3
Canada 15.0 12.4 3.8 2.1 2.1
Mexico 11.9 13.7 14.2 22.6 24.7
Caribbean 4.9 14.2 16.5 11.9 10.8
Central America 1.8 3.1 3.0 6.4 5.8
South America 3.6 7.8 6.6 6.3 5.9
Africa 0.6 0.9 1.8 2.4 3.9
Oceania 0.5 0.8 0.9 0.6 0.6
Total (thousands) 2,515 3,322 4,493 7,338 9,095
SOURCE: Hatton and Williamson 2004, table 10.2.
NOTES: National origin is based on country of last residence. Totals include 2.7 million for-
mer illegal aliens receiving permanent resident status under the Immigration Reform and
Control Act, 1986. Of these, 1.3 million fall in the decade 1981–1990 and 1.4 million in
the decade 1991–2000.

market quality of immigrants certainly has its parallel in the pre-1914

era, years that culminated in the influential Dillingham Commission
Report in 1911 and the subsequent country-of-origin quotas
imposed a decade later. An ominous comparison, perhaps, but it pro-
vides an obvious benchmark. So how do the two eras match up?
In 1909, the wage for the average male immigrant in industry was
6.4 percent lower than for native-born men, a figure comparable with
the late 1970s. Recent male immigrant arrivals in 1909 earned 20.4
percent less than natives, a figure also similar to the 1970s. But note
this important fact: The variation in immigrant quality by source is
five times greater in modern times than it was in the past—the stan-
dard deviation of the log wage across twenty-six immigrant national-
ities was 0.056 in 1909 as compared with 0.295 across forty-one
 JEFFREY G. WILLIAMSON 5

immigrant nationalities in 1980.1 Much of the source country differ-

ence in labor market performance is accounted for by the wage gap
between “old” and “new” immigrants. The wage gap in 1909 between
immigrants from northwest Europe (old) and the rest (new) was 6.7
percent. By contrast, the wage gap in 1980 between Europeans and
those from Africa, Asia, and South America was 30.7 percent.
The implication, of course, is that any shift in immigrant source
away from high-quality and toward low-quality origins has a much
bigger impact on the average quality of immigrants today than a
century ago. And so it was. Between 1873 and 1913, the effect of
changing source-country composition was to reduce the immi-
grant wage by 4.7 percentage points (2.3 percentage points after
1893). Between 1940 and 1980, source-country composition shifts
reduced the immigrant wage by 27 percentage points (17 percentage
points after 1960). So, while immigrants experienced an earnings dis-
advantage in 1980 similar in magnitude to that which prevailed on
the eve of World War I, the decline that preceded it was much larger
in the modern era and it continued for an additional decade as well.
In the earlier era, shifts in the source-country composition were
the result of rising incomes and demographic booms in Europe com-
bined with falling transport costs between sending and receiving
regions, forces amplified by the friends and relatives effect. These
forces slowly reduced positive selection: The really poor could not
finance the move until late in the first global century, as their incomes
at home rose and the cost of passage fell (Hatton and Williamson
1998, chapter 3). The same forces have also been at work in the
modern era, but policy served to accelerate the demise of what the lit-
erature calls positive selection. These policy changes included the abo-
lition of the country-of-origin quotas that previously favored Europe,
the shift to a worldwide quota, and the emphasis on family reunifi-
cation over skills as the key criteria for admission. Other OECD
countries also opened their doors more widely and experienced shifts
in immigrant composition and quality, but the effects have not been
as dramatic. For example, as the sources of Canadian immigration
widened after the 1960s, immigrant quality fell but by less than it did
in the United States (Baker and Benjamin 1994). Some have argued
6 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

that the difference can be explained by policy, the Canadian points

system selecting immigrants with higher average labor quality (Borjas
1993). Perhaps, but note that the difference is accounted for by one
dominant fact: Latin Americans are 47 percent of U.S. immigrants
but only 14 percent of Canadian immigrants, and Mexicans account
for most of that disparity (Antecol, Cobb-Clark, and Trejo 2003).
While this Latin difference may be partly due to immigration policy,
it also reflects location. Distance matters enormously in explaining
who migrates to the United States (Clark, Hatton, and Williamson
2002). Because of its closer proximity to Latin America and its long
land border with Mexico, the United States would need an even more
skill-selective immigration policy than Canada (or even quotas for
Latin Americans) to raise immigrant quality to the Canadian level.
What about the selection of immigrants from a given country?
According to the Roy model, immigrants should be more negatively
selected the higher is the return to skills (and the greater is earn-
ings inequality) at the origin (Borjas 1987). Given that Mexican
inequality exceeds American inequality, Mexican emigrants should be
unskilled. So much for theory. In terms of observable skills, however,
immigrants from Mexico were drawn predominantly from the middle
of the distribution, not from the bottom (Chiquiar and Hanson
2002). A good example of this is offered by table 3, which reports
education data for adult migrants in OECD host countries by sending
source and for adults in the same sending source countries. While
migrants in the OECD have 7.2 more years of education than the
adults they left back home, Mexican migrants (mostly in the United
States) had only 1.2 more years of education than did Mexican adults
back home. The data in table 3 do not adjust for the fact that immi-
grants are younger than the average adult back home or that immi-
grants may have received some education in host countries after their
arrival. However, it is very clear that the gap between mover and
stayer is much smaller for Mexicans (close to the United States) and
for East Europeans, Balkans, and Turks (close to the European Union).
It appears that the revealed weaker positive selection is because, as a
share of income, migration costs decrease sharply with skill level, off-
setting the positive selection effects of greater inequality at the source.
 JEFFREY G. WILLIAMSON 7

TABLE 3
EDUCATION OF THOSE STAYING IN THE SENDING COUNTRY AND ITS
EMIGRANTS IN HOST COUNTRIES, C. 1990

Years of Schooling
Region Migrants Difference
(no. of sending Those to Host (migrants --
countries) Staying Countries stayers)

Africa (4) 4.6 15.4 10.8

Mexico (1) 6.3 7.5 1.2
Caribbean, Central America (14) 5.4 11.2 5.8
South America (10) 5.9 12.5 6.6
Asia (15) 5.8 14.4 8.6
Eastern Europe, Balkans, Turkey (3) 7.8 12.6 4.8
Total (47) 5.7 12.9 7.2
SOURCE: Based on Hendricks 2002, table B1.
NOTES: All figures are unweighted averages. The column of those who stayed is based on
Barro-Lee, while the migrant column is based on OECD censuses around 1990. The two
columns use country observations only if they supply information on both the stayers and
the migrants.

Although Latin American immigrants are not, on the whole,

negatively selected, it seems likely that they are less positively
selected than migrants from poorer and more distant sources. To
repeat, high migration costs favor positive selection and low
migration costs favor negative selection. Mexico is close enough to
the United States and countries to the immediate east and south-
east are close enough to the EU, so that they all share lower migra-
tion costs and therefore can send poorer and less-skilled immigrants.
Greater distances, lower source-country inequality, weaker friends
and relatives effect, and (for the poorest regions) the poverty con-
straint all imply that U.S. and EU migrants coming from farther
away should be more positively selected. So it was that the 1990
share of U.S. immigrants with tertiary schooling was more than
three times higher for Asians and Africans than for Mexicans and
Central Americans. One implication of this is that the brain drain
8 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

must be more serious the poorer, the more distant, and the more
egalitarian is the sending nation.
The United States faced rising immigrant quantity and falling
immigrant quality before World War I, and it faces them again today.
It appears that the same is true of the EU. What was the political
economy of immigration backlash then? Do these lessons of history
apply today?

A Framework

Most developed countries moved decisively to restrict immigration

during the first third of the twentieth century. Those restrictive con-
trols introduced between World War I and the 1930s were the result
of a combination of factors: public assessment of the impact of immi-
gration on the labor market, growth in the political participation of
those affected, and as a triggering mechanism, the sudden shocks
delivered by the 1890s depression, World War I, the postwar adjust-
ment, and the 1930s depression. Public opinion was becoming
increasingly negative toward immigration, in part as a response to the
imagined or real economic threats delivered by immigration. When
asked for their opinions by state labor bureau interviewers in the
middle of the 1890s depression, here is how some workingmen in
the Midwest responded: Almost 63 percent of the Kansas wage earn-
ers surveyed in 1895 thought immigration should be restricted and
another 24 percent thought it should be outright suppressed, adding
up to 87 percent who wanted to retreat from the free-immigration
status quo; almost 68 percent of the Kansas wage earners surveyed in
1897 thought immigration should be restricted and another 24 per-
cent thought it should be suppressed, adding up to 92 percent favor-
ing a retreat from the status quo; about half the Michigan railway
employees surveyed in 1895 thought that immigration injured their
occupation; and almost 62 percent of the Michigan owners of public
conveyances surveyed in 1895 thought immigration hurt their busi-
ness through greater competition, and more than 92 percent favored
restriction (Hatton and Williamson 2004, chapter 8).
 JEFFREY G. WILLIAMSON 9

Negative public opinion is on the rise today, too (Mayda 2003;

O’Rourke and Sinnott 2004). A 1995 international survey asked
whether immigration should be reduced in their country, where a
score of 3 meant remain the same, 4 meant reduce a little, and 5
meant reduce a lot. The figures for three big immigrating countries
were Germany 4.2, Britain 4.1, and the United States 3.9—ranging
between “reduce a little” and “reduce a lot” (O’Rourke and Sinnott
2004, table 1). Furthermore, these responses were given during
boom times in these labor markets. One can well imagine what
they would be now, as the OECD struggles out of its recent slump.
While the labor market effects of immigration are again at issue,
fiscal effects matter now as well, and they matter far more today
than a century ago when governments were much smaller and immi-
grants were never a big net fiscal burden. Nevertheless, the labor
market effect of immigration has always been the key focus in
debate over immigration policy, and it is what I focus on here.
The debate can be motivated by reference to the textbook pic-
ture of labor supply and demand in figure 1, where we simplify by
assuming for the moment only one type of output and one type
of labor. As usual, labor demand slopes downward to the right,
capital and technology are taken to be fixed, and exogenous
changes in immigration increase the total labor supply from S1 to
S2. Immigration lowers the wage rate from W1 to W2 while it raises
total profits from the area X to the area X + Y + Z (the area under
the demand curve down to the wage). The total loss to resident
wage earners is area Y and the net gain to society, excluding the
immigrants themselves, is Z. Two points emerge immediately from
figure 1. First, the overall gain to all residents collectively is likely
to be small. One estimate for the United States puts the annual gain
(Z) from the accumulated stock of immigrants at 0.1 percent of
national income (Borjas 1999, 1701). Second, distributional effects
are unambiguous—wage earners lose while their employers gain—
and they are likely to be large. Immigration has different effects,
therefore, on different interest groups, but if wage earners have the
voting majority and immigration policy reflects majority prefer-
ence, then policy is likely to be restrictive.2
10 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

FIGURE 1
THE ECONOMIC EFFECTS OF IMMIGRATION

Wage
S1 S2

X
a
c
W1

Y Z
W2 b

D2
D1

Labor Force

SOURCE: Hatton and Williamson 2004, table 14.1.

Things get more complicated the farther we depart from the

assumptions underlying the simple textbook analysis underlying
figure 1. Four complications are particularly important. First, if
labor markets fail to clear through wage adjustment (in the short
run at least), then immigrants add more to the labor force than to
employment. If immigrants gain employment, they rob jobs from
residents, pushing some of them into unemployment or out of the
labor force. If, on the other hand, immigrants are the last hired and
first fired, then the immigrants themselves dominate the unem-
ployed, or the “informal,” sector, where wages are more flexible and
productivity lower. Second, labor market effects may be attenuated
by adjustments in goods or capital markets. For example, if capi-
tal is the only other input and it is perfectly mobile internation-
ally, then the new equilibrium in figure 1 is at c rather than b, as
capital chases after the migrants in response to the incipient rise in
returns (shifting the labor demand curve to the right from D1 to
D2). Under perfect world capital mobility, and thus elastic capital
 JEFFREY G. WILLIAMSON 11

supplies, the incomes of the domestic owners of capital and the

wages of resident workers remain unchanged: Residents are neither
better nor worse off, and the immigrants are absorbed without a
hitch. Third, suppose there are two or more types of labor. If the
immigrants are mainly unskilled, then unskilled residents may
lose as a result of the increased job competition, but skilled work-
ers may gain. The more are skilled and unskilled workers comple-
ments in production (and the less they are substitutes), the more
likely skilled workers gain from unskilled immigration. Finally,
some of the economic effects of immigration may come through
fiscal transfer rather than labor market adjustment. If immigrants
earn low wages and have low labor market participation, high
unemployment, and high dependency rates, they are likely to be
supported by residents through redistributive tax and welfare sys-
tems. If immigrants lack those attributes, then they are likely
instead to support residents through transfers.
These are some of the more obvious effects of immigration on
the incomes of resident populations. Listing them is easy enough;
measuring them is not.

Looking at Local Labor Markets

One obvious way to measure the impact of immigration is to
look across local labor markets that have different rates of immi-
gration from abroad to see if those with higher rates of immigra-
tion also have slower wage or employment growth (or higher
unemployment growth) among resident workers. One advantage of
this so-called spatial correlations approach is that, by focusing on
local labor markets within a nation, country-specific shocks and
institutions are held constant. Because of these attractive features, a
number of studies have employed this methodology to investigate
the effects of immigration. The results of a representative sample of
these are summarized in table 4, covering four OECD countries
over the last four decades. The penultimate column reports the
impact on wages in percent from an immigrant-induced 1-percent
12 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

TABLE 4
ESTIMATED EFFECTS OF IMMIGRATION ON WAGES AND
EMPLOYMENT OF NATIVES

Study Country/Region, Time

Altonji and Card (1991) U.S. cities, 1970–80

Lalonde and Topel (1991) U.S. cities, 1970–80

Borjas, Freeman, and Katz (1997) U.S. states, 1960–90 (men)

Card (2001) U.S. cities, by occupation,

1985–90

De New and Zimmermann (1994) German industries

Pischke and Velling (1997) German counties, 1985–89

Addison and Worswick (2002) Australian states, by occupation,

1982–96

Dustmann et al. (2002) UK regions, 1983–2000

SOURCE: Hatton and Williamson 2004, table 14.1.

NOTE: The estimates reported here are based on regression coefficients that are
often not significantly different from zero. Many of the authors offer a range of

change in the labor force. The last column reports the impact of the
same immigrant-induced labor force impact on employment or
unemployment, this in percentage points.
Table 4 makes it clear that there is little consensus among
economists regarding the amount by which an immigrant influx
(equivalent to 1 percent of the resident workforce) reduces the
wage. In some cases, resident wages of the native born (and previous
 JEFFREY G. WILLIAMSON 13

Effect on Employment/Unemploy-
Effect on Earnings of Equivalent ment of Equivalent to 1% of the Labor
to 1% of the Labor Force (percent) Force (percentage points)

–1.2 (less skilled) NA

–0.63 (immigrants); –0.83 NA

(young blacks)

0.59 (1960–70); 0.07 (1970–80); Employment: –0.03 (1960–1970);

–0.01 (1980–90) 0.13 (1970–1980); –0.05 (1980–1990)

–0.15 Employment: –0.05

–4.1 (all); –5.9 (blue collar); NA

3.5 (low-experienced white collar)

NA Employment: 0.05
Unemployment: 0.2

1.5 (all); 2.7 (less educated) No effects on unemployment

1.9 (all); 2.2 (skilled); 1.2 (semiskilled); Unemployment: 0.2 (all); 0.1 (skilled);
2.2 (unskilled) 0.4 (semiskilled); 0.03 (unskilled)
estimates using different methods, and the ones presented here are considered
the most representative. Since the model specifications vary, the estimates
from different studies are not strictly comparable.

immigrant cohorts) are reduced; in other cases, they are not.

Lack of strong negative wage and crowding-out effects might
be explained by the fact that, in the short run, immigration
increases unemployment, as immigrants either “rob jobs” from
locals or remain unemployed themselves. This impact would
be expected if wage rates are sticky downward, as we think they
are in the short run. However, there is no consistent evidence
14 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

confirming adverse effects on employment or unemployment in

local labor markets.
Findings like these contributed to a general consensus by the
mid-1990s that the effects of immigration on host country labor
markets are small (Borjas 1994; Friedberg and Hunt 1995). Yet,
three nagging doubts suggested that the “small-impact” view was
premature. First, the finding that immigration neither reduces the
wage nor raises unemployment seems to be inconsistent with ele-
mentary theory: Labor demand curves slope downward to the
right. It seems justified to insist that analysts offer an explicit expla-
nation for any finding that rejects such a powerful weapon from the
economists’ arsenal. Furthermore, such findings are inconsistent
with decades of empirical work by economists who estimated
the labor demand curve to have elasticities around –0.5 or higher
(Hammermesh 1993). Second, there is little consistency across
these modern immigration studies, even for the same country.
Third, economists have ignored the first global century and that
pre–World War I history shows unambiguously that immigrants
crowded out natives.
So where has the modern economist gone wrong? There are sev-
eral reasons why the spatial correlation approach is biased against
finding large crowding-out effects. One reason is simply that the
annual flow of immigration is usually small relative to the size of the
labor market. Since immigrants gravitate toward a few major urban
centers, most regions in most countries that make up the bulk of
the observations in local area studies have immigrant inflows that
are very small relative to local labor supply. Nearly a third of the
U.S. foreign born live in just three metropolitan areas: New York,
Los Angeles, and Miami. About 40 percent of immigrants to Britain
go to London alone and the same share of immigrants to Australia
go to Sydney, while more than a third of those arriving in France
locate in the greater Paris area. Hence, systematic immigration
effects are hard to assess anywhere but in the few areas where new
immigrants concentrate. To make matters worse, immigrants tend
to locate in areas where economic conditions are favorable: where
unemployment is low and falling and wages are high and rising.
 JEFFREY G. WILLIAMSON 15

Local immigration is, at least in part, endogenous; and where immi-

gration is endogenous, the direction of causation is reversed and of
the opposite sign. When both this endogenous effect and the “true”
labor market impact are present, the net result is to bias estimates
of crowding out downward. That downward bias could be big.
More important still, the markets for labor and goods are likely
to be very well integrated within developed countries, much more
so than between countries. Suppose goods markets adjust quickly:
As immigrants are absorbed in one region, it expands its produc-
tion of the goods that use most intensively the skills that immi-
grants bring. In short, a boom in the region’s export sector absorbs
the immigrants. Labor markets are also likely to be far better inte-
grated within a country than between countries. As immigrants
enter a local labor market, they induce interregional migration by
the native born and previous immigrant cohorts with whom they
compete. As a result, the crowding-out effect is not observed accu-
rately at the local level. Indeed, it may not be observed at all.
Integrated national goods and labor markets imply that the effects
of immigration are spread across the entire country: All boats rise
and fall together as the immigrant tide flows and ebbs. The better
integrated are the markets for goods and labor across regions with-
in a country, the less is an immigration shock reflected in local labor
markets, even though the effects of immigration could still be large
for the country as a whole.
If regional markets are well integrated, then the effects of
immigration can be observed only at the national level. But how?
George Borjas (2003) argued recently that if different types of labor
(defined by schooling and labor market experience) are not good
substitutes for each other, then the effects of immigration can be
inferred by estimating the relative wage impacts of changes in the
supply of different types of labor at the national level. One advan-
tage of this approach is that mobility between these skill groups is
limited. Intercensal changes between 1960 and 2000 reveal strong
negative effects consistent with labor demand elasticities ranging
between –0.3 and –0.4, a little below the –0.5 elasticity typically
found for labor demand. Therefore, the 11 percent increase in labor
16 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

supply brought about by immigration between 1980 and 2000

must have reduced the wage of the average nonimmigrant worker
by 3.2 percent. Not surprisingly, these impacts vary greatly across
the skill groups: Immigration reduced the wage by 8.9 percent for
high school dropouts, 4.9 percent for college graduates, 2.6 percent
for high school graduates, and almost nothing for those with some
college education (Borjas 2003, 36). Thus, to the extent that immi-
grants cluster in the group competing with high school dropouts,
the crowding-out impact is very big (bringing that elasticity closer
to –0.5). As we shall see, this result is consistent with assessments
of immigration’s impact on host labor markets during the age of
mass migration before World War I.
An alternative approach is to look across countries whose labor
markets are linked only very loosely. One recent study examined the
short-run impact of immigration on native employment rates in
eighteen European countries between 1983 and 1999, using the
“shock” of asylum immigrants from Eastern Europe to better iden-
tify the effects (Angrist and Kugler 2003). The study found that the
addition of one hundred immigrants to a country’s labor force
reduced native employment by between thirty-five and eighty-five,
for an average of sixty (close again to that –0.5 elasticity). These job
losses were largest for young men; and overall job loss was greater
in countries with the least flexible labor markets and the highest
benefit replacement rates (for example, the European welfare states).
It seems reasonable to conclude that the initial effects on employ-
ment would eventually translate into wage effects, the adjustment
process depending on the degree of labor market flexibility.
These new findings seem to have solved the riddle of why the
modern, spatial correlation approach so often fails to find big
negative immigration effects on either wage rates or resident
employment. Immigrants do lower the incomes of those residents
with whom they compete most directly, just as they did a cen-
tury ago. But why did the spatial correlation approach fail to find
big labor market effects? Was it goods market integration, labor
market integration, or something else? Let us begin with the
goods market.
 JEFFREY G. WILLIAMSON 17

The Rybczynski theorem suggests that a globally integrated region

can absorb changes in relative factor supply without changes in rel-
ative factor prices (in this case, wages relative to other factor prices).
As noted previously, when unskilled immigrants arrive in a local
market, the theorem predicts a relative expansion of industries that
use the additional unskilled labor most intensively and a shift in the
pattern of trade with other regions toward exporting those goods
that use the newly abundant factor most intensively. A recent study
isolated these effects by looking at the skill composition across forty
industries in fourteen U.S. states. The study found that a significant
part of the difference across states in their skill mix was accounted
for by changes in their output mix “consistent with the hypothesis
that state-specific factor-supply shocks do not trigger large state-
specific wage effects” (Hanson and Slaughter 2003, 19).3 While these
results offer an impressive confirmation of market integration among
U.S. states, they do not tell us whether the goods market or the labor
market does the adjusting. So, let us turn to the labor market.
In April 1980, Fidel Castro declared that Cubans were free to
emigrate from the port of Mariel. In just a few months, 125,000
took up Castro’s offer and about half of these settled in Miami. The
Cuban influx added 7 percent to the Miami labor force, and they
were mainly unskilled. In his celebrated study of this Mariel
boatlift, David Card (1990) found that this large Cuban influx had
almost no effect on the wage rates of the unskilled relative to skilled
in Miami or relative to the wage rates of the unskilled in other
states. Even previous cohorts of Cubans and other Hispanics did
not seem to have suffered from competition with the Marielitos.
Why? It looks like the answer is displacement. In-migration to
Miami of the native born (or previous immigrants) slowed down
dramatically in the early 1980s, so much so that interregional
migration accounted for most of the adjustment.
How general are the Mariel findings? Is the interregional displace-
ment effect of natives by immigrants large at the economywide level?
One post-Mariel study found that an influx of immigrants 1975–80
equivalent to 1 percent of a standard metropolitan statistical area’s
labor force displaced native workers equivalent to 1.2 percent of the
18 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

labor force (Filer 1992). This huge displacement—more than one for
one—seems consistent with the Miami experience following the
Mariel boatlift. Looking at intercensal changes in the growth of native
and foreign-born populations in U.S. states, another study also found
a crowding-out effect close to one (Borjas et al. 1997). Other studies
have reported much more modest effects (Card 2001).
This variety in results is hardly unique to the United States, and
it may be due in part to some of the same problems that beset
the spatial correlations studies of local employment and wage rates.
That is, when immigration to most of the regions in a sample is
small, measurement error or idiosyncratic shocks to a regional labor
supply or demand may obscure the immigration crowding-out
effect. To illustrate the point, consider the net interregional migra-
tion into six booming regions in the south of the United Kingdom
from 1982 to 2000. One study explained that interregional migra-
tion by regional job vacancy rates, earnings, and house prices as
well as by the net foreign immigration into the region (Hatton and
Tani 2003, table 5). The study found that, for every hundred for-
eign immigrants, forty-three residents were displaced from the
region. But when the relationship is assessed for all eleven U.K.
regions, not just those six in the booming south, the foreign immi-
gration impact falls in size and becomes insignificant. It appears
that the total immigration effect is now harder to discern because
the additional five regions received relatively few migrants.
Similar effects can be observed for other times and places, pro-
vided that the regions observed are ones where immigration has
been large. In the decades before 1910, the bulk of immigrants to
the United States moved into New England, the mid-Atlantic, and
the east north central. An analysis of the intercensal flows of native
born from the fourteen states that compose those three regions
showed that crowding-out occurred there, too. Indeed, the west-
ward migration in the United States was powerfully influenced
by the influx of foreign immigrants into the East. For every net
inflow of one hundred immigrants, the out-migration of native
born increased by forty (Hatton and Williamson 1998, 168). This
late nineteenth century estimate is very close to the late twentieth
 JEFFREY G. WILLIAMSON 19

century estimate for contemporary southern Britain just discussed.

The similarity serves to reinforce the point that the crowding-out
effects of immigration can be observed only by focusing on times
and places where immigration has been large, so that its effects can
be clearly assessed.

Immigration Shocks and Labor Market Absorption:

Two Modern Examples

Perhaps a better way to assess the effects of immigration on the

host economy is to look at what might be called natural experi-
ments, cases (like the Mariel boatlift) where the changes in immi-
gration have been sudden and unambiguously exogenous and
where they are large enough to leave a clear imprint on the whole
country’s labor market. This section considers two modern exam-
ples: the migration of Soviet Jews to Israel in the early 1990s after
Soviet emigration policy became liberal and the return migration
of French Algerians to metropolitan France in 1962 following
independence.
The dramatic influx of immigrants into Israel in the early 1990s
offers a classic example of an exogenous immigration shock of
significant economywide proportions (Cohen and Hsieh 2000;
Eckstein and Weiss 2003). Late in 1989, the government of what
was then the Soviet Union shifted its policy to permit Soviet Jews
to emigrate. Most of those who left went to Israel. The dramatic
surge in Israel’s aggregate immigration rate is shown in figure 2. In
the decade before 1990, it averaged 3.7 per thousand of the Israeli
population. In 1990–91, the rate surged to more than thirty-five
per thousand and then continued at ten to fifteen per thousand for
the rest of the decade. There was an inflow of 610,000 in the first
two years, equivalent to 7 percent of the Israeli population, and by
the mid-1990s, the influx amounted to a million, or about 12 per-
cent of the initial population. The effects on the labor market were
equally dramatic: The working age population increased by 8 per-
cent between 1990 and 1992 and by 16 percent up to 1997.
20 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

FIGURE 2
IMMIGRATION TO ISRAEL, 1980–2000
(per 1,000 population)

50
45
40
Immigration Rate

35
30
25
20
15
10
5
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

SOURCE: Israel, Central Statistical Bureau online at http://194.90.153.197/reader/

shnatonenew.htm.

An exogenous immigration shock of this magnitude should have

left a clear mark on the host country labor market, and figure 3
confirms that this was so. The figure plots percentage deviations
from logarithmic trends calculated for the preshock period,
1980–89. The labor force was more than 15 percent above its trend
by the mid-1990s. Employment rose more slowly at first, but by the
mid-1990s, it was more than 20 percent above its trend. Relative to
its trend, the real wage plunged in the early 1990s, then hovered at
about 10 percent below the trend for the rest of the decade. There
were other short-run adjustments as well. The unemployment rate
was 10.6 percent in 1991, compared with an average of 6.1 percent
over the 1980s. Furthermore, the unemployment rate was 37.3
percent among immigrants, compared with 9 percent among
nonimmigrants. This difference evaporated over the 1990s, and by
2000, it was just two percentage points apart, 10.4 percent for
immigrants and 8.4 percent for nonimmigrants.
The Israeli evidence seems clear: The real wage fell by around
5 percent for every 10 percent immigration-induced increase in the
 JEFFREY G. WILLIAMSON 21

FIGURE 3
LABOR SUPPLY AND THE REAL WAGE IN ISRAEL, 1980–2000
(deviations from 1980–89 trend)

30

25
Employment
20

15 Labor force
Percent

10

-5

-10 Real wage

-15
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

Year

SOURCE: Bank of Israel online at http://www.bankisrael.gov.il/publeng/dataeng.htm.

labor force—once again, that elasticity of about –0.5. But other

forces at work helped ease the labor market adjustment. One was
an impressive capital accumulation response. The sudden increase
in labor supply reduced the capital/labor ratio and increased the
return to capital; as a result, gross investment in machinery and
equipment increased from 12 percent of the stock in the 1980s to
19 percent in 1994–1996. This accumulation response was
financed largely from abroad; as a share of the GDP, the current
account deficit increased by about 8 percentage points between
1990 and 1996 (Cohen and Hsieh 2000, 19). In contrast, adjust-
ments through induced changes in the composition of output and
the structure of trade do not seem to have been important.
Although immigrants were more highly skilled than natives, no
shift in the output composition toward skill-intensive sectors took
place (Cohen and Hsieh 2000, 15).
Given that immigrants appeared to enter with much higher skill
levels and the lack of adjustment in the output mix, one might have
anticipated a big fall in the premium for skill. Appearances can be
22 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

deceiving. Among those Soviet Jews arriving in the first wave,

60 percent were college educated and 25 percent were college grad-
uates, compared with 30 percent and 12 percent, respectively, of
Israeli Jews. They also had much higher occupation-specific skills.
Of those arriving in 1990–93, 57,000 had been engineers and
12,000 had been physicians; by comparison, the numbers in the
much bigger 1989 Israeli labor force were 30,000 and 15,000,
respectively. Therefore, given the higher skills of the immigrants, one
might have expected the skill premium to fall. In fact, it increased
(very slightly) to the mid-1990s, before it fell back, largely because
the Russian immigrants entered occupational grades that were con-
siderably below those in which they had worked previously.
Looking across occupations, there is a negative correlation between
the number of Russian entrants and wage growth between 1989 and
1994: Every 10 percent added to employment reduced the wage by
3–6 percent—once again, implying an elasticity of almost –0.5. But
there is no correlation between the number of Russians classified by
former occupation and wage growth in that occupation (Friedberg
2001). Hence, in 1994, the Russian immigrant earned 45 percent
less than the Israeli despite having an average of one more year of
schooling. There are two important explanations for this down-
grading. First, education and skills acquired in Russia were not
easily transferable to the Israeli labor market, and second, many of
the immigrants had poor Hebrew language skills. The assimilation
process took time, but the Soviet immigrants did move up the Israeli
occupational ladder, and by 1997, they had about the same occupa-
tional distribution as the Israeli labor force as a whole.
The second modern example is offered by the inflow to metro-
politan France from Algeria following the latter’s independence.
These immigrants were very largely French-born expatriates fleeing
the regime change; about 900,000 flooded into France in the year
1962. They added about 1.9 percent to the population and 1.6 per-
cent to the labor force. They were slightly younger and better qual-
ified on average than the host labor force, but those differences were
not large. They located largely in southern France. An analysis of
changes in average earnings across departments between 1962 and
 JEFFREY G. WILLIAMSON 23

1967 indicates that an influx of repatriates equivalent to 1 percent

of the French labor force reduced the wage by 0.5–0.8 percent
(Hunt 1992, 567)—once again, an elasticity around –0.5 or more.
The overall effect was to reduce the wage by 1.3 percent and
increase unemployment rates by 0.3 percentage points. In short,
the Algerian immigration shock was sufficiently large to have a clear
effect on French labor markets.

Immigrants, Wages, and Inequality:

The Global Centuries Compared

How has immigration affected incomes and income distributions in

the larger economies, such as the United States, that received the
bulk of migrant flows from the less-developed parts of the world?
And how do these effects compare with those we observe for the first
global century before 1914? The French and Israeli examples sug-
gest that, when the impact on the host country labor supply is large
enough to observe the impact clearly, the effects of immigration
accord with the simple model depicted in figure 1. Given that accor-
dance, the wider effects of immigration can be easily calculated.
Using a standard production function that combines capital with
different types of labor, the effects on the earnings of workers of dif-
ferent skills arising from immigrant-induced changes in labor sup-
ply by skill can be estimated (Borjas et al. 1997). Assuming capital
to be fixed, the effects of U.S. immigration between 1979 and 1995
were to reduce the earnings of skilled natives by 2.5 percent and
the unskilled native born by 4.6 percent. Immigration therefore
contributed to a rise in U.S. earnings inequality, the earnings ratio
of the skilled to the unskilled having increased by 2.1 percent. If
instead perfect world capital mobility is assumed (capital flows into
the U.S. economy in response to immigration, keeping the rate of
return constant), then earnings for skilled natives now actually
increase (although only slightly) while those of unskilled natives fall
by 4.6 percent as before. Therefore, the earnings ratio of the skilled
to the unskilled increases by more (5 percent) when there is perfect
24 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

world capital mobility and hence elastic capital supplies. Because the
bulk of the labor force is skilled, and capital and skilled labor are
assumed to be complementary, the average wage falls only margin-
ally when there is perfect world capital mobility. The gain to the econ-
omy as a whole (area Z in figure 1) is at most 0.1 percent of the GDP.
How do these estimated modern labor market impacts compare
with the late nineteenth century estimates? Had there been no U.S.
immigration over the forty years between 1870 and 1910, it has
been estimated that the unskilled real wage would have been
higher in 1910 by 34 percent, a figure that falls to 9.2 percent if
perfect world capital mobility is assumed (Taylor and Williamson
1997; Hatton and Williamson 1998, chapter 8; O’Rourke and
Williamson 1999, chapter 8). While these late nineteenth century
impact estimates are double those of the late twentieth century (9.2
versus 4.6), the former covers a much longer period, when immi-
gration rates were much higher, too. Suppose we focus instead on
the 1870–90 decades, a shorter period with lower immigration
rates. In this case, the 1890 real wage would have been higher by
14.4 percent in the absence of immigration and by only 3.7 percent
if capital mobility is assumed (Hatton and Williamson 1998, 212).
While the estimates for the late nineteenth century are derived
differently from those for the late twentieth century, they appear to
fall into the same ballpark (3.7 versus 4.6), at least when perfect
world capital mobility is assumed.
There is a moral here that is worth stressing. Immigrant absorp-
tion is much easier in times when world capital markets
are globally integrated. Under such conditions, world capital is
allowed to chase after world migrations, augmenting the capacity
of the host country to absorb the immigrants. Complaints about
crowding-out and evidence of rising inequality are muted under
such conditions, conditions satisfied before 1913 and after 1970.
They were not satisfied between 1913 and 1970, when world cap-
ital markets were in a shambles.
This analysis of two U.S. immigration periods separated by a
century ignores some important differences in the character of the
immigration and the structure of the economy—differences that
 JEFFREY G. WILLIAMSON 25

should have mattered to the economywide impact. First, the late

twentieth century skill gap between immigrants and natives was
five times larger than in the late nineteenth century; hence, the
immigrants’ influence on reducing the host country skill mix—
diluting its “quality”—should have been much greater in more
recent times. Added to that, the unskilled are now a much smaller
share of the U.S. labor force, and so a given immigrant inflow
should make a proportionately larger contribution to the unskilled
labor supply. Hence, the effects of immigration on the unskilled
wage should be even greater today than they were a century ago.
However, these forces have a potential offset, the absorptive capac-
ity of the U.S. economy. Consider that agricultural employment,
where labor was unskilled, accounted for 50 percent of the U.S.
labor force in 1870 and 27 percent in 1913 but only 3 percent in
1999. How does this fact speak to the labor absorption issue
(Williamson 1982)? Land was a much more important factor of
production a century ago—and land is a quasi-fixed factor. Given
the importance of land, there were much stronger economywide
diminishing returns to a rising unskilled labor force in the nine-
teenth century, effects that were only partly ameliorated by inter-
national capital mobility. For this reason, the same immigrant
inflow had larger effects on unskilled earnings in the nineteenth
century than it does today. Apparently trends in these two offset-
ting forces (a rising skill gap between immigrant and native born
versus an improved capacity to absorb the immigrant) have been
pretty much a wash, since the net effect of the two is similar then
and now.

Policy and the Demise of Mass Migration in

the First Global Century

World War I brought an end to mass migration and closed the door
on the first global century. The combined effects of two world wars,
the Great Depression, and the introduction of a restrictive immi-
gration policy served to choke off emigration to the New World,
26 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

and those mass migrations never regained their pre-1914 levels in

the half century that followed. What was true of absolute levels was
even more true, of course, of migration rates.
The magnitude of the collapse in the global mass migrations is
apparent in figures 4 and 5, both based on the impressive work of
Dudley Kirk (1946) alone and that involving the famous collabora-
tion between Imre Ferenczi and Walter Willcox (1929), scholars who
lived through the global implosion between 1914 and 1950. Three
central facts leap out from those two figures. First, the migrations of
the 1920s were never able to recover the migrations of the 1880s, let
alone those of 1895–1914, and they fell to much lower levels after
the 1920s. By the 1950s, the United States was no longer a melting
pot or a nation of immigrants but rather a closed economy whose
youth was mostly native born, a characteristic that fit awkwardly on
the shoulders of this new twentieth-century world leader. Second,
most of the collapse was due to the sharp decline in emigration from
the new source countries located in southern and eastern Europe: the
Austro-Hungarian Empire, the Russian Empire, Iberia, Italy, and the
Balkans. Emigration from the old sources in northwestern Europe—
the British Isles, Scandinavia, the Lowlands, Germany, France, and
Switzerland—fell hardly at all. Third, the United States underwent
the biggest fall in immigration, far exceeding that of the other top
three overseas destinations: Argentina, Brazil, and Canada.
When the guns of August started thundering in 1914, Euro-
pean immigration to the New World began to dry up: Overseas
immigration to the United States fell from 1.1 million annually in
both 1913 and 1914 to 60,000 and 54,000 in 1918 and 1919
(figure 5). Potential immigrants in the European interior found it
difficult to make their way to the traditional ports of departure,
and ports shut down to commercial activity, making steerage
space scarce and expensive. As the war in the trenches dragged
on, economic hardship made it increasingly difficult for potential
emigrants in source countries to find the resources to finance the
move. Postwar recession and unemployment kept the figures low
in 1919 and 1920. With economic recovery in 1921, the United
States recorded an overseas immigration rate of 702,000, as high
 JEFFREY G. WILLIAMSON 27

FIGURE 4
EMIGRATION FROM EUROPE, 1871–1939
(five-year averages)

1600

1400
All emigrants
1200

1000
Thousands

800
"New" sources
600

400

200
"Old" sources
0
1871–1875 1881–1885 1891–1895 1901–1905 1911–1915 1921–1925 1931–1935

Year

SOURCE: Kirk 1946, p. 289.

FIGURE 5
IMMIGRATION INTO CHIEF NEW WORLD DESTINATIONS, 1881–1939

2000

1800 Four-country total

immigration
1600 United States

1400 Argentina
Canada
Thousands

1200
Brazil
1000

800

600

400

200

0
1881 1886 1891 1896 1901 1906 1911 1916 1921 1926 1931 1936

Year

SOURCE: Ferenczi and Willcox 1929, pp. 361, 384–89, 539–40, 550; Kirk 1946, p. 280.
28 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

TABLE 5
NET U.S. IMMIGRATION BY REGION OF ORIGIN, 1910–1939

1910–19 1920–29 1930–39

“Old” Europe 910,309 (21.2%) 991,128 (32.9%) 77,839 (37.0%)

“New” Europe 2,548,453 (59.5%) 542,058 (18.0%) 113,016 (53.7%)
Mexico 135,678 (3.2%) 455,502 (15.1%) –75,240 (–35.8%)
Canada 417,016 (9.7%) 912,651 (30.3%) 144,325 (68.6%)
Other 274,809 (6.4%) 107,441 (3.6%) –49,503 (–23.5%)
Total 4,286,265 (100.0%) 3,008,780 (100.0%) 210,437 (100.0%)
SOURCE: Gemery 1994, table 9.2, 178.
NOTE: Canada includes Newfoundland.

as anything achieved over the fifteen years between 1885 and

1900, but that brief spurt was it. The average between 1922 and
1929 was 232,000, a figure about one-third the 1881–1914 aver-
age. During the Great Depression decade, the flood dried up to a
trickle, averaging about 50,000 each year. The great mass migra-
tion was over.
How much of this collapse in European emigration was due to
policy and how much to war and the Great Depression? It seems
quite clear that, in the short run, much of the collapse in global
migration can be attributed to world wars and the Great
Depression. The clearest evidence of this fact is that none of the
country quotas was binding from the early 1930s to the mid-
1940s. Although the country quotas were set far below pre-1914
immigration levels, the new regions of emigration were able to fill
only small shares of their quotas between 1932 and 1937: southern
and eastern Europe, less than 40 percent; Asia, less than 30 percent;
and Africa, less than 10 percent (Gemery 1994, figure 9.1).
However, two lessons of history apply here. First, changes in immi-
gration policy usually come in very big, discrete steps, and only
after long, acrimonious, and time-intensive debates (Timmer and
Williamson 1998). The U.S. debate started on the House floor in
1895, continued with the first House roll call in 1897, when
 JEFFREY G. WILLIAMSON 29

86 percent of the representatives voting went for restriction, contin-

ued still further with the creation of the fact-finding Immigration
(Dillingham) Commission in 1906, and concluded with the 1917
congressional override of Woodrow Wilson’s veto. The fact that the
policy steps are big when implemented maximizes their impact at
the destination. Second, when the underlying fundamentals favor
immigration restrictions, usually they are not imposed until an eco-
nomic crisis occurs, when short-run labor market problems are
most apparent and affected citizens are most verbal. These are pre-
cisely the episodes when labor demand slumps, labor markets go
slack, potential emigrants postpone their move, and previous
immigrants return home disappointed. Net immigration falls to low
levels, even in the absence of any policy restriction. Hence, the
impact of immigration restrictions must be assessed over the long
run, when capacity rather than aggregate demand determines out-
put, employment, and productivity and when peacetime normalcy
rather than wartime scarcities dominates.
Four pieces of U.S. immigration legislation were enacted
over the decade 1917–27, and all were restrictive in intent and
impact.4
The 1917 Immigration Act imposed a literacy test that was
precisely the instrument of restriction debated by Congress
from 1895 onward. By the end of World War I, the literacy test
proved completely ineffective in stemming the inflow, mainly
because, while the U.S. Congress was debating, a revolution in
the provision of free and public elementary education was spread-
ing east and south to backward and illiterate Europe (Easterlin
1981; Lindert 2003). Italy illustrates the process best. Between
1881 and 1931, Italian regional literacy rates soared: from less
than 20 percent to more than 60 percent in southern Italy, Sicily,
and Sardinia; from less than 35 percent to almost 80 percent in
central Italy; from about 40 percent to about 85 percent in Venice
and Emilia; and from almost 60 percent to more than 95 percent
in the northern industrial triangle (Kirk 1946, 183–85). The lit-
eracy rate for Italy as a whole was about 80 percent by 1931.
What about the rest of poor Europe, and what about young adults
30 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

whose literacy is much more relevant evidence for any prediction

regarding the effectiveness of the 1917 literacy act? The liter-
acy rate in poor European source countries (including Italy) for
those aged 15–29 ranged from 80 to 83 percent in 1931 (Kirk
1946, table 12, 189). No wonder the literacy criteria failed to offer
an effective bar to immigrants from poor European countries.
However, the 1917 legislation did include an “Asian barred zone”
provision that was very effective in keeping out almost all poten-
tial immigrants from that part of the world.
The second piece of restrictive legislation was the Emergency
Quota Act of 1921 (the Johnson Act) that set limits to immigra-
tion from Eastern Hemisphere countries. This second act was
implemented in a congressional rush, when the 702,000 arrived
from Europe that year (easily jumping over the literacy bar) and
with the election of President Warren Harding, who was much
more comfortable with anti-immigration interests than his prede-
cessor, Woodrow Wilson. The annual number of immigrants of a
given nationality was limited to no more than 3 percent of that
nationality as recorded in the 1910 Census. Under the 1921 act,
quotas for immigrants from northern and western Europe were
set at about 198,000, and from all other source countries, mainly
southern and eastern Europe, at about 158,000, or about 356,000
in all. The legislation was clearly targeted to limit “new” immi-
grants who, the prewar Dillingham Immigration Commission had
argued, were harder to assimilate, were a source of poverty and a
potential welfare burden on the state, became poor citizens, or
failed to become citizens at all. That is, it targeted “low-quality”
immigrants. The targets worked: Annual quotas for southern and
eastern European countries were in all cases less than a quarter
the numbers admitted before the war. The Asian “barred zone”
remained in place, a racial restriction that applied everywhere
in overseas destination countries, including Australia, Brazil, Can-
ada, and Natal. This Asian restriction embedded in the U.S. acts
had its source in the increasingly strong lobbying interests on the
West Coast who managed to get Congress to accept a Chinese
exclusion act as early as 1882. Had British Columbia, California,
 JEFFREY G. WILLIAMSON 31

Nevada, Oregon, and Washington formed an independent nation

in 1870, the New World would have seen an Asian exclusion act
even sooner. Furthermore, U.S. Asian restrictions stayed in place
for almost a century, until the reforms of 1965.
The 1921 act also had a pro–Western Hemisphere bias since
such immigration was not subject to quotas. After all, there
appeared to be no reason to set quotas since South America
seemed too poor and too distant to become a viable pool of emi-
grants, at least not yet. Furthermore, Canada was viewed as a
member of the British family with old European origins. Finally,
farm interests in the Southwest were lobbying for cheap Mexican
unskilled labor to work their fields, the products of which were
now supplying national and international markets. These aspects
had one important, but perhaps unpredictable, implication.
Illegal immigrants poured over the border from Canada and Mex-
ico, trying to sidestep the European quotas and the Asian restric-
tions by passing through contiguous neighbors and over porous
borders. One estimate has it that “hundreds of thousands (per-
haps millions) of illegal immigrants” entered the United States in
the 1920s via Canada and Mexico (Briggs 1984, 48). In any case,
the share of (legal) U.S. immigrants coming from Canada and
Mexico rose from 12.9 percent in 1910–19 to 45.4 percent in
1920–29. Mexican immigration by itself rose by about 320,000
over the decade (table 5), a harbinger of things to come later in
the century.
Finally, the 1921 act also introduced a nonquota category. This
category was based on individual characteristics (rather than
nationality) and would come to represent the “family reunification”
part of U.S. immigration.
The 1921 act was not restrictive enough for some anti-
immigration interests, and their power in Congress was on the rise.
Therefore, the 1924 (Johnson-Reid) act lowered the quota from
356,000 to 165,000, mostly by reducing the new source country
quota from 158,000 to 21,000 (Bernard 1982, table 3.1, 96). The
more restrictive quotas were now set at 2 percent of the foreign
born by nationality in the 1890 Census. The 1927 act completed a
32 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

decade of U.S. experimentation with immigration restriction, end-

ing with what has been called a national origins act, which set the
overall quota at about 150,000, now based on national origins of
the U.S. 1920 population.
Recall that there were quota and nonquota categories, and the
1924 act made it far easier for relatives to enter as nonquota immi-
grants. Since wives and children were now exempted from the
numerical quota, the number admitted each year from a given
country in the late 1920s was much higher than that set by the
quota. Thus, actual gross immigration into the United States from
southern and eastern Europe was more than three times the quota
in 1929 (Gemery 1994, table 9.4, 182).
Family reunification had become an important part of U.S.
immigration policy by the late 1920s, and it was reinforced in the
1965 reforms. It has stayed that way ever since. Indeed, who did
the U.S. quotas keep out and what did it do to positive selection?
As table 5 shows, net immigration to the United States fell dra-
matically from 4.3 million in 1910–19 to 210,000 in 1930–39.
But the composition by source also changed dramatically, reflect-
ing the intent of the legislation. The share coming from “new”
sources in Europe fell from almost 60 percent in the 1910s to
18 percent in the 1920s, and the share from “other” (mainly Asia)
fell from 6.4 to 3.6 percent over the same period. In short, tradi-
tional “low-quality” sources (“new” Europe and Asia) dropped
from 65.9 to 21.6 percent of the total immigration. In contrast,
the “old” European and Canadian share combined rose from 30.9
to 63.2 percent.
These national-origins policies clearly increased positive selec-
tion to the extent that a larger share of U.S. immigrants was coming
from developed regions. Indeed, the share of immigrants entering
with skilled, professional, or commercial occupations rose from
17.9 percent in 1911–16 to 24.1 percent in 1926–30 and 30.6 per-
cent in 1936–40 (Gemery 1994, 178). Among those in the labor
force and hence reporting occupations, the rise is even more dra-
matic, from 24.6 to 40.4 and to 69.1 percent. To repeat, the intent
of the quotas was achieved: Immigrants from “low-quality” sending
 JEFFREY G. WILLIAMSON 33

regions fell dramatically. But we now know that the “quality” gap
between the “old” and the “new” European immigrants was actually
pretty small: In 1909, the wage gap between old and new immi-
grants in U.S. labor markets was only 6.7 percent (Hatton 2000)!
Contemporary observers acted like that quality gap was much big-
ger, perhaps because they had not given the “new” immigrants the
same opportunity to assimilate that had already been given to the
“old” immigrants. In any case, it is hard to believe that the quotas
really served to increase U.S. labor market skills by much, even
though it certainly did have a big impact on immigrant by source.
Note, however, the impact of family reunification. The share of
female immigrants rose from 35.1 to 54.8 percent over the two
decades, almost a 20 percentage point rise; and the share of indi-
viduals not in the labor force (mainly women and children) rose
from 27.2 to 55.7 percent, a 28.5 percentage point rise. In short, it
looks like a century of positive selection—carrying high labor par-
ticipation rates and low dependency rates overseas—was com-
pletely overturned by policies introduced during the quota decade.
Oddly enough, economic historians of the first global century and
modern analysts of the second global century have not paid much
attention to this fact, perhaps because politicians have always found
“cheap labor from poor countries” good rhetoric when seeking
votes from the working man.

Population and Labor Force Impact of the Quotas

Did the collapse in world migration have an impact on receiving

countries? The United States was the biggest immigrant labor mar-
ket and it also underwent the biggest decline in immigration after
1914, so our focus is there. Whether due to a switch to a restrictive
immigration policy, war, the Great Depression, or all three in con-
cert, did the rate of labor force and population growth slow down
in the three decades after World War I? If so, how much of the
decline can be attributed to declining immigration? Only if we can
show that the immigration policy switch contributed to a labor
34 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

force slowdown can we then ask whether it had an impact on eco-

nomic events within the U.S. economy.
Three studies explored the impact of immigration on the U.S.
population and labor supply in the interwar years, but all three
seem to have asked the wrong question. Simon Kuznets and Ernest
Rubin (1954) adopted a foreign-born measure and counted net
migrants of labor force age and immigrant children born abroad as
they reached employment age. Richard Easterlin’s (1968) measure
was narrower, and excluded the impact of immigrant children.
More recently, Henry Gemery (1994) extended the analysis, also
using the Easterlin measure, the narrow definition that we use in
what follows. However, all three studies measured only the share of
the observed labor force or population increases accounted for by
observed immigration. While such accounting decompositions are
useful, they do not assess the impact of the demise of mass migra-
tion on labor force or population growth. What we want instead is
to compare what we observe with a counterfactual world in which
the mass migrations continued. Only then can we identify the role
of the demise of mass migration.
First, what was the extent of the labor force slowdown? Table 6
documents a dramatic fall in the rate of labor force growth in the
United States, from 2.29 percent per annum over the three pre-
war decades, 1880–1910, to 1.14 percent per annum over the
three war and interwar decades, 1910–40. This slowdown in the
rate of labor supply growth amounted to 1.15 percentage points,
a massive regime switch in which the growth rate was cut in half.
Would we find similar large numbers for other immigrant coun-
tries? The answer depends on two factors. First, which economies
were most dependent on immigration prior to World War I?
We already know the answer to that question: Immigration after
1870 raised the 1910 labor force of Argentina by 86 percent,
Canada by 44 percent, Australia by 42 percent, and the United
States by 24 percent (Taylor and Williamson 1997). Second,
which economies underwent the biggest fall in mass migration?
With an answer in hand, we would then predict that the biggest
labor force slowdown occurred in those economies where net
 JEFFREY G. WILLIAMSON 35

TABLE 6
U.S. LABOR FORCE GROWTH, 1910–1940: SOME COUNTERFACTUALS

Labor Force Growth Percentage Due to

Rate (% per annum) Net Immigration
Actual: 1880–1910 2.29 40.1
Actual: 1910–40 1.14 11.6

Counterfactuals for 1910–40 with Immigrant

Participation Rate of 1910–40
Net immigration rate of 1910–40 1.14 11.6
Absolute net immigration of 1.38 30.9
1880–1910
Net immigration rate of 1.66 44.1
1880–1910

Counterfactuals for 1910–40 with Immigrant

Participation Rate of 1880–1910
Net immigration rate of 1910–40 1.17 14.5
Absolute net immigration of 1.48 35.6
1880–1910
Net immigration rate of 1.82 50.4
1880–1910
SOURCE: Hatton and Williamson 2004, table 9.3.

migration had the biggest impact on the prewar labor force totals
and across-border net migration underwent the biggest decline
after 1914. Australia would be one such candidate; indeed, the
rate of labor force growth there fell by 1.41 percentage points
between 1870–1913 and 1913–38 (Maddison 1991, 266). The
other immigrant countries are harder to document, but we expect
similar answers.
Next, does the demise of mass migration explain the slowdown?
Table 6 poses the following counterfactual: What would have been
the rate of labor force growth between 1910 and 1940 had the
1880–1910 immigration experience persisted? Our expectations
36 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

are, of course, that the demise in the mass migrations accounted for
a very large share of the slowdown in labor force growth. The coun-
terfactuals are calculated to take account of two forces. First, immi-
gration into the United States fell after 1910. So, what would have
been the impact on 1910–40 if, first, the immigration rate had
maintained the 1880–1910 average thereafter and if, second, the
absolute level of immigration had maintained the 1880–1910 aver-
age thereafter? The first sets an upper bound, while the second sets
a lower bound on the counterfactual impact. These counterfactuals
are reported in the second panel of table 6. Second, the age and sex
distribution of the immigrants changed (partly induced by immi-
gration policy), lowering the labor participation rate (and raising
the dependency rate) of the interwar immigrants. So, what would
have been the impact on 1910–40 labor force growth if, in addi-
tion, the immigrant labor participation rate had maintained its
1880–1910 average thereafter? These counterfactuals are reported
in the third panel of table 6.
The bottom line is this: The observed decline in the rate of labor
force growth 1880–1910 to 1910–40 was 1.15 percentage points,
but the no-mass-migration-demise counterfactual decline would
have been only between 0.47 (2.29–1.82, third panel) and 0.63
(2.29–1.66, second panel) percentage points. Hence, the demise in
mass migration accounted for 45–59 percent of the massive slow-
down in U.S. labor force growth around World War I.5 If the
demise in immigration accounted for about half the slowdown in
labor supply growth during the interwar years when the world
went antiglobal, it must have had an even bigger impact on an
unskilled labor supply growth slowdown.

Did the Absence of Immigrants Contribute to the Great

Income Leveling in America?

Reverend Thomas Malthus thought that immigration fostered

inequality. When appearing before a Parliamentary committee in
the 1820s, he argued that Irish immigration into industrial England
 JEFFREY G. WILLIAMSON 37

reduced real wages of the working class and thus raised British
poverty rates (Williamson 1986, 694). When the sixth edition of
Paul Samuelson’s famous Economics textbook was published a cen-
tury and a half later, he joined Malthus with the statement: “After
World War I, laws were passed severely limiting immigration. Only
a trickle of immigrants has been admitted since then. . . . By keep-
ing labor supply down, immigration policy tends to keep wages
high” (Samuelson 1964, cited in Borjas 2003, 2).
This debate has a very old political tradition in the United
States that goes back into the late nineteenth century and the
appearance of the Dillingham Immigration Commission reports.
But the tradition had its origins a half-century earlier, when the
first great immigration waves pounded U.S. labor markets:

The pressures immigration placed on labor markets,

particularly in the urban Northeast, produced a
remarkable backlash in the 1850s. . . . The popular
press took up the anti-immigrant cry with [an editori-
al stating that] “the enormous influx of foreigners will
in the end prove ruinous to American workingmen.”
(Ferrie 1999, 161–63)

The economics underlying these editorial statements in the

1850s, as well as the comments by Malthus in Britain three decades
earlier, has already been laid out in figure 1. To repeat, a glut in the
labor supply lowers the wage relative to the returns to capital and
rents on land. Since capital and land are held by those at the top of
the distribution pyramid, immigration-induced labor supply
growth should create more inequality and the demise of immigra-
tion should create less, ceteris paribus. If, in addition, immigrants
tend to be more unskilled than the native born, then immigration
should also raise the premium on skills over the common laborer’s
wage as skills get relatively scarce, and the demise of immigration
should reduce the premium on skills as they get relatively abun-
dant, ceteris paribus. And, by the 1850s, U.S. immigrants had
become increasingly unskilled as declining trans-Atlantic transport
38 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

costs brought overseas emigration within reach of poorer

Europeans (for example, the immensely positive selection bias pre-
vailing for 200 years before 1820 had disappeared by 1850; Hatton
and Williamson 2004, chapter 3).
Not everyone agrees with this immigration-breeds-inequality
position, perhaps because the ceteris-paribus qualifications do not
obtain: Many other dynamic forces drove the booming American
economy between the 1860s and the 1920s, offering potential off-
sets to any measured immigrant glut or scarcity. Potential offsets
invite debate. For example, Vernon Briggs (1984, 50) thought that
the premise of the traditional argument was false, since he believed
that immigration was still substantial in the 1920s and productiv-
ity advance was very different in rate and bias. Others have argued
that immigration generates accumulation responses, forces that
would mute the immigration impact. This paper will not resolve
the debate, but it will pose the arguments and stress an impressive
correlation in the historical time series.
During the mass migrations in the half century before 1913, rich
labor-scarce countries with big immigration rates underwent rising
inequality, and poor labor-abundant countries with big emigration
rates underwent falling inequality (figure 6). During the antiglobal
and immigrant-restricted interwar years 1921–38, the correlation
disappeared. Indeed, some previously emigrating countries, like
Italy, now underwent rising inequality, while some previously
immigrating countries, like Australia, Canada, and the United
States, underwent falling inequality (figure 7). This is only a corre-
lation, of course: Immigration policy may have been correlated with
some omitted variables and the omitted variables may have been
doing all the work. Still, at least the correlation does not reject the
immigration-breeds-inequality hypothesis.
Now consider figure 8, where we plot the correlation for the
United States only, but over 150 years. Figure 8 is taken from a
book published some time ago (Williamson and Lindert 1980),
and the underlying data have been revised since. Still, the corre-
lation has not been overturned by those revisions; namely, rapid
rates of labor force growth in the United States took place during
 JEFFREY G. WILLIAMSON 39

FIGURE 6
INITIAL LABOR SCARCITY AND DISTRIBUTION TRENDS IN THE GREATER
ATLANTIC ECONOMY, 1870–1913

1.0
swe den
Annual Change (%) in Equality Index

0.5 nor

ita
0
bel
por
–0.5
net ger
uk can
fra
spa
–1.0
aust

usa
–1.5
10 30 50 70 90 110 130

1870 Real Wage

SOURCE: Williamson 1997, figure 6.

FIGURE 7
INITIAL LABOR SCARCITY AND DISTRIBUTION TRENDS IN THE GREATER
ATLANTIC ECONOMY, 1921–1938

bel
Annual Change (%) in Equality Index

1.0

can
aust usa
0.5
net
swe
0
den
gb nor
–0.5

–3.0 fra
ita

–4.0
20 60 80 100 120 140 160

1921 Real Wage

SOURCE: Williamson 1997, figure 7.

40 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

FIGURE 8
LABOR SUPPLY AND THE SKILL PREMIUM IN THE UNITED STATES,
1820–1973
Growth of Skill Premium (% per annum)

1820–1840
4

2
1840–1860
1
1899–1909
1860–1880 1879–1899
0 1948–1966
1909–1929
1966–1973
–1

–2
1929–1948

–3
0 0.5 1 1.5 2 2.5 3 3.5 4

Growth of Labor Force (% per annum)

SOURCE: Williamson and Lindert 1980, p. 205.

episodes when earnings inequality was on the rise and the skill
premium was increasing, while slow rates of labor force growth
took place during episodes when earnings inequality was decreas-
ing and the skill premium was falling. Note the observations
1909–29, 1948–66, and 1966–73 in the lower left-hand quad-
rant, where the skill premium was stable and the growth rates of
the labor force were slow by previous historical standards. Note
the observation 1929–48 where labor force growth was especially
slow and the collapse in the skill premium spectacular during the
“great egalitarian leveling” in America. And note those five pre–
World War I observations in the upper right-hand quadrant,
where the skill premium was rising and the growth rates in the
labor force were fast. Correlation is not causation, but figure 8 is
certainly consistent with the immigration-breeds-inequality
hypothesis.
The twentieth century evidence on the evolution of U.S. inequal-
ity has improved over the past decade or so, thanks to the authors
cited in figure 9, and it confirms a great egalitarian leveling in
 JEFFREY G. WILLIAMSON 41

FIGURE 9
AMERICAN INEQUALITY TRENDS, 1890–1965

160

140

120
1938–40 = 100

100

80

60
Wage structure in mfg 90/10
Pay ratio in mfg
40
Income ratios profs/unskilled
Top 10% share income earners
20 Log wage 90th-10th

0
1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965

SOURCES AND NOTES: Wage structure in mfg 90/10 = wage ratios, male production work-
ers, top 10 percent relative to bottom 10 percent (Goldin and Katz forthcoming, table 2.1);
income ratios, profs/unskilled = ratio of earnings of college full professors to low-skilled
workers (Goldin and Katz forthcoming, table 2.3); log wage 90th–10th = wage dispersion
of white men, log weekly wages 90th–10th percentiles (Goldin and Margo 1992, table 1);
pay ratio in mfg = pay ratios, skilled to unskilled workers in urban manufacturing (Goldin
and Margo 1992, table VII); top 10 percent share income earners = income share of the
top 10 percent of earners (Piketty and Saez 2003, table II).

American incomes between the first and second thirds of the cen-
tury. The ratio of wages among the top to the bottom 10 percent in
manufacturing fell by almost a third between 1890 and 1940, a
period of labor force slowdown as we have seen, half of which we
attribute to the demise of mass migration. Pay ratios of skilled to
unskilled workers fell by two-thirds between 1907 and 1952. The
ratio of college professors’ incomes to that of unskilled workers was
cut in half between 1908 and 1960. Weekly wage dispersion meas-
ures among white men fell by more than a quarter between 1940
and 1965, as did the share of the top 10 percent of income earners.
Among the authors contributing to the evidence in figure 9,
Claudia Goldin and Lawrence Katz have made the greatest effort to
explain the great leveling (Goldin and Margo 1992; Goldin and
42 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

Katz 1998, 1999a, 1999b, forthcoming), and the relative demand

and supply of skills is central to their story:

[The] long-run change in the distribution of earnings is

shaped by a race between the demand for skill, driven
largely by industrial shifts and technological advances,
and the supply of skill, altered by changes in educational
investments, demographics and immigration. (Goldin
and Katz forthcoming, 68)

While Goldin and Katz are cautious, they appear to favor an exoge-
nous and revolutionary change in the supply of secondary and ter-
tiary schooling6 that must have overwhelmed the skill-using bias
that has characterized modern technological progress since the sec-
ond industrial revolution began a century ago. Such schooling
forces would, of course, help erase the skill premium, compress the
wage structure, and level incomes. But what about exogenous and
revolutionary changes in unskilled labor supplies associated in part
with the demise of mass migration? These exogenous policy-
induced immigration forces would reinforce the exogenous policy-
induced schooling forces: As the growth of the unskilled labor
force slowed down and that of skilled labor speeded up, unskilled
labor would have gotten scarcer relative to skilled labor. So, is the
recent schooling-oriented literature on twentieth century American
inequality only half right?
A good illustration of how policy-induced immigration forces
created greater unskilled labor scarcity and lower inequality in the
United States is not hard to find, and it involves disadvantaged
black Americans. Did European immigrants crowd out southern
blacks from northern jobs that offered much better earnings and
living standards than sharecropping in the South? This is a very
old question that was, until recently, illustrated only by com-
pelling correlations. More than thirty years ago, Brinley Thomas
(1972, chapter 18, 130–34) noted the striking inverse rhythm
between southern black emigration and European immigration to
northern cities. The problem left unanswered by the correlations,
 JEFFREY G. WILLIAMSON 43

however, was causation, but William Collins (1997) unraveled

the issues and supplied the answers. While only about a half mil-
lion southern blacks left for the urban North in the four decades
before 1910, seven times that—about 3.5 million—left in the four
decades after 1910. By 1950, one-fifth of all the blacks born in the
South now lived in the North.7 Not only did those who moved
improve their economic lives, but those that stayed gained too,
since the wage gap between North and South declined sharply as
the Great Black Migration better integrated what had been south-
ern labor markets segmented from the rest (Wright 1986). Collins
concludes that the mass migrations from Europe did indeed
crowd out southern blacks from better jobs in the urban North,
and symmetrically, the demise of the mass migrations crowded
them in. A very large share of the Great Black Migration can be
explained by the disappearance of new European immigrants in
northern U.S. cities after 1914.
Since the Great Black Migration greatly improved the relative
income position of blacks between 1910 and 1950, it helps account
for the great leveling of incomes in the middle third of the twenti-
eth century and offers one important channel through which
exogenous changes in European mass migration contributed to the
leveling. Historical symmetry also suggests that poorly educated
American blacks must have found that increasing immigrant com-
petition after 1970 held back their economic progress.

Explaining Immigration Policy before the 1930s:

Political Debate and Backlash

New World doors to immigrants gradually closed after the 1880s.

The doors did not suddenly slam shut on American immigrants
when the United States Congress overrode President Wilson’s veto
of the immigrant literacy act in February 1917 or when it passed
the Emergency Quota Act of May 1921, since there was plenty of
precedent and warning. Over the half-century prior to the literacy
act, the United States had been imposing restrictions on what had
44 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

been free immigration (for example, contract labor laws, Chinese

exclusion acts, excludable classes, head taxes, and so on). And the
United States was hardly alone. Argentina, Australia, Brazil, and
Canada enacted similar measures, although the timing was some-
times different and the policies often took the form of an enormous
drop in, or even disappearance of, large immigrant subsidies rather
than of outright exclusion. Contrary to the conventional wisdom,
therefore, there was not simply one big regime switch around
World War I from free (and often subsidized) immigration to quo-
tas but rather an evolution toward a more restrictive immigration
policy in the high-wage New World. Attitudes changed slowly and
over a number of decades; they did not change all at once.
What explains this evolution in immigration policy? Increasing
racism, xenophobia, and widening ethnicity gaps between previous
and current immigrants have always been popular candidates.
But political economy candidates turn out to be more promising:
more immigrants, lower-quality immigrants, the threat of even
lower-quality immigrants, crowded-out native unskilled workers,
rising inequality, greater awareness of that inequality by the power-
ful (informed by activist reformers), and greater voting power in
the hands of those hurt most, the working poor.
The two central questions for any political economy model of
immigration policy are these: First, who gains and who loses?
Second, who decides the policy? Let us focus briefly on the second
question and who had the vote. A lively literature has emerged
recently that explores the rise of suffrage in Europe (Acemoglu and
Robinson 2000) and the Americas (Engerman, Haber, and Sokoloff
2000; Sokoloff and Engerman 2000), and it should be helpful in
identifying when and where anti-immigration policy emerges in the
New World. In 1850, 12.9 percent of the U.S. population voted. If
this figure seems small, consider that it almost doubles in size when
restricted to males (25.3 percent), doubles again when restricted to
male adults (52.3 percent), and increases still further when restricted
to white adult men (60.9 percent). In any case, there was no wealth
or literacy requirement in the United States in 1850 and no other
country had a higher political participation (as a share in total
 JEFFREY G. WILLIAMSON 45

population): The figures were 1.8 percent for Argentina in 1896,

Brazil 2.2 percent in 1894, Canada 7.7 percent in 1867, Chile 1.6
percent in 1869, Ecuador 2.8 percent in 1888, and Britain 3.5 per-
cent in 1832 (Sokoloff and Engerman 2000, 225–26; Engerman
and Sokoloff 2003, 43). Only after Britain’s 1867 act did the vote
reach down far enough so that the British “working-class voters
became the majority in all urban constituencies,” and only after
1870 did “all adult males over the age of 25” have the vote in
Germany (Acemoglu and Robinson 2000, 1184).
In short, by 1860 and the end of two decades of very high
American immigration rates, the (free, white) workingman had the
vote in the United States. Therefore, he had an important voice in
the choice of immigration policy. While the rest of the English-
speaking overseas immigrant regions were not far behind in giving
voting power to their workers, most of Latin America was. But
since the United States was the world leader in setting immigration
policy and since—as we shall see—the other high-wage immigrant
countries followed the leader, it could be said that the American
workingman set the policy for all overseas immigrant areas.
The empirical literature on the determinants of immigration pol-
icy for the years between 1860 and 1930 is very new, but the main
outlines are beginning to emerge (Timmer and Williamson 1998;
O’Rourke and Williamson 1999, chapter 10). The most consistent
effect is that immigration policy was slow to change. This was espe-
cially true of Brazil and the United States: In the latter case, the
result is driven by the 1895–1916 period, which included two
decades of public scrutiny and congressional debate, ending in
the 1917 Immigration Act and the quotas that followed; and in the
former case, the result is driven by the 1890–1920 period, when
heavily subsidized immigration, financed by fat export earnings
generated by high coffee prices, was replaced by restriction and
no subsidies when plunging coffee prices generated lean export
earnings. It is worth noting that, where historical persistence was
strongest, the switch in policy, from open to closed, was biggest. Big
immigration policy changes typically required long periods of
debate, and the longer the debate, the bigger the change.
46 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

Measures of macroeconomic conditions, like unemployment

rates, predictably, are of little help in accounting for long-run pol-
icy changes. However, the timing of the introduction of such
policies was powerfully influenced by short-run macroeconomic
conditions, often serving as the triggering mechanism.
Labor market conditions had a consistent influence on immigra-
tion policy, and they did so both through the absolute and relative
income performance of unskilled workers. Real wage growth mat-
tered most in the United States, nominal wage growth mattered
most in Australia, while real wage levels mattered most in Brazil. In
all cases, poor wage performance was associated with more restric-
tive policy. However, the most consistently significant explanatory
variable is the ratio of the wage of unskilled workers to per-capita
income or of income near the bottom of the distribution to income
in the middle. Rising inequality was associated with increasingly
restrictive immigration policy. As we have seen, new immigrants
tended to cluster at the bottom of the income distribution, a fact
increasingly true as positive selection diminished over the century.
Regardless of what else is included in the regression equation, this
measure of labor’s relative economic position stands up as an
important influence on policy. Rising relative labor scarcity encour-
aged more open immigration policies; declining relative labor
scarcity encouraged more restrictive immigration policies.
The evidence just summarized speaks to the indirect impact of
immigration on policy by looking at absolute and relative wage per-
formance in labor markets. What about the direct impact of immi-
gration on policy? Perhaps the size and character of the current and
expected future immigrant flow precipitated policy change, the lat-
ter serving to anticipate the labor market impact. Two variables
might measure these direct immigration effects. First, one might
use a proxy for the quality of the immigrants, here the real wage of
unskilled urban workers in the source countries. Second, one
might measure immigrant quantity by the foreign-born population
share. Low and falling immigrant quality tended to precipitate immi-
gration restrictions in Australia, Canada, and the United States,
even after controlling for other forces: Policy in these countries
 JEFFREY G. WILLIAMSON 47

anticipated the impact of rising numbers of low-quality immigrants

on wages for the unskilled and moved to exclude them. In addition,
Argentina seems to have looked to the north across the Rio de la
Plata to watch labor market events in Brazil, acting as if they knew
that those events would divert immigrants to or from Argentina’s
borders. Thus, rising relative and absolute wages in Brazil tended to
produce a more open policy in Argentina.
The difference in ethnic composition between the current immi-
gration flow and the foreign population stock seems to have had lit-
tle bearing on policy. This is not the relationship that the popular
literature favors: According to that view, a rising gap between the
ethnic origins of previous immigrants, who had become residents
and probably voting citizens, and that of current immigrants would
erode commitments to free immigration. We should be quick to
add that we are speaking almost entirely about immigrants of
European ethnic origin. The United States and other high-wage
countries had already excluded most Asians, and free Africans
rarely applied for admission into the historically slave-based New
World.
To what extent was a change in a country’s policy in part a reac-
tion to policy changes abroad? As expected, the United States was
never responsive to competitors’ policies, presumably because it
was too big and an immigration policy leader. For most of the other
countries, policy abroad mattered a great deal. For Argentina, the
combined impact of Australian, Canadian, and Brazilian policy
mattered; more restrictive policy abroad induced more restrictive
policy at home. Brazil tended to mimic the policies followed by the
United States. Australia tended to favor open immigration policies
when the United Kingdom offered more generous subsidies to its
emigrants and, to some extent, when Canada adopted more open
policies.
To summarize, while the size of the immigrant flow did not seem
to have any consistent impact on New World policy up to 1930, its
low and declining quality certainly did, provoking restriction. Racism
and xenophobia do not seem to have been at work in driving
the evolution of policy (which is not, of course, to deny that they
48 THE POLITICAL ECONOMY OF WORLD MASS MIGRATION

existed). Rather, immigrant quality, labor market conditions, and

policies abroad—especially those set by the economic leaders,
Britain and the United States—mattered most for policy. New
World countries acted in a way that revealed an effort to defend the
economic interests of their scarce factor, unskilled labor.

Summing Up

Over the long haul, the high-wage immigrant countries tried to

protect the economic position of their scarce factor, unskilled
workers. Labor became relatively more abundant when immigrants
poured in, and governments sought to stop any absolute decline
in the wages of the native unskilled workers with whom the
immigrants competed, often even in their wages relative to the
income of those in the middle of the distribution. The greater the
perceived threat to these wages from more immigrants, from
lower-quality immigrants, or from both, the more restrictive the
policy became. And perception is what mattered.
Immigration policy seems to have been influenced indirectly
by conditions in the labor market, and directly by immigration
forces that, if left to run their course, would have had their impact
on labor market conditions. Yet, the switch to more restrictive
policies was less a result of rising immigrant flows and foreign-
born stocks and more the result of falling immigrant quality.
Furthermore, very often immigration policy at home was driven
by immigration policy abroad, a correlation that suggests that
countries tended to anticipate the likely impact of policies abroad
on labor markets at home. Finally, the United States was a clear
policy leader, showing no evidence of responding to policies
adopted elsewhere; but the remaining immigrant-receiving coun-
tries were very sensitive to the leader’s policies and the policies of
their competitors.
History offers strong support for the proposition that relatively
poor labor market conditions and rising inequality played an
important role in precipitating the immigration backlash. New
 JEFFREY G. WILLIAMSON 49

World governments acted to reduce inequality and defend the eco-

nomic position of unskilled labor and therefore moved to insulate
them by restricting immigration. Still, immigration restrictions
came late in the first global century, perhaps because unskilled
workers did not have a full political voice until late in the century.
Economic forces matter for policy, but so do the political institu-
tions with which those forces interact.
 Notes

1. The remainder of this paragraph and the next draws on Hatton

(2000, 520–25).
2. The recent empirical literature on the determinants of individual
attitudes toward immigration cited previously shows that, while nega-
tive attitudes toward immigration reflect nationalist sentiment, self-
interested economic motivation does indeed matter (Mayda 2003;
O’Rourke and Sinnott 2004).
3. A large part of the change in the skill composition was also accom-
modated by economy-wide skill-biased technical change, thus confirm-
ing that technology and factor supplies are always jointly at work.
4. This section on U.S. quotas relies heavily on Gemery (1994,
179–83), who offers the best survey of what is a large literature.
5. The demise in mass migration was not the only force at work, of
course, since the crude birth rate in the United States also fell, from
about thirty-seven per thousand in the 1880s to about eighteen per
thousand in the 1930s.
6. Goldin and Katz treat the schooling supply response as exogenous,
but surely the relative scarcity of skilled labor and the high returns to
schooling urged governments to invest in education, the Midwest lead-
ing the way. And where else would the returns be higher than in the
agricultural Midwest, where rural/urban wage gaps were so big (Hatton
and Williamson 1991, 1992)?
7. Only a little more than 4 percent of the southern-born blacks lived
outside the South at the turn of the century (Collins 1997, 607), or only
a fifth of the 1950 figure.

51
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 About the Author

Jeffrey G. Williamson is the Laird Bell Professor of Economics

at Harvard University, where he is a faculty fellow at the Center for
International Development and a faculty associate at the Weather-
head Center for International Affairs. He is also a research associate
at the National Bureau of Economic Research. Professor Williamson
received his PhD from Stanford University and taught at the Uni-
versity of Wisconsin for twenty years before joining the Harvard
faculty in 1983.
The author of more than twenty books and almost two hundred
scholarly articles in economic history, international economics,
and economic development, Professor Williamson has served as
president of the Economic History Association, chairman of the
Economics Department at Harvard, and master of Mather House at
Harvard. His most recent books include Growth, Inequality, and
Globalization (Mattioli Lectures: Cambridge, 1998, with P. Aghion),
Globalization and History (MIT, 1999, with K. O’Rourke), and
Globalization in Historical Perspective (Chicago and NBER, 2002,
with M. Bordo and A. M. Taylor). This AEI Wendt Lecture draws
extensively on a forthcoming book written with Timothy Hatton,
entitled World Mass Migration: Two Centuries of Policy and Perfor-
mance. Professor Williamson is currently working on a forthcoming
book entitled Globalization and the Poor Periphery in the Pre-Modern
Era.

59
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