Question

Read the article "Coase and immigration" by Alex Nowrasteh (pdf available on google) and answer the following questions-

1. Outline a few of the main economic costs and benefits associated with immigration. Please be sure to use sound economic reasoning and do not make unsubstantiated claims.  

2. Are some of the costs and benefits you outlined above external? If so, please make the distinction between pecuniary and real external costs/benefits. Do you believe using the Coase theorem would help solve some of these externalities? Give one or two short examples.

The article is long and cant be pasted in this box, kindly find the PDF online on Google, it is written By Alex Nowrasteh and is roughly 12 pages long.

Answer 1

Answer 1 :-

Economic costs :-

1) As the immigrants are ready to work at lower wages , they absorb the jobs of native American thereby lowering the wage rate.

2) Immigrants make great use of public services such as public health services and education , however their contribution to the public revenue is less . Thus the cost of the services consumed by the immigrants exceeds benefits received from them .

3) Low skills and low education cuts them off from the mainstream culture and thus there are chances of social conflicts.

4) Crime rates also increase as most immigrants are working on low wages thus they are unable to sustain their families with the living they are earning .

Economic benefits :-

1) It reduces the burden of employers as they are able to get sufficient labour at cheap cost .

2) Reduction in labour cost helps to reduce the prices of the goods .

3) Housing and food requirements of the immigrants helps in boosting of the economy due to more production and economies of scale .

4) Immigration leads to cultural diversification.

Answer 2 :-

Yes , working at lower wages have a direct external cost on the native Americans as its them who lose their job irrespective of being neutral .

Similarly reduction in prices of goods gives an external benefit to the society in terms of better economy and less inflation.

According to Coarse theorem allowing Americans and immigrants to gain from immigration while decreasing the costs imposed upon American taxpayers via the welfare state will help to reduce the negative externality caused by immigration.