Thursday, May 24, 2007

Where are those huddled masses?

George Borjas asks why anyone still lives in Puerto Rico

Ever since I was first exposed to the music from West Side Story as a teenager, some of Stephen Sondheim's lyrics stuck with me. They appear in the song America. In the movie version, Bernardo and Rita are arguing over the costs and benefits of migrating from Puerto Rico to New York.

BERNARDO: I think I'll go back to San Juan
ANITA: I know a boat you can get on
BERNARDO: Everyone there will give big cheer
ANITA: Everyone there will have moved here


There are no legal restrictions whatsoever that hamper the mobility of Puerto Ricans to the mainland--they are American citizens by birth--and transportation costs are low. Yet here we are, 60 years on (to use an Elton John song title) from the onset of Puerto Rican migration after World War II, and there are still quite a few people left in Puerto Rico. Why hasn't Puerto Rico emptied out?

Between 30 to 40 percent of the Puerto Rican population chose to move out. But that means that about two-thirds did not. Why?

If people are not leaving Puerto Rico even though wages are so much lower there, is capital flowing in the other direction, anxious to exploit these poor, dumb people? Appears not.

There are also no restrictions that hamper the flow of capital between the two places. Yet despite all these unrestricted labor and capital flows, there is still a sizable income differential between the United States and Puerto Rico. By 2003, price-adjusted per-capita GDP in Puerto Rico was still only two-thirds that of the United States (according to the Penn World Table). Whatever happened to the factor price equalization theorem? If 60 years is not the "long run," maybe Keynes was right after all.

Its not just Puerto Rico and the United States.

In London, I was struck by the number of East Europeans around- rather like Hispanics in New York City. New Economist writes that that was an illusion.

Meanwhile, the Daily Star announced: "An army of 600,000 Romanian and Bulgarian immigrants will start entering Britain on Monday - and they won't even have to show a passport."

None of this actually happened. Officially, only 8,000 Romanian and Bulgarian migrants came to work in Britain in the first three months of this year and it is clear now that there will be no "tidal wave".

Of course, they are writing about the migrants who were expected to arrive after Romania and Bulgaria acceeded to the EU this year- not the ones who 800,000 young Bulgarians who left in the 18 years since the Berlin wall fell. I guess those are the ones I met.

I totally understand this fellow

Besides all that, the UK is not the most preferred destination for Bulgarian workers with low qualifications - Greece, Spain and Italy are. The United States also provides opportunities for immigration. I remember a friend who told me that he would always prefer the United States. One of the main reasons was that when you say "I am from Bulgaria" in the United States, the next question usually is: "Where is that?" When you say "Europe", most Americans think "Ah, Europe - Paris", great. And no further questions asked.

Quite right.

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