The Effects of Immigration on the United States Economy
Immigration has long been a hotly debated political issue in the United States, especially when it comes to illegal immigration. Because it is a nation of immigrants, immigration has always been very important in shaping the United States. Today, widespread immigration to the United States both legal and illegal continues to have a variety of effects. Most economic historians believe the effects of immigration have been much less harmful than commonly supposed and, in many ways, have been beneficial.
Positive Economic Effects
Immigration provides several economic benefits to the United States. The argument for the free movement of labor among nations is exactly the same as the argument for the free movement of labor among the sectors of the domestic economy. Suppose an economy produces only two goods, X and Y. If demand for good X picks up, the demand for labor used to produce X rises as the marginal revenue product of labor employed in the production of X increases. Labor will move out of the production of good Y if and only if its productivity is higher in X in terms of the value of output. This movement ensures efficiency. Recall the simple definition that an efficient economy produces what people want at least cost. Those who favor a looser policy believe immigrants do not displace U.S. workers but rather take jobs that Americans do not want. Immigrants serve as domestics and low-wage farm workers producing things that the United States needs. In addition, the U.S. economy has absorbed wave after wave of immigrants while maintaining virtually full employment. At the opposite spectrum of the economy, the Cato Institute reports that one-quarter of all engineering and technology companies founded between 1995 and 2005 had at least one key founder who was foreign-born, and the same ratio of patents filed in