Made in America (by Immigrants): How Protectionism Spurs Illegal Immigration

Tim Larsen, Brigham Young University

International trade theory predicts that in the presence of protectionism, labor will flow in to compensate for restricted trade. Preliminary estimations show that for an average American industry from 1974-1985, tariffs raised the foreign-born percentage of their workforce 1.4 percentage points, very significant since the mean percentage of immigrant laborers was 8.2. The mechanism drawing labor into the country is shown to be the inequality in wages across borders that result from protectionism. The evidence presented here does not aim to explain all of the reasons for immigration, but it does show a strong correlation between protected industries and immigration, clearly accounting for some of the movements. It further shows that though labor flows can substitute for free trade, immigration imposes an additional deadweight loss on the world economy. It also notes that by attracting immigration, tariffs may actually counteract their intended purposes in terms of wage and unemployment effects.