Monday 12 August 2019

The importance of population mobility

Population mobility is very important in my opinion because I believe that population mobility determines the efficiency of resource reallocation. In the real world, we often see many people move from poorer areas to richer areas to seek better opportunities. Richer areas are more likely to have greater economic opportunities available for more people. When more people move into richer areas, more resources are also likely to be reallocated to these richer areas. However, the resource growth rate in these richer areas is likely to diminish after the resources accumulate to a certain level, because one place cannot contain all resources due to its natural constraints, such as land constraint. When the population growth rate exceeds the resource growth rate, people will gain fewer resources on average, so they will be worse off. Under such circumstance, the original locals will try to block people from other areas from entering their areas in order to maintain their current economic benefits. This will lead to increasing opposition to immigration.
Then is it possible to mitigate the opposition to immigration? It is possible. When the resource growth rate in the richer areas is diminishing, it means the resource outflow rate in the poorer areas is also diminishing. Then the people in the poorer area should enjoy more resources when many people move to the richer area. If the people in the richer area find that they enjoy fewer economic benefits than those living in the poorer area, they will move from the richer people to the poorer area, including those who originally live in the richer area. The reason that we do not often see people living in the richer area move to the poorer area is because maybe those who live in the richer area do not enjoy as many economic benefits as previously, they still enjoy more than they will enjoy if they move to the poorer area. To reduce this problem, we need to reduce the transportation cost and improve the returns in the poorer area. The latter point means that when people take resources from the richer area to the poorer area, the return of investing in the poorer area is higher than the return of investing in the richer area. This is not too difficult. Because the competition in the poorer area is relatively low and people can borrow successful business models from the richer area and apply them in the poorer area.
Overall, better population mobility and narrower wealth gaps across areas can reduce the problem of opposition to immigration and improve social stability.

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