America, but with fewer immigrants

America is an outlier. Its GDP per capita is far higher than any other country with at least 10 million people. The US GDP per capita (PPP adjusted) is $85,373, while the next nine range from Taiwan at $77,858 to the UK at $58,880.  (All of these are IMF estimates for 2024.)  If you prefer nominal GDP measured at current exchange rates, the gap is even larger. The US is again at $85,373, while Australia comes in second at $66,589.

There’s another way in which the US is an outlier.  We’ve experienced much more immigration than any other country.  How should we think about those two facts?

Opponents of immigration often claim that it makes America poorer by depressing wages.  Presumably this means that if we had experienced less immigration, we’d be even richer.  Imagine that instead of 330 million people, our population had only risen to 110 million—to somewhere between Germany and Japan.  How rich would we be in that case?

I suppose it is possible that even though America is much richer than all other mid-sized and large countries, and even though we’ve had vastly more immigration than other countries, the immigration has depressed incomes in America. Perhaps with lower levels of immigration we’d be even more of an outlier.

But does that seem likely?

David Levey directed me to a recent study of this question, by Alessandro Caiumi and Giovanni Peri.  Here’s the abstract:

In this article we revive, extend and improve the approach used in a series of influential papers written in the 2000s to estimate how changes in the supply of immigrant workers affected natives’ wages in the US. We begin by extending the analysis to include the more recent years 2000-2022. Additionally, we introduce three important improvements. First, we introduce an IV that uses a new skill-based shift-share for immigrants and the demographic evolution for natives, which we show passes validity tests and has reasonably strong power. Second, we provide estimates of the impact of immigration on the employment-population ratio of natives to test for crowding out at the national level. Third, we analyze occupational upgrading of natives in response to immigrants. Using these estimates, we calculate that immigration, thanks to native-immigrant complementarity and college skill content of immigrants, had a positive and significant effect between +1.7 to +2.6\% on wages of less educated native workers, over the period 2000-2019 and no significant wage effect on college educated natives. We also calculate a positive employment rate effect for most native workers. Even simulations for the most recent 2019-2022 period suggest small positive effects on wages of non-college natives and no significant crowding out effects on employment.  [Emphasis added]

I think this is the key:

native-immigrant complementarity and college skill content of immigrants

Other countries tend to be good at one thing, such as building cars or pumping oil out of the ground.  America’s diverse population allows us to adapt to changing global trends.  When new industries develop, we are usually in the forefront (smart phones, fracking, pro basketball, e-commerce, electric cars, AI, GMO foods, superhero movies, high speed trading, etc., etc.  We have all kinds of people, able to fill all sorts of niches.

Opponents of immigration may have in mind a model where adding labor to a fixed quantity of land reduces per capita output.   But that’s not how the real world works.  America’s people, not its land, is its greatest resource.

PS.  The per capita GDP of very small countries is often distorted by factors such as multinational earnings, oil income, and tax haven status.