Why letting in refugees from Syria is good economics

Economist David Card found that the flood of refugees to Miami -- which increased Miami's labor force by about 7 percent -- had no adverse impacts on the local labor market.

Opinion

Finance professor Noah Smith says US states that don't want Syrian refugees should think about the business case.

My ancestors weren't officially refugees. But some of them came to the U.S. from Lithuania to escape the Russian draft during the Russo-Japanese War of 1904. Serving in the czar's poorly equipped, badly managed armies was a ticket to an early grave.

Now the U.S. faces the dilemma of whether to take in refugees from the Syrian civil war. The governors of some two dozen states have declared their refusal to accept the refugees into their states. Of course, governors don't actually have the legal authority to do that, since immigration policy is handled at the federal level. But through a combination of rhetoric and policy, they can probably discourage refugees from settling in their states, at least in the short term, if they try hard enough.

I am not qualified to comment on the national security implications of taking in Syrian refugees. Posing as a refugee seems to me like a very inefficient way to infiltrate a country that you want to attack, but maybe I'm wrong. Instead, I want to think about the economic impact of refugees.

Immigrants of all stripes obviously increase a country's total gross domestic product.

More people equals more production overall, which also means a larger tax base. Its effect on per capita GDP is more ambiguous, since that depends on whether the immigrants have higher or lower skill levels than the native populations that they join. If you import a bunch of engineers, local average income probably will go up, simply because engineers tend to make more money. If you import a bunch of farm workers, the opposite will happen.

Because of this phenomenon -- called a composition effect - - what you really want to look at is the impact of immigration on the native-born. Economist David Card famously researched this in the 1990s, when he looked at what happened to Miami's economy after the Mariel boatlift in which about 125,000 Cubans came to the U.S. He found that the flood of refugees -- which increased Miami's labor force by about 7 percent -- had no adverse impacts on the local labor market.

That means that if a state takes in a bunch of Syrian refugees, it will have more money to spend on roads and other public goods that benefit everyone, while not hurting its indigenous population.

If that pattern holds throughout the U.S. -- if Miami is typical -- then it means an influx of refugees is actually good news for a region. It increases the tax base without hurting local workers. That means that if a state takes in a bunch of Syrian refugees, it will have more money to spend on roads and other public goods that benefit everyone, while not hurting its indigenous population.

When I look at the map of states whose governors have declared opposition to Syrian refugee settlement, I notice that many of the states -- Michigan and Ohio, for example -- could use an economic boost. People have been moving away from these states for years, thinning out the tax base and leaving whole neighborhoods blighted and empty in cities like Detroit. Letting in Syrian refugees would partially combat this trend.

It's possible that the long-term effect of admitting refugees might be even more positive than the short-term boost. According to the theory of economic agglomeration, population density encourages companies to relocate to a region in order to gain access to customers. Just look at the eagerness of U.S. companies to invest in China.

While I don't know much about national security, I do think that in economic terms, the Syrian refugees would probably be a boon for any region that welcomes them with open arms.

A number of economists and commentators have batted around the idea of policies to encourage immigration as a way to shore up declining regional economies. Forbes writer Adam Ozimek has called for U.S. regions to issue their own visas to prospective immigrants. Although region-based visas would probably violate the Constitutional protection of free movement, the basic idea of targeting immigrant flows to places like Michigan and Ohio is a sound one.

In fact, Michigan is already home to a very large number of Arab-Americans. Many of those Michiganders immigrated because they were fleeing the Lebanese civil war, the Iraq war or other conflicts in the Middle East. Syria is merely the latest convulsion in a process that has been going on for decades. Michigan's economy has probably benefited substantially from these immigrants, who likely helped mitigate the economic losses from the decline of the state's auto industry.

So while I don't know much about national security, I do think that in economic terms, the Syrian refugees would probably be a boon for any region that welcomes them with open arms.

Noah Smith is an assistant professor of finance at Stony Brook University and a freelance writer for finance and business publications.