This would only be true I believe if there were zero incremental migration, that is, if one transferred all and only existing migrants into higher cost legal status and hence reduced demand. But since supply exceeds demand at the rationed price (with border restrictions) this is not going to be true with additional migration.

You are exactly right that it tells an interesting story...but not so obvious that the simple story is true. If one thinks of "A" world (see Bill Easterly's papers) in whcih there is country specific productivity (say, due to institional weaknesses) then capital returns are not in fact higher in poor countries. Today more capital is flowing to and between rich countries than to poor countries. In historical episodes it does appear labor mobility was much more important than capital in equalizing returns.

Exactly, the saying that "there are no guest worker programs" or "nothing is more premanent than a temporary worker" is a canard. IN fact, there are a large number of "guest worker" like programs in operation (e.g. seasonal migration)--its just people often avoid the term or pretend they are something else.

I think the answer is, the citizens of the recipient country. After all, if we believe they have the moral right to deny them entry altogether then I cannot see any objection to allowing them entry on specific conditions (which after all, is the point of every visa).

How to see those rights are observed is an important question, to which I don't know the answer.

One is an information campaign for arriving contract workers to inform them of rights, provide them with contact numbers for a protection, ombudsman, etc.

I think all of this can be financed out of the fees paid for employers (as it is the case with many employer provided protections).

One difficult issue is that enforcement and protection of rights is actually much easier if workers are legal--of whatever temporary status. Once they are forced underground is where the abuses can become truly horrific. To the extend a legalization and regularization of temporary flows can lead to a reduction in illegality and informaliit yprotecting human rights becomes easier.

Wage differentials are easy to show.

There was a recent experience with randomization of access to migration rights of Pacific Islanders to Australia (I believe) by Mckenzie and others which shows the income gains controlling for selection effects of migrants (through randomization of eligibles).

Sometimes workers would move with families, sometimes not, depending on programs.

Excluding from citizenship is not usually problematic (as it is after all the status quo) as there are all kinds of existing visa status which allow families but not citizenship.

There is a tricky issue with America as children born are constitutionally entitled to eventual citizenship--this is intractable. Don't know.

I don't think these are intractable problems. In order to organize a scheme of labor mobility these questions need to be resolved. There are an emormous number of workers moving already--more in the Gulf and Asia (e.g. Singapore) than in OECD but they are there.

In those programs workers are usually recruited by labor brokers who them assume all kinds of responsibilities, including I would suspect what to do in cases of emergencies.

The key question is dividing up the gains from the wage differentials between the moving worker, the labor brokers (if any) in the sending country, the employer in the receiving country and the citizens of the receiving country (e.g. to bear the logistical costs of the visas, regulation, protection of rights, etc.).

I think there is little cooperation today, but cooperation will emerge, for two reasons.

First, the only way to create enforceable agreements (which the rich countries will want) is to get sending country buy-in. In the current situation the sending countries have absolutely no incentive to cooperate in limiting flows. Sooner or later the OECD countries are going to not want to exercise non-cooperative limitation exclusively through border enforcement. I have heard the new French president is already talking about more cooperation between France and the countries in the Mediterranean.

Second, particularly in Europe, I believe the demand is going to be so high that they will feel the need for more workers and they will not want to live (as the USA does) with a massive informal sector and hence they will seek cooperative solutions.

But, in the end rich countries have high wages and exclusive control over access to their labor markets and hence they do hold substantial bargaining power.

Not clear what you mean by "equivalent" income--the whole idea is that the pre (or post) tax wages are several fold different between sending and recieving countries so the net income of movers goes up for the moving worker, even if they pay taxes and recieve limited services (obviously they are not excluded from basic police proteciton etc.)

This question has to be answered tax by tax.

First, they would not be exempt from taxes in the way, say, a diplomat is exempt from taxes--they would have to pay sales taxes and such.

Second, I would think under a program for unskilled labor mobility the income tax issue is not that important as they would often be below the threshold in any case. For instance, in the USA with the Earned Income Tax Credit many workers at low wages actually pay negative taxes (e.g. recieve net subsidies for working).

Third, a big issue is Social Security or pension contributions and health insurance.

The obvious thing is to charge Social Security taxes. One reason is to withhold those and the employer contribution and refund whatever is due (and this needn't be 100 percent of contributions) only as the worker returns. Obviously the higher SS taxes the bigger the return incentive. (This is already the case in at least some countries that SS contributions of foreigners are rebated on departure).

The other obvious one is taxes to fund health insurance, which would have to be charged. Whereas many people worry about the additional health costs if one has a temporary program for prime age workers and charges some usual proportional contribution my guess, without having seen the numbers done, is that it would be self financing (as most costs are for the elderly).

Not really, or more particularly, many of the new theories or programs actually just avoid the big issues and focus on tiny marginal parts of the picture. The only way to end poverty is for incomes in currently poor countries to go way up.

So it depends on what you mean by "new theories"--theories of general economic growth and prosperity or "new theories" of specific interventions aimed at poverty reduction for a given level of income (e.g. currently fashionable CCTs (Conditional Cash Transfers) or microcredit or some such).

There are always "new theories" on the economic growth side, the only problem is that the facts refute the theories faster than we can construct new ones (see the "Lessons ofthe 1990s" book).

On the programmatic intervention side there are also always new theories, but in the end, poverty specific programs in low income environments have almost never been the route of sustained poverty reduction--which isn't to say they cannot help enormously.

Gloria: Your question reflects precisely the concern that many people in Latin America have today. Most Latin countries have repaid their debt to the IMF and the region enjoys macroeconomic stability and, therefore, there is no need for new IMF programs. However, this does not mean that Latin America does not need the IMF. In fact, one of the most important concerns of Ministers of Finance in the region is the probability that inflows to the region may reverse, leaving the countries with financing problmes. That is why countries are accumulating large amounts of international reserves. If an adverse shock from the international capital markets were to materialize and impact negatively on Latin America (even on the countries that have been following prudent macro policies, through contagion) who will be there to provide necessary liquidity? This is precisely the role of the IMF: not only to utilize its own funds, but to arrange and allow for international support coming from other industrial countries. Remember the US bilateral support to Mexico at the time of the Tequila crisis? Most likely the US wouldn't have done it if there were not an IMF program in place.
So, Latin America needs the IMF. The real problem is that the IMF is not preparing itself adequately to deal with a potential future crisis. As the Latin America Shadow Financial Regulatory Committee, that I Chair, stated yesterday: "The absence of fires doesn't mean that the Fire Department should close, it only gives an opportunity to conduct "fire drills" to improve its performance in the next tragedy"

Dave:
I wouldn't call the IMF hypocrit and coward. Remember that the actions of the IMF are determined by the decisions of its Board, which is formed by the Governments of the world (but of course, dominated by the US, Europe and Japan). What I see is complacency and lack of vision from industrial countries regarding the risks that the international environment poses to many emerging markets, including Latin America. Good times, like the ones we are having now, are times for action, for planning and designing new policies and instruments that might help the region face an adverse shck, such as a hard landing in the US economy, a disorderly unwinding of the current US-China external imbalances. The IMF would lose even more relevance if its Management and Board don't take the leadership in improving their instruments for action if a crisis were to emerge.

Mike:
Foreign direct investment is quite active in the region right now, but of course it varies significantly across countries. Enthusiasm for FDI is larger in Brazil and Peru, for example, than in Venezuela and Bolivia. However, the expected return from the oil and gas industry is so high that I believe that the countries will be able to reach agreements with foreign investors to satisfy their financing needs (especially if the price of oil continues to be as high as it currently is).

Mike:
The IMF has recently consolidated two operational departments: one in charge of assesing the evolution of international capital markets and another in charge of providing technical assistance for the development of domestic capital markets. I think that this move signals the IMF effort to increase its focus of technical assistance support tp financial issues, including the deepening of local bond and equity markets, the strenghtening of banking and securities supervisory offices, the improvement of payment systems and the like.

Rafael:
The answer to your question is yes and no. Yes, the IMF is trying to cooperate with the World Bank on the issues of better transparency, labor reforms, improved financial systems. No, the IMF is not involved (at least directly) on issues like cheaper financial market access for SMEs).
The IMF worries about structural reform issues, but the real question is the extent to which that should be the domain of the IMF. In my view, the IMF is stretching itself too thin by getting involved in too many issues and losing focus on its principal mandate: the design and implementation of policies and instruments for crisis prevention and management. For example, the creation of a new IMF line of credit for countries that might experience liquidity problems is on the table for discussion during the meetings that start tomorrow. This is a crucial issue for the IMF, but I have low expectations that an important decision will come from the discussions!

Dave:
You pose a difficult question. More interventionist governments might also refuse to deal with the IMF if a crisis were to materialize. On the other hand, it is also possible that public support for interventionist governments might decline in times of severe problems. In any event, if less market-friendly policies lead to the eruption of serious macro imbalances, it would be difficult to avoid an IMF-like stabilization program, with or without the direct involvment of the IMF

The single most important thing the U.S. can do is "be" development-friendly" in all of its policies. Why? Good development-friendly policies will make it easier for the poorest countries to grow faster. If African countries for example grow faster, inequality in the world will fall. Development-friendly policies include: reducing greenhouse gas emissions, which will harm poor countries and people most; improving the way foreign aid is organized and delivered; opening access to U.S. markets for sugar, cotton and other agricultural products and so on. You can learn more about this by looking up on our website something called the Commitment to Development Index. The components of the Index provide good hints about what U.S. policies might matter. And you can find out how the U.S. scores on those policies compared to other rich countries.

Migration of poor people to rich countries almost surely reduces global inequality if we measure inequality across all the peoples in the world. On the other hand, it could be that emigration of the richest, best educated people from poor countries leaves those countries less able to cope with their development challenges. On this second front, we don't know yet the specific circumstances under which "brain drain" emigration is good even for the sending country, or is bad. Michael Clemens here at the Center is studying this issue.

That's a great question. My own view is that private sector actors can be an important force for change in developing countries -- including by using their leverage to demand from governments fair competition, fighting corruption, and providing adequate infrastructure, education and so on. That's true for domestic private businesses and for multinational corporations. In settings where governments aren't listening or willing, global businesses can help by joining cooperative efforts like the Extractive Industries Transparency Initiative.

Yes. Latin America is the most unequal region in the world. Almost every country has high income and wealth inequality. Sub-Saharan Africa also suffers from high inequality, but the data from Africa are less reliable.

The problem is history. In Latin America, going back to colonial times, income was concentrated among a small elite. In part that was because the plantation economy by definition (sugar cane, coffee) led to concentration of income, as does still today natural resource wealth (copper, oil). The contrast of East Asia is notable. Korea and Taiwan invested in their people, through education, in part for lack of natural resource wealth.

If you take away the top 10 percent of households in most countries of Latin America, then the common measure of overall inequality compares to the U.S. -- i.e. all the "excess" of inequalityin Latin America compared to the U.S. is due to the high concentration at the top. In Brazil, the top 10 percent of househodls capture more than 50 percent of income -- compared to perhaps 30 percent in the U.S.

The first best solution is to undo the current protection of agriculture in the U.S. Europe and Japan, so that producers in the rich world don't have an advantage over local producers in the poor world. When there is a free trade agreement with countries like Colombia and Peru -- these are now under heated discussion in the U.S. Congress -- ideally those agreements would be complemented by support, in this case from the U.S., for those countries' programs to help people make the transition from low-productivity agriculture to high productivity agriculture and other work. This is what the norhtern EUropeans did for Spain, Italy and Greece in the context of the Euopean Union.

Extending the period of time over which protection of developing countries is removed under a trade agreement for their own agriculture -- particularly the products produced mostly by the poor -- can help.

This is one of the toughest questions before the development community. One key ingredient seems to be creating an environment where small businesses can flourish. The ingredients for that include access to credit (not just putting more capital into microfinance but ensuring competition in banking so banks go downmarket and creating the right system of prudential regulation and supervision), avoiding tax harassment and other regulatory burdens, and so on. It's about fostering growth of a middle class that has economic clout -- and then helps lock in accountable responsive government. Back to education and other basics....

Samantha: I'm so glad you asked that question. Fair Growth is the title of a forthcoming book of mine, co-authored with Augusto de la Torre and Rachel Menezes. Please check back to our website in about a month!

There is no single magic bullet for ensuring an equitable society. But it does help to have a productive system that is competitive -- to have what economists like to call a "level playing field" for everyone. And that is much harder politically to secure and sustain when reliance on commodities and minerals means a small elite controls a lot of a country's wealth.

Among commodities, of course, there are differences. In 19th century America, wheat was most productively grown on small farms -- that turns out to have been more conducive to an equitable system and a democratic one, than sugar and cotton produced on large plantations with unskilled labor -- slaves, indigenous people.

At least one country, Botswana, has managed an equitable system and sustained good governance and democracy, based on diamond wealth. So it can be done.

The U.S. can support explicitly the governments and businesses in LAtin America that represent well their citizens and workers. President Lula of Brazil has an op ed in today's Washington Post about a good joint Brazil-U.S. initiative to develop better global technologies for clean fuels -- an alternative to the oil-based economy of Venezuela for example. In this case, the U.S. seems to the trying to work with an interlocutor who represents the majority of his people and is committed to an open market approach rather than to populism and demogoguery.

Of course in this case best of all would be for the U.S. to reduce or eliminate its current tariff against sugar-based ethanol produced in Brazil. Presidnet Lula was polite in not making that an issue in his op ed. By doing that we would be showing the people of Latin America that the U.S. can get beyond its short-term selfish interests and support its friends in the region.

Bill Cline (see our website) says in his book that a completely liberalized trading environment could reduce poverty in the world by almost 500 million people in the next decade. The World Bank has said that the liberalization envisioned in the Doha round (which is floundering) could reduce the numbers of poor by about 80 million. There are of course many different assumptions behind these estimates. But even 80 million fewer people in poverty would be an achievement. See Kim Elliott's book (also at our website) for a fine discussion of the specific issues of trade, agriculture and the world's poor -- and what must be done by the U.S. if any deal to help the poor benefit from their own producitivy in agriculture is to be completed.

There is already a healthy amount of such online retailing of local artisan and other products directly from poor villages all over the developing world, to consumers in the rich world. Luckily, most of such products do not face high tariff or health-standard barriers. What is interesting is how and whether this system of online purchasing can expand to, for example, organic specialty food and other products where rich country protection is higher and health concerns can be used, sometimes as an excuse, to limit trade. Kim Elliott here at the Center is starting a study of such specialty "fair trade" products as Starbuck's coffee. . . so I will pass your question to her!

COnor: I can't confine myself to just one. I do think that we need to go well beyond the approach President Bush emphasized on his recent trip -- of handouts in the form of traditional foreign aid programs. Our aid programs should be more clearly aimed at the great majority in LAtin America, to create opportuniteis and build a middle class. The amount is less important than the visibility of our support for Latin America to build more fair and just systems -- looking more like the U.S. in terms of a middle class, opportunities for upward mobility and so on. We cannot compete with Chavez's billions with our dollops of aid. We have to compete on the basis of our better values.

Second, we have to concrete intaking steps to signal to the people of Latin America that we favor equal opportunities beyond our borders. These are steps that are much harder politically for the U.S. to take: a sensible immigration bill; a more open market for agricultural and other goods from Latin America; and less emphasis on the drug war in Bolivia and Colopmbia and more emphasis on helping do land reform and reducing tax evasion of those countries' richest households.

I don't have a good answer to this good question. As a start it seems important to ensure that inefficient biofuels (e.g. corn to produce ethanol which is less efficient and more environmentally harmful than sugar) are not subsidized in one way or another. I believe much more resources of the rich world should be dedicated to resaerch and development focused on the energy/agriculture nexus.

It's surprising how little of the rich countries' foreign aid budgets go to this kind of investment in global punblic goods compared to country-based aid, which of course is sometimes politically more attractive. The WOrld Bank and otehr international isntitutions should also put more effort into this sort of global public good. We put that on the agenda for this current World Bank President in our 2005 report.

Matt; Take a look at our Commitment to Development Index to get the answer to this question.