Politico reports on the policy challenge that the Biden Administration faces.  There are thousands of Haitian immigrants living in squalid conditions under the Del Rio International Bridge.

A dynamic incentives issue arises.  If the Biden Administration engages in humane policies to help these immigrants then this will attract more immigrants to move to the area as they will anticipate that they will be treated well.  If the Biden Administration is tough on this group, then the group suffers and the Biden Administration angers its progressive wing and immigrant children will suffer.

Spatial equilibrium logic is crucial here.  The immigrants have taken a gamble.  They have compared the expected benefits of migrating to the U.S with the costs of doing so.  The costs include what they leave behind in their home nation (in this case Haiti) and the migration costs they incur.  The expected benefits depend on the probability that they will actually enter the U.S and the probability that they will not be deported to their origin and the financial and emotional gains they and their family will enjoy if they actually live and work in the U.S.

Spatial Equilibrium logic offers several constructive ideas here.  Potential immigrants will move to the U.S when their expected lifetime utility in the U.S exceeds their expected lifetime utility from remaining in Haiti net of migration costs (including lost social networks).

This model makes several predictions and offers insights;

1. Economic development in the home country would slow down migration to the U.S.

2.  If the U.S could commit to being tough on illegal immigrants and have a process for legally migrating to the U.S, more potential immigrants would pursue this path.  

3. There should be an orderly process so that Haitian-Americans can sponsor a new migrant to move to the country.  This is an idea in the Posner and Weyl book.  The idea is presented and debated here.   

4.  The ugly living conditions at the Del Rio Bridge represent a type of tax on illegal migration.  Unlike a typical tax, no revenue is received.  Gary Becker endorsed a U.S passport market for auctioning off such passports.  The progressive Biden Administration is wrestling with the allocation of valuable property.  Economists such as Becker support using markets to allocate this scarce resource.

5.  U.S politician nudges saying "stay home" represent Cheap Talk and won't slow the flow.

6. If climate change differentially injures Haiti as compared to the U.S (because a richer nation is better able to adapt), then this issue will only grow in importance in the future. The U.S must begin to think through how climate change adaptation affects migration patterns. In this blog post, I offer some adaptive ideas.

In China, there is a Hukoo domestic passport system that limits where floating workers can receive government services. This approach creates a system of "insiders and outsiders" that allows a mayor of a city such as Shanghai to treat his poor residents better because unlike in the U.S , he anticipates that his actions do not have a "welfare magnet" effect because other poor residents in other areas cannot arbitrage the spatial variation in generosity towards the poor by moving from a poor city to a rich city.   What can the U.S learn from this system?  When are entry barriers good?

 The Biden Administration has made an announcement that it seeks to protect outdoor workers from extreme heat exposure.   What does the theory of compensating differentials in real estate markets and labor markets teach us about exposure to high temperatures.

I maintain two assumptions.

Assumption #1:  The apartment rental market is perfectly competitive and an area's heat risk is common knowledge. If heat risk rises in a location, all market bidders are aware of this.

Assumption #2:  The labor market for outdoor jobs is perfectly competitive and the job conditions (including heat exposure on the job) is common knowledge.

Result #1:  As climate change raises heat in certain areas, rents decline in such areas and this $ rental decline compensates those who choose to take the risk.   Facing lower rents, apartment renters can install more powerful air conditioners. Here are some products that Amazon sells for roughly $100. 

Result #2:   As climate change raises heat in certain areas, outdoor wages in such areas rise and this  $ wage increase compensates those who choose to take the risk.

Facing result #2,  for profit firms will have an  incentive to provide cooling products to workers if these are cheaper to purchase than to pay the higher "combat wages".   Amazon sells a collecting of cooling vests for under $70 each.     If outdoor workers are cash constrained, their employer will have an incentive to purchase these self protection devices for the workers. 

An environmental economist studying adaptation could run a randomized field experiment where she gives out these cooling vests and studies whether this treatment causes worker heat exposure on hot days to decline and for their productivity to rise.  Publicizing this result would lead more firms to consider making this investment rather than paying higher wages to workers exposed to high heat.   Sherwin Rosen has taught us that firms must offer a compensation bundle that is as good as your next alternative.

The key point here is that if outdoor workers (who are housing renters) participate in competitive markets then capitalism compensates them through higher pay and lower rents for taking on this risk.  This $ compensation gives them the resources to protect themselves through products that have proven to be effective (see this 2017 JPE "Remarkable" paper).

I conclude that the Biden Administration rejects the perfect competition model in the housing and labor markets and instead has an economic model of spatial monopsony in mind such that less educated workers are being exploited by a few powerful big employers.  Joe Tracy and I question this claim in this NBER Working paper titled "Monopsony in Spatial Equilibrium".   Migration offers a pro-active strategy to move to another local labor market that offers a thicker set of employers.   We are not passive victims as Mother Nature cranks up the heat.

FINALLY, people know themselves. If they are extremely sensitive to the heat --- they can move somewhere cool.  The Biden Team must have an implicit economic model in mind that migration costs are huge and that few people have strategies to protect themselves from Mother Nature's punches.  Is this logic correct?  What data has been collected to document the "passive victim" hypothesis?  Many development economists have documented the coping strategies that poor people in the developing world exhibit.