Research Highlights

CoPS goes to Capitol Hill

On August 14 2009 Peter Dixon and Maureen Rimmer went to Capitol Hill in Washington DC to present their research on illegal immigration in the U.S. The presentation was attended by more than 100 Congressional advisors and the media. It was televised by C-SPAN and covered in dozens of media outlets including the Wall Street Journal, Newsweek and Forbes Magazine.

The event was organized by the Cato Institute to launch Dixon and Rimmer's study entitled "Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform" (Cato Trade Policy Analysis, paper no. 40).
About 8 million people work illegally in the U.S. mostly in low-skilled, low-paid jobs. Under business-as-usual assumptions this number is expected to grow to about 12 million by 2019. Immigration reform is a key component of the U.S. political debate with proposed policy responses to the current situation ranging from more restrictive border and workplace enforcement to various forms of legalization. Dixon and Rimmer's study shows that U.S. households would derive major economic benefits from a policy under which employers could purchase visas allowing temporary legal entry of low-skilled immigrant labor.

In conducting their analysis, Dixon and Rimmer used USAGE, a detailed model of the U.S. economy. USAGE has been developed over the last 10 years at Monash University's Centre of Policy Studies in collaboration with the U.S. International Trade Commission. The model is used not only by the International Trade Commission but also by the U.S. Departments of Agriculture, Commerce and Homeland Security.

Via USAGE, Dixon and Rimmer identified and quantified several factors that have been missing from the current discussion of low-skilled immigration. The most important of these is what they called the occupation-mix effect. Allowing a significant legal inflow of low-skilled workers on temporary visas would improve occupational outcomes for U.S. workers. This is because such a policy closes off vacancies for U.S. workers in low-skilled, low-paid jobs. At the same time, it makes the economy bigger and opens up vacancies in higher-skilled, better-paid jobs. Thus over time, U.S. residents entering the workforce would find their career prospects favorably enhanced.

The occupation-mix effect will be familiar to students of the history of U.S. immigration. The inflow of low-skilled immigrants early in the 20th century induced native-born U.S. residents to complete their education and enhance their skills. In this way, low-skilled immigration chased native-born workers up the occupational ladder.

Peter Dixon is Sir John Monash Distinguished Professor and Maureen Rimmer is Senior Research Fellow in the Centre of Policy Studies.

Selected Media coverage of Dixon and Rimmer's study of illegal immigration:

Wall Street Journal article in the Opinion page of August 19

Newsweek, for the magazine of August 31

Forbes Magazine, opinion-editorial to appear.

Oregonian newspaper, Editorial, August 21

World Sentinel August 17

Investor's Business Daily , Fri, August 14, 2009: Daniel Griswold authored an op-ed on immigration: "Bipartisan Visa Program Could Fix Nation's Illegal Immigration Mess"

Congressional Quarterly Homeland Security, Fri, August 14, 2009: Cato featured in an article by Rob Margetta on immigration's effects on the economy: "Allow Temporary Workers but Tax Their Visas, Immigration Study Says"
Washington Independent, Fri, August 14, 2009: Cato featured in an article by Daphne Eviatar on immigration's effects on the economy: "CATO Institute Finds $180 Billion Benefit to Legalizing Illegal Immigrants"

KPCC (Southern California Public Radio), Mon, August 17, 2009: Cato featured in an article by Kitty Felde on immigration's effects on the economy: "Study says guest worker program may help stop illegal immigration"

Talk Radio News Service, Fri, August 14, 2009: Cato featured in an article by Annie Berman on immigration's effects on the economy: "Immigration Reform Should Include Guest Worker Program And Taxes On Work Visas, Says Economist"

Phoenix New Times blogs, Mon, August 17, 2009: Cato cited in a new media post by Stephen Lemons on immigration's effects on the economy: "Why Janet Napolitano Should Read the Cato Institute Report on Immigration Reform"

Center for Immigration Studies blogs, Mon, August 17, 2009: Cato cited in a new media post by Bryan Griffith on immigration's effects on the economy: "Morning News 8/17/09"

Immigration Prof Blog, Fri, August 14, 2009: Cato featured in a new media post on immigration's effects on the economy: "Cato Institute Report: Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform"

Rhode Island's Future (blog), Sat, August 15, 2009: Cato featured in a new media post by Matt Jerzyk on immigration's effects on the economy: "Even Right Wing Think Tanks See the Benefits of Comp. Immigration Reform"

C-SPAN (Television), Fri, August 14, 2009: covered Dixon and Rimmer hill briefing

Univision (Television), Fri, August 14, 2009: Juan Carlos Hidalgo discusses Dixon and Rimmer study on Noticias

KPCC (Los Angeles CA), (Radio), Mon, August 17, 2009: Cato mentioned regarding Dixon and Rimmer study

KTVU (San Francisco CA) (Television), Fri, August 14, 2009: Daniel Griswold discusses Dixon and Rimmer hill briefing

KFOX (El Paso TX) (Television), Fri, August 14, 2009: Daniel Griswold discusses Dixon and Rimmer hill briefing

Chinese delegation visit CoPS

On 20 April 2007, CoPS hosted a Chinese delegation from Development Research Centre (DRC) of the State Council, National Development and Reform Commission, State Information Centre (SIC), and China Australia Governance Program of AUSAID. The delegation was headed by Mr ZHANG Xiaochong, Director General of the International Cooperation Centre of the National Development and Reform Commission. The purpose of the delegation's visit to Australia was to investigate the process of public policy enquiries and debate.

During a half-day workshop, Dr Yinhua MAI introduced modelling, policy consulting and training activities of CoPS. Professor Philip ADAMS presented "The Contribution of CGE Modelling in Public Policy Debate in Australia".

Professor LU Zhongyuan, Director General and Research Fellow of the Department of Macroeconomic Research of DRC, reflected on a similar role to CoPS that DRC plays in China's policy making process.

Mr ZHANG Xueying, Deputy Director-General of the Comprehensive Management Department of SIC, introduced activities of SIC.Mr Zhang expressed a sincere willingness to establish long-term cooperation with CoPS in CGE-model development and its policy applications.

CoPS goes to China

In September 2006, Peter Dixon, Yinhua Mai, Xiujian Peng, Maureen Rimmer and Charles Xiao presented a 7 day course on dynamic CGE modelling for forecasting and policy analysis at Hunan University. This followed a course presented earlier in the year by CoPS on static CGE modelling. The dynamic course was attended by about 30 people including staff and graduate students from Hunan and other universities and several public servants from Beijing. The course was built around the MC-HUGE (Monash-China Hunan University General Equilibrium) model. This is a 57 industry MONASH-style model of China constructed by Yinhua. During the course, Yinhua described her basecase forecast, generated by MC-HUGE, for the period 2006 to 2015. The forecasts imply continuing strong growth accompanied by rapid accumulation of foreign assets.

Participants in the course conducted and analysed several policy simulations concerned with the effects of: cuts in protection; changes in energy prices; productivity growth; and changes in business confidence concerning investment in China.

The course was hosted by Hunan University's Sino-Australia Centre of Economy and Policy Study and financed by Hunan University through a grant from the Chinese Ministry of Education.

At the culmination of the course, Hunan University honoured Peter Dixon by appointing him Guest Professor.

Following the course, the CoPS' team visited Beijing where they held discussions with officials from the State Information Centre on potential applications of CGE analysis in China. They also attended a round table workshop at Beijing University on model-based analysis of trade issues.

The keynote address was given by Peter Dixon with translations by Yinhua Mai.

CoPS analyses President Bush's energy policy

An important objective of the President's energy policy is to cut U.S. reliance on imported crude oil. The President is supporting research aimed at reducing the cost of biomass fuels (e.g. ethanol) so that these fuels are competitive with petroleum.

In June 2006, CoPS was commissioned by the U.S. Department of Commerce to estimate the benefits to the U.S. economy that would follow from technological breakthroughs that make ethanol competitive with petroleum when the price of crude oil is at its 2004 level.

Peter Dixon and Maureen Rimmer, together with Stefan Osborne of the U.S. Department of Commerce, analysed the issue using USAGE: a 500 sector dynamic CGE model of the U.S. economy developed over the last six years at CoPS in collaboration with the U.S. International Trade Commission.

They assumed that by 2020, 25% of crude oil is replaced by biomass products. Their analysis shows large benefits for the U.S. economy arising from four factors:

  1. Costs-savings. In the Department of Energy benchmark out to 2020, adopted in USAGE, the price of crude oil increases sharply relative to the overall price level. By contrast, the USAGE benchmark price of biomass products declines relative to the overall price level, reflecting continuing rapid productivity growth in agriculture. If research makes ethanol competitive with petroleum at 2004 oil prices, then ethanol will be super-competitive at 2020 prices.
  2. A reduction in the world price of crude oil. The United States accounts for about a quarter of world consumption of crude oil. The assumed substitution of biomass for crude oil has a noticeable damping effect on world demand for crude oil, generating a reduction in its price.
  3. An increase in aggregate employment. Biomass substitution generates a strong long-run increase in agricultural employment. This will have the effect of keeping farmers in work who otherwise would have retired or would have worked their farms less intensively.
  4. An increase in export prices. Biomass substitution means that the United States will have a smaller import bill - a reduced volume of crude oil imports at a reduced price. With a smaller import bill, the U.S. will need less exports to pay for its imports. Foreign demand curves for U.S. exports slope downwards, implying that foreigners will pay higher prices when U.S. supply contracts.