Organizations and Markets

Immigration and the Housing Bubble

2 January 2008 at 2:29 pm stevphel 2 comments

| Steve Phelan | 

Brad De Long’s analysis of the current financial crisis published in the Taipei Times on 01/01/08 received some attention in the blogosphere yesterday. For a crisis resulting in a sustained fall in asset values, he recommends either 1) nationalizing the debt or 2) inflating the price of nominal assets. As I was reading the article (and another on the fact that an 3 million excess housing units were created in the boom above long term trends) it occurred to me that a third path might be available — increased immigration.

The Bush presidency has cut H1 visas for professional workers from 195,000 to 85,000 per year since 2003. Imagine, instead, lifting the quota and allowing qualified (work-based) immigrants to enter the country (perhaps even granting foreign graduates of US universities a green card as suggested here). Each new immigrant would create a new household, either renting or buying, thus soaking up much of the excess construction and boosting demand for consumer durables. Moreover, immigrants will probably settle in the areas with the highest housing problems (i.e. the coasts). To what degree can immigration mitigate such a downturn?

Entry filed under: Business/Economic History, Evolutionary Economics, Former Guest Bloggers.