EclectEcon

If one input into the production process cannot move to where it is more efficient, then others will sometimes move to it. Economic efficiency is a very powerful force.

Here is an example [h/t to Brian Ferguson]: with the crackdown on illegal immigrant labour, the land cannot move to Mexico, where the cheap labour is located. However, capital goods can move there, and that is what is happening.

Steve Scaroni, a farmer from California, looked across a luxuriant field of lettuce here in central Mexico and liked what he saw: full-strength crews of Mexican farm workers with no immigration problems.

Farming since he was a teenager, Mr. Scaroni, 50, built a $50-million business growing lettuce and broccoli in California’s Imperial Valley, relying on the hands of immigrant workers, most of them Mexicans and many probably in the United States illegally.

But early last year he began shifting part of his operation to rented fields here. Now some 500 Mexicans tend his crops in Mexico, where they run no risk of deportation.

... A sense of crisis prevails among American farmers who rely on immigrant laborers, more so since legislation in the United States Senate failed in June and authorities announced a crackdown on employers of illegal immigrants. An increasing number of farmers have been testing the alternative of raising crops across the border where many of the workers are, according to growers and lawmakers in the United States and Mexico.

This example of the Heckscher-Ohlin Theorem (some might say, in reverse) exemplifies one of the effects of the North American Free Trade Agreement. So long as there were restrictions on the importation of produce from Mexico to the U.S., it became a second-best efficiency solution for labour to migrate to the U.S. But now the combination of NAFTA and the crackdown on illegal immigration makes it more efficient for capital to migrate south of the border instead.

However, contrary to the views stated in the NYTimes article quoted above, the result is not a crisis; rather it is a move toward more economic efficiency.