De Facto Openness to Immigration

Various factors influence why some countries are more open to immigration than others. Policy is only one of them. We design country-specifc measures of openness to immigration that aim to capture de facto levels of openness to immigration, complementing existing de jure measures of immigration, based on enacted immigration laws and policy measures. We estimate these for 148 countries and three years (2000, 2010, and 2020). For a subset of countries, we also distinguish between openness towards tertiary-educated migrants and less than tertiary-educated migrants. Using the measures, we show that most places in the World today are closed to immigration, and a few regions are very open. The World became more open in the first decade of the millennium, an opening mainly driven by the Western World and the Gulf countries. Moreover, we show that other factors equal, countries that increased their openness to immigration, reduced their old-age dependency ratios, and experienced slower real wage growth, arguably a sign of relaxing labor and skill shortages.

Explore the country rankings in our interactive visualization website and learn more about the project, Leveraging the Global Talent Pool to Jumpstart Prosperity in Emerging Economies.

Growth Through Diversification in Hermosillo

In this report, we study Hermosillo’s economic performance and assess critical issues affecting the city’s ability to achieve stronger economic growth. Although Hermosillo is far from experiencing economic stagnation, it fell behind other cities that managed to become successful economic hubs between 2010 and 2020. The main reason behind this trailing growth is Hermosillo’s relatively low diversification and investment dynamics, especially in the manufacturing sector. We apply growth diagnostic testing on various potential constraints to economic growth: logistics, electricity, water, human capital, housing, and transportation. Although none of them have directly constrained economic growth in the past, some are explicit threats to increasing growth in the future, thus catching up with high-performing peers. Electricity, human capital, and logistics are comparative advantages, while water, housing, and transportation are threats. 

In 2025, Mexico is expected to start a new period in its economic history marked by the promise of nearshoring and a new presidential administration. In the past, Mexico has gone through milestones that heavily impacted its economic development path, like the establishment of NAFTA and the China Shock (Hanson, 2010). The rise of Northern Mexico and other regions like El Bajío as global manufacturing hubs has resulted from greater integration with the North American market. This has brought foreign direct investments (FDI) targeted at establishing manufacturing sites primarily to cater to US demand and exports to the rest of the world. Mexico holds high expectations that nearshoring will bring opportunities of the same or greater magnitude. In that context, Hermosillo stands out as a city with the potential to exploit those opportunities and enhance its economic transformation. It is crucial to analyze its binding constraints for economic growth, comparative advantages, and potential concerns to understand how well-positioned Hermosillo is to take advantage of this momentum. 

Following the introduction and a methodological overview, the report is divided into four main sections. Section 3 provides a growth perspective on Hermosillo; Section 4 presents an analysis of growth constraints; Section 5 explains the local diversification challenge in detail; and Section 6 describes strategic policy areas to accelerate growth that result from this growth diagnostic analysis. 

How Wyoming’s Exodus of Young Adults Holds Back Economic Diversification

Wyoming is a rural Mountain West state with a high Gross State Product (GSP) per capita, foremostly driven by its fossil fuel sector. The state’s longstanding strengths in resource extraction provide much of its livelihood, including both its private earnings and public finances. Its other industries are comparatively much smaller, but Wyoming would benefit from their expansion in order to smooth out resource-related shocks going forward. Importantly, Wyoming should think on a big scale when considering such opportunities. Middling, business-as-usual growth in its non-resource sectors will not fundamentally do much to insulate Wyoming’s economy against resource busts.

One category of diversification opportunities to consider are those in industries tied to the natural endowments of the land. Wyoming generally does well in these sectors, but prospects of further expansion are either highly uncertain or limited in scale. Some of the most promising opportunities are in new energy and critical minerals, but these carry significant technological uncertainty and/or modest income potential. Transformative growth in agriculture is likely to be difficult because Wyoming faces hard constraints on its water consumption, and its tourism income per capita is already among the very highest of any US states. Adding value to raw materials is a commonly-discussed strategy that, in practice, does not work well in the modern economy because raw materials are often easily traded over long distances.

While it is therefore vital for Wyoming to pursue economic activities related to its natural endowments, it must also look to its advanced services and manufacturing sectors. Wyoming is a severe laggard in these industries versus other states, and serious action is needed to generate the large pools of skilled labor that they need to succeed. There is widespread recognition that Wyoming is behind on this matter, and the state has made critical investments in education to bridge this gap. The missing ingredient, however, is keeping young people and families in the state. By the time people born in Wyoming reach their thirties, nearly two thirds have left – one of the highest rates in the country. Without access to this workforce, it is exceedingly difficult for the Wyoming economy to diversify.

Empirically, young Wyomingites and families overwhelmingly leave the state in favor of larger cities. University of Wyoming graduates especially are attracted to large cities a few hours’ drive away from Laramie, Wyoming (where the University of Wyoming is located). These destinations include Fort Collins and Denver. Even if it wanted to, Wyoming could not wave a magic wand to create a large urban metropolis overnight, and it is therefore necessary to understand what specifically attracts young adults and families to these big cities instead of Wyoming towns so that the latter can compete better.

The evidence shows that housing is a surprisingly important factor related to migration decisions on which Wyoming underperforms. Young adults fresh out of university often prefer to live in centrally-located apartments, so that they are close to jobs, restaurants, and friends. Wyoming towns, however, lack dense multi-family housing in their downtown cores as compared to other US towns with very similar overall population. This lack of dense downtown housing suitable for young people contributes to an overall housing supply deficiency, thereby driving up housing prices across the board. It also entails depressed foot traffic in downtowns, leading to fewer customers for local businesses and ultimately fewer urban amenities like restaurants versus Colorado communities – a key result given that surveyed University of Wyoming students report that restaurants are their top desired urban amenity.

The main reason there is not denser housing in Wyoming downtowns is because strict regulations have illegalized them. A plethora of restrictions exist around issues like minimum lot sizes, maximum building heights, minimum parking space requirements, maximum dwellings per unit of area, and more. Studies show that Wyoming is more overregulated than other communities when it comes to restrictions on housing density. Other places successfully leave these decisions to the free market rather than government, and Wyoming could remove these restrictions to increase its supply of housing for young people at no cost. There is additionally a lack of funding for arterial infrastructure in Wyoming, such as water and sewage lines, which drives up development costs.

A general lack of funding for community assets arguably also affects young peoples’ and families’ migration decisions. There is evidence that community demand for investment outstrips supply in water and transport infrastructure, and that many counties use allotted sales tax expansions (“Penny Taxes”) very frequently. One way Wyoming could direct more funding to its local communities is via an expanded grants management system; Wyoming gets less federal grant funding per person than other rural US states, and based on interviews this is tied to a lack of dedicated staff who can navigate the significant overhead associated with following and applying for grants.

Overall, while Wyoming is currently a laggard on advanced service and manufacturing industries there are concrete steps it could take to compete better by retaining more of its young people. Wyoming’s Pathways to Prosperity economic development project has already enacted a number of changes to support that outcome, but more can be done. With denser downtowns and more funding for community assets, Wyoming would bolster both its economic and cultural vitality by keeping its young people and leveraging them to obtain growth in new industries.

Related project: Pathways to Prosperity in Wyoming

Global Trends in Innovation Patterns: A Complexity Approach

Technological know-how in a country shapes its growth potential and competitiveness. Scientific publications, patents, and international trade data offer complementary insights into how ideas from science, technology, and production evolve, combine, and are transformed into capabilities. Analyzing their trajectories enables a more comprehensive and multifaceted understanding of the whole innovation process, from generating ideas to internationally commercializing products. We analyze the production patterns in these three domains, documenting the differences between advanced and emerging market economies. We find that future income, patenting, and publishing growth correlate with the economic complexity indices calculated from these domains. Capabilities embedded in the country also shape future diversification opportunities and make the innovation process path dependent. Lastly, we also show that diversification opportunities can be inferred across innovation domains.

Innovation Policies Under Economic Complexity

Recent geopolitical challenges have revived the implementation of industrial and innovation policies. Ongoing discussions focus on supporting cutting-edge industries and strategic technologies but hardly pay attention to their impact on economic growth. In light of this, we discuss the design of innovation policies to address current development challenges while considering the complex nature of productive activities. Our approach conceives economic development and technological progress as a process of accumulation and diversification of knowledge. This process is limited by the tacit nature of knowledge and by countries’ binding constraints to growth. Consequently, effective innovation policies should be place-based and multidimensional, leveraging countries’ existing capabilities and addressing countries’ current problems. This contrasts policies that lead to economic efficiencies, such as copying other countries’ solutions to problems that countries do not currently have.

Diagnosing Wyoming’s Workforce Challenges

Wyoming is facing two distinct labor market challenges: in the short-term low workforce availability is a constraint while in the long-term job and wage growth have stagnated. Currently, Wyoming’s labor market is characterized by tightness and employers are struggling to fill positions. However, the current tightness of the labor market is not a phenomenon that is specific to Wyoming but instead is prevalent across the country. What sets Wyoming apart is the lack of growth in employment and wages over the long-term. Understanding these differing dynamics is important because policy responses may attempt to address the short-term issue without considering the underlying structural causes of the long-term dynamics. This will likely be ineffective and not lead to lasting change. For lasting change, the structural issues of the long-term dynamic need to be addressed.

An often-discussed solution is to increase the supply of training and education – this has merits in its own right but will not solve the long-term labor market challenge facing Wyoming. Only 38% of all jobs in Wyoming require tertiary education, the second lowest of any US state. Additionally, our analysis shows that the returns to a tertiary degree in Wyoming are significantly below those of its peers. Unsurprisingly, the lack of demand for tertiary-educated workers leads many young Wyomingites with a tertiary degree to leave the state. Overall, however, Wyoming has become an exporter of well-trained young people. Increasing the supply of tertiary education will not address the underlying structural issues facing the labor market.

A main driver of Wyoming’s lagging performance has been the comparatively low labor productivity in the state. Most of Wyoming’s industries have a lower output per worker than the respective national industry and pay lower wages on average. Industries that fall into this category cover 82.8% of all employment in Wyoming. The few industries in which Wyoming is more productive than the rest of the US are mostly related to natural resource extraction. Wage dynamics of occupations in the state exert a similar pattern where STEM-related occupations have not seen much growth, indicating low demand in the state.

To address the long-term issue, Wyoming needs to create the conditions for a more complex economy that can use the potential of its human capital instead of excessively relying on its natural resources. The challenge is to attract and grow competitive companies in industries with strong demand. A critical factor in doing so is scale. Many more knowledge-intensive industries tend to develop in places that are larger urban agglomerations. Wyoming should focus on the positive forces of agglomeration to develop these industries and make use of the productive potential it has. Creating the conditions for this includes place-based investments and an enabling regulatory framework. In Wyoming, housing regulations have been an important barrier preventing further agglomerations, but efforts are underway to address this barrier.

In the short-term, solutions that are focused on increasing the available labor pool within the state appear most promising in easing the current constraint. This is especially true when they address structural barriers that could persist after the labor market cools off. Our work documents specific recommendations within the areas of childcare, justice-involved individuals, higher education, and out-of-state workers (Section 3.2) that aim to increase the participation from these labor pools in Wyoming’s workforce. These are labor pools that are significant in size and have underutilized potential in terms of labor force participation within the state.

Related project: Pathways to Prosperity in Wyoming

From Products to Capabilities: Constructing a Genotypic Product Space

Economic development is a path-dependent process in which countries accumulate capabilities that allow them to move into more complex products and industries. Inspired by a theory of capabilities that explains which countries produce which products, these diversification dynamics have been studied in great detail in the literature on economic complexity analysis. However, so far, these capabilities have remained latent and inference is drawn from product spaces that reflect economic outcomes: which products are often exported in tandem. Borrowing a metaphor from biology, such analysis remains phenotypic in nature. In this paper we develop a methodology that allows economic complexity analysis to use capabilities directly. To do so, we interpret the capability requirements of industries as a genetic code that shows how capabilities map onto products. We apply this framework to construct a genotypic product space and to infer countries’ capability bases. These constructs can be used to determine which capabilities a country would still need to acquire if it were to diversify into a given industry. We show that this information is not just valuable in predicting future diversification paths and to advance our understanding of economic development, but also to design more concrete policy interventions that go beyond targeting products by identifying the underlying capability requirements. 

Export-led Growth

In this paper, I argue that a focus on exports, both at the intensive margin (where existing products increase their volume), but especially at the extensive margin (where new products start being exported), can help countries figure out what policies to adopt in order to achieve sustained growth. I present five stylised facts about growth and its trends in the decades that followed the Washington Consensus. 

Japan’s Economic Puzzle

This paper examines Japan’s economic performance in recent years, uncovering a narrative that challenges conventional views. Despite slow productivity growth, Japan maintains the highest economic complexity globally due to its sophisticated export portfolio. The study reveals that while Japan has been experiencing a decline in goods export market shares it has had a rise in services exports, particularly in R&D licensing. Furthermore, Japan has significantly increased its net foreign assets and direct investments abroad, resulting in abnormal high returns. These results put together suggest that Japanese firms —perhaps in reaction to a stagnant domestic labor force—are leveraging their extensive knowledge capital by investing and redeploying resources internationally, which are generating these higher returns. The increasing wealth generated abroad results, we show, in an expansion of non-tradable activities which are less productive, driving down aggregate productivity growth. The paper also highlights concerns over declining innovation quality, posing risks to Japan’s future economic performance and its ability to redeploy its accumulated knowledge to enjoy from unusually high returns from their foreign investments. The findings emphasize the need for policy reforms to enhance innovation quality to sustain Japan’s productivity of non-tradable activities and with an immigration policy that may change the downward trend in labor supply. 

Grants in Wyoming: Constraints and Solutions

Wyoming communities are reliant on grants to fund local priorities, yet the grants system is not effectively meeting the needs of many communities across the state. This problem is central to the growth challenges of many rural economies across the state. Although this problem pre-dates the recent expansion of federal grant programs, the importance of this problem has grown in the last several years as the scale and complexity of federal grant opportunities — particularly discretionary grants — has increased. Wyoming communities are struggling to navigate and benefit from these federal funding opportunities. As of late 2023, the state is significantly underperforming many comparator states in the number of federal grants received and the distribution of federal grants across the state. Grant writers and administrators face a sometimes impossible task in navigating an ever-shifting grants landscape. This is a challenge for local governments across the country but may be especially important in Wyoming due to narrow local tax bases and the rural nature of the state.

Through an eight-month effort combining research and action, we have explored the causes of this problem to inform potential solutions. We have identified four principal constraints that are most to blame for Wyoming’s underperformance: (1) Lack of relationships between communities and funders; (2) Inability to follow changing grant opportunities (esp. federal); (3) Shortage of prioritized community needs and “grant ready” project plans; and (4) Overreliance on “local heroes” – especially for smaller communities. We argue that these challenges are “principal constraints” because they are binding for the largest number of communities, especially smaller communities. However, there are additional constraints that are critical for other communities, especially those that have more experience with accessing state and federal grants. This note summarizes key evidence we have found on each of these principal constraints. These constraints occur early in the grants process, meaning many potentially promising grant opportunities are never pursued. We find that many federal grant programs and discretionary award processes are inconsistent with the realities of scarce staff, resources, and bandwidth of local governments, especially in small communities. However, we find widespread examples and evidence that these constraints can be overcome through actions to enable a strong state-wide network that supports local leaders and grant administrators. Examples of success within the state and in other states show that building the capabilities of the network and enabling all communities to access the knowhow of the network can lead to much better grant outcomes.

The note closes with a discussion of how to target a network-enabling response to the grants problem. We outline a first-best option that centers on establishing regional officers who would be responsible for a set of tasks that would respond directly to the principal constraints identified. This approach would require annual funding, but preliminary analysis shows the return on investment overall would be very high and the approach would have the greatest benefits for smaller communities across the state. Very initial designs have been explored for how to establish such a system building on existing assets. Finally, we compare this first-best approach to alternative approaches that are closer to the current support actions underway in the state.