Is American Economic Freedom Determined by Ancestry, Ethnicity, and Immigrant Countries of Origin?

Interesting study and methodology by Cato Institute that counters some of the populist and academic rhetoric:

The best potential counter argument against vastly expanding legal immigration is that immigrants might bring the less-efficient economic institutions, political systems, or cultural mores of their homelands with them to the United States. Ultimately, the United States and other rich countries are prosperous because of our economic and political institutions with some variation potentially explained by culture.

Most immigrants come from poorer countries with worse economic institutions, especially as measured by the Economic Freedom of the World Index. My co-author Benjamin Powell and I investigated whether immigrants worsened domestic economic institutions in our new book Wretched Refuse? The Political Economy of Immigration and Institutions, and we found it either to be unsupported by the evidence or that the evidence suggests that more immigration can sometimes increase economic freedom and improve institutions. There’s not much worry that immigrants would kill the institutional goose that the lays golden eggs of economic growth.

Some supporters of the so-called deep roots hypothesis, that events many thousands of years ago affected culture, genes, or both in such a way that our economic outcomes were basically determined long ago, are also worried that immigrants could undermine our institutions. Proponents of this view argue that it’s impossible for immigrants to not bring support for the bad economic institutions of their ancestral homelands with them. Although economic institutions have changed substantially over time, even recently in some countries, and the deep roots theory can’t explain why economic institutions change, it’s still a thoughtful counter argument.

To test whether there is support for it, we created a predicted economic freedom index for a hypothetical United States whose economic freedom is entirely a product of the economic freedom of the countries where immigrants and their ancestors came from. In other words, a native-born American of Irish descent and a native-born American of Italian descent would each support economic freedom in the United States to the extent that economic freedom exists in Ireland and Italy, respectively. For example, if half of a country’s population were of Irish ancestry and half were of Italian ancestry then the predicted economic freedom score of that country would be 7.82 ((8.13+7.51)/2) under this theory. Thus, we created an average weight of the U.S. population by ancestry, attributed the economic freedom scores of those countries to those Americans, and then took the weighted average of economic freedom for the United States in 1980 and 2019. The former date was the first year that the U.S. Census asked about ancestry.

We obtained ancestry data from the American Community Survey (ACS). We used the Economic Freedom of the World (EFW) index to gather data on the economic freedom of the United States and other countries over time. The EFW estimates a country’s economic freedom by looking at five variables: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation.

The ACS data is reported using either demonyms, broader regional terms, or ethnic terms. As a result, we had to interpret some proportionally. For example, if an ACS respondent said that he was “Eastern European,” we calculated his inherent EFW score as coming from all Eastern European countries proportionally. Similarly, we combined some terms together. For example, both English and Scottish were combined into British. We then applied the EFW score for the United Kingdom to them, since EFW is reported by country. The biggest challenge was apportioning the ancestry of Black Americans who are the descendants of slaves. We know the general area where they came from but not the specific countries. Thus, we followed the general methods here for allocating black American ancestry. The different allocations made in this study are listed in Table 1.

In order to perform later calculations, we needed to determine which countries were relevant to the study. To be relevant, ACS and EFW data needed to both be available in each year. Some countries did not qualify, but their exclusions did not impact the final result as they were generally smaller countries with few historical immigrants to the United States. All demonyms and ethnic terms were interpreted by their national association to match the ACS and EFW data, but this was straight-forward.

To predict the ancestry-only EFW score for the United States, we multiplied the proportion of the population of ancestry by the EFW score in that country for that year. We then simply added up the results.

If ancestry alone determined the United States’ EFW score, it would have had a score of 6.32 in 1980 and 7.46 for 2019. In reality, the United States’ EFW was 8.13 in 1980 and 8.22 for 2019 – 1.8 and 0.76 points higher than what the ancestry-only score would predict. The economic freedom of the United States is substantially higher than its ancestry adjusted EFW score would predict if the deep roots theory were correct. For example, if American ancestry determined our EFW score then we should have the economic freedom score of Hungary in 2019 (7.44) rather than the much higher actual score of 8.22.

Interestingly, the average EFW score of the ancestral homelands of Americans and immigrants has increased considerably over time from 6.32 to 7.45. If deep roots really did drive our economic destiny by affecting economic freedom, we should be much less concerned today than in the recent past, as the ancestral homelands of immigrant groups are much freer today than in the past.

Ancestry and country of origin are not destiny, at least not in the United States in these two years.

Source: Is American Economic Freedom Determined by Ancestry, Ethnicity, and Immigrant Countries of Origin?