Though Bradford and Lawrence point to these deviations from goods price equalization as evidence that globalization has not “gone far enough”, we note that international price gaps for the labor of people from poor countries make all remaining global price gaps in trade look small. Many gaps in goods prices have been small for a century: O'Rourke and Williamson (2000) (pp. 29-55) report that the transportation revolution in the late nineteenth century brought prices of the most basic commodities, such as wheat, to near parity between the US and Great Britain. Over the same period, wage gaps for equalproductivity workers between the richest and poorest countries have almost certainly risen dramatically.

This holds to an even greater degree for price gaps in international finance. Lamont and Thaler (2003) survey the literature on cross-border price gaps for equivalent financial instruments, and point out that gaps of 15% are considered “inexplicably large”. Alongside gaps on the order of 1,000% in the price of equal-productivity labor, all remaining price gaps in financial markets amount to rounding error.

The fact that price gaps for labor frequently exceed price gaps for goods by an order of magnitude has strong implications for the social welfare effects of different forms of economic liberalization. Welfare effects move as the square of price wedges. The World Bank (2005) (p. 128) finds that following an elimination of _all_ remaining policy barriers to trade worldwide, developing countries would gain $109 billion in annual income by 2015. But the simulations of Walmsley and Winters (2005) (Table 4, col. V) suggest that just a tiny relaxation of barriers to migration—allowing a movement amounting to just 3% of the OECD countries’ labor force—would raise the annual incomes of people from developing countries by $156 billion. These aggregate figures suggest that liberalizing labor movements might be a more effective antipoverty measure than others—like trade liberalization—that have dominated policy discussions. We now take up this question in greater detail.

4.3 _Comparison with other antipoverty interventions for the marginal worker_ The increment in wages for the marginal worker moving to the United States is, for workers from many countries, enormously larger than the marginal effect on wages caused by any available _in situ_ antipoverty measures.

For example, the pioneering (if controversial) estimate by Pitt and Khandker (1998) of the net return on microloans to Bangladeshi women is 18%. Taking this substantial return at face value, this translates into an increase in annual household income of US$65 at purchasing power parity, so that a lifetime of continuous access to lending with these returns would return US$683 in net present value.<sup>32</sup> From Table 2, the annual PPP dollar gain to a male Bangladeshi solely due to working in the US is just over $10,000 when

> 32 Their estimate of the return to males is 11%, but we use the higher figure for females to be conservative. Average annual female borrowing is Tk3415, or US$361 at PPP using the average PPP conversation factor from World Bank (2007) over the relevant period (1986-1992) of 9.47. The resulting increase in household income is thus Tk615 or US$65 at PPP. Average life expectancy in Bangladesh during 1986-1992 was 55 years and average borrower age in the sample is 23, and a 33-year stream of US$65 payments (including one at time 0) discounted at 10% has a net present value of US$683. At 5% the value is US$1091 and at 15% it is US$493.