Transcript Diapositiva 1

Modelling the Effects of Labour Migration on
Regional Economic Performance
Pouliakas, K, Roberts, D, Balamou, E and Psaltopoulos, D.
University of Aberdeen Business School, UK
&
University of Patras, GR
TERA Final Conference as a pre-Congress Symposium of EAAE
Gent (Belgium) – August 26-29, 2008
Layout of Presentation
Aim:
To estimate on the basis of a CGE model the
impact of different scales and skill types of
immigration on remote regions of the EU.
Structure
• Migration as a regional phenomenon.
• Theoretical foundation & Lit. Review:
 The Economic Impact of Immigration.
• Description of migration patterns in case study areas.
• Description of Labour Supply Simulations:
 The ‘basic’ labour supply simulation.
 The ‘skills’ labour supply simulation.
• Findings from the migration simulations.
• Sensitivity analysis.
• Conclusions.
Migration as a
regional phenomenon
• In the last 45 years the number of persons across
the globe who were living abroad more than
doubled from 75 million to 191 million (UN, 2006).
• Most research on migration has focused at
national level.
• Immigration is likely to exert its most significant
impact on local communities.
• Important regional element in the decision where
to migrate (predominantly urban centres).
• Survival of rural economies dependent on
migrant labour (e.g. Scottish Highlands).
• Yet data restrictions have inhibited the study of
small geographical units in the past.
Theory & Lit. Review
• The standard economic paradigm predicts
that
more workers into an economy is
expected to reduce wages, ceteris paribus.
• If wages are rigid, unemployment should
arise if migrants and natives are substitutes.
• More realistic models (e.g. wage bargaining,
trade H-O models) predict an ambiguous
effect of immigration on an economy.
• In small and homogenous regional economies
expect large effects due to the inflexibility of
the output mix in the traded goods sector.
• “A meaningful exploration of immigration and
wages requires a clear understanding and
treatment
of
the
general
equilibrium
mechanisms at play” (Lee, 2007).
Theory & Lit. Review
• The weight of the empirical evidence suggests that
immigrants are complements.
• “The impacts of immigration on non-immigrant
employment and unemployment outcomes are
minimal, but there is some evidence of wage effects”
(Blanchflower et al., 2007; Dustman et al., 2005).
• Meta-analysis of 348 estimates: “A 1% increase in the
proportion of immigrants in the labour force lowers
wages across the investigated studies by only
0.119%” (Longhi et al., 2005).
• Positive impact on GDP as skill bottlenecks are
alleviated and domestic productivity rate raised.
• Ambiguous effect on prices as immigrants affect both
AS as workers/producers and AD as consumers.
CGE Estimation
CGE Model Estimation
• Data - SAM plus other elasticity estimates.
• Procedure - calibrate CGE models so each CGE
replicates Case study SAM.
CGE Model Usefulness
• Full Picture of case-study economic transactions.
• Controlled experiments – what if?
Example Simple Scenario – labour migration
• How different are the effects of large labour
inflow/outflows in case study areas?
Migration flows in
case study areas
• The Scottish, Greek and Italian areas have
been experiencing population growth driven
primarily by in-migration of foreign labour
in the past decade.
• Although often highly skilled, migrants have
tended to work in low-skilled/low-paid
sectors such as agriculture and tourism.
• A
negative
migration
balance
has
predominated in Latvia, Czech Republic and
Finland.
• Primarily high-skilled labour (‘brain-drain’).
CGE Findings
Scenario 1
+- 10% change in total labour supply in all areas.
Scenario 2
a) -20% skilled labour category – LV, CZ, FIN
b) +20% unskilled labour category – GR, IT, UK
Key Assumptions
• Each case study area separate labour market.
• Urban-rural labour market integrated within
case study area.
• Capital fixed by sector; Investment savingsdriven; Government savings flexible; ER fixed.
• Neoclassical labour market; Labour mobile,
wages flexible.
Scenario 1
Basic analysis
Table 1 %Impact on Real GDP (+10%)
CZ
FIN
GR
IT
LV
UK
10.75
3.34
3.94
8.89
4.59
2.62
Investment
na
21.90
13.93
14.22
22.17
24.89
Reg exports
7.80
7.27
3.89
8.59
7.87
7.35
Reg imports
GDP at factor
cost
5.48
7.86
6.04
7.38
7.64
7.98
6.53
5.43
4.60
8.13
5.88
5.64
Private Cons.
Scenario 1
Basic analysis
Table 2 %Impact on Real GDP by sector (+10%)
CZ
FIN
GR
IT
LV
UK
Rural
R-primary
R-manufacturing
R-services
6.53
6.63
7.34
5.92
5.44
1.70
9.80
4.26
1.82
0.96
2.98
2.40
9.05
6.66
8.48
9.73
5.30
3.77
7.88
4.51
3.25
2.75
6.05
2.67
Urban
6.55
5.42
4.73
7.70 6.28 7.26
na
na
4.66
0.00 3.70 4.67
U-manufacturing
7.14
9.83
9.30
7.76 8.46 8.92
U-services
6.23
3.81
3.96
7.61 5.16 6.85
U-primary
Scenario 1
Basic analysis
Table 3 %Impact on wage of labour
+10%
-10%
Skilled
Unskilled
Skilled
Unskilled
CZ
FIN
-3.97
-10.64
-3.84
-6.52
4.64
13.46
4.48
7.16
GR
IT
LV
-4.47
-1.96
-6.99
-4.31
-2.00
-9.58
5.26
2.20
8.36
5.03
2.20
12.11
UK
-15.79
-12.96
18.21
13.18
Scenario 2
Skills analysis
Table 4 %Impact on real GDP at factor cost (-20% skilled)
CZ
FIN
GR
IT
LV
UK
Rural
-12.64
-5.55
-1.13
-12.74
-9.60
-7.05
R-primary
-11.80
-1.19
-0.45
-4.36
-6.59
-6.24
R-secondary
-13.68
-10.87
-2.53
-9.13
-14.99
-16.40
R-services
-11.92
-4.04
-1.51
-15.99
-7.93
-5.04
Urban
-12.78
-6.02
-5.59
-11.43
-11.29
-14.95
na
na
0.40
0.00
-8.52
-13.33
U-secondary
-13.52
-10.89
-11.62
-8.54
-16.00
-22.32
U-services
-12.38
-4.24
-4.84
-15.32
-8.85
-13.03
Overall
-12.75
-5.74
-5.40
-11.85
-10.59
-11.76
U-primary
Scenario 2
Skills analysis
Table 5 %Impact on real GDP at factor cost (+20% unskilled)
CZ
FIN
GR
IT
LV
UK
Rural
1.16
5.97
2.54
5.28
2.02
1.26
R-primary
2.43
2.24
1.41
9.20
1.36
0.99
R-secondary
1.70
10.45
3.60
8.14
2.66
0.62
R-services
0.63
4.72
3.39
3.16
7.77
1.42
Urban
0.98
5.44
4.23
4.45
2.58
1.94
U-primary
na
na
9.16
0.00 -0.55
1.12
U-secondary
1.44
10.39
8.08
7.47
2.89
1.11
U-services
0.73
3.64
3.37
0.39
2.42
2.17
Overall
1.02
5.75
4.16
4.72
2.35
1.67
Scenario 2
Skills analysis
Table 6 %Impact on wage of labour
-20% skilled
+20% unskilled
Skilled
Unskilled
Skilled
Unskilled
CZ
11.52
-12.52
1.00
-16.94
FIN
34.91
-5.91
2.55
-15.84
GR
17.64
-5.62
4.41
-12.23
IT
10.70
-11.80
4.59
-13.04
LV
21.08
-2.55
1.64
-19.77
UK
50.18
-34.38
5.72
-41.65
CGE Findings
Scenario 1
Aggregate effect on GDP broadly similar across case
study areas
 +10% in LS positive impact on GDP of 4-8%
 -10% approximately same negative effect.
The urban centres are mostly affected (#IT).
An increase (decrease) in LS is associated with a fall
(rise) in the region-wide wage of labour.
The magnitude of the shock is driven by a combination
of initial factor endowments and the degree of
substitution between factors of production.
The link between migration and prices is not clear-cut.
CGE Findings
Scenario 2
Areas losing skilled labour
Big overall losses in GDP of 5-12% depending on the country
Urban areas worst hit
A skill deficiency leads to marked rise in wages of remaining
skilled workers
Areas gaining unskilled labour
Smaller overall gains in GDP 2-6%
No clear pattern whether urban or rural areas gain most
Wages of unskilled workers fall
Sensitivity Analysis
• Changing elasticity of factor substitution
- Key macro aggregates affected marginally.
- Smaller wage effects.
• Allowing for mobility and accumulation of capital
- The long-term positive effect of migration on GDP is 14% higher depending on the degree of capital
accumulation.
- Smaller wage effects.
- Greater divergence in the GDP levels of the rural and
the urban areas of each region.
• Increased substitutability between Sk/Usk labour
Interviews
with
local
policymakers/managers:
productivity of migrants equal/higher than that of locals.
- Modelled as skilled and unskilled labour becoming more
“substitutable” (e.g. σ ~ 1).
- Slight increase in GDP.
- Smaller impact on wages of unskilled workers.
Migration &
Capital accumulation
GDP Response to 10% LS Shock with Capital Accumulation
10
Increase in Real GDP(%)
9
8
7
6
5
4
3
2
1
0
1
2
3
4
5
6
7
Increase in Capital Supply (%)
8
9
10
Conclusions
• Modelling Approach: SAMs and CGE
• 1% rise in immigration:
 0.4-0.8% rise in GDP.
 0.4-1.5% fall in wages.
 ambiguous effect on prices.
• Skilled/unskilled
wage
gap
widens
–
is
immigration of unskilled workers significant
contributor to earnings inequality?
• ‘Brain-drain’ is a potentially serious barrier to
economic growth and development of regions.