Transcript Slides - James Ashley Morrison

The Economics of Migration
The Inspection Line, Ellis Island
Lecture 16 – Tuesday, 8 November 2011
J A Morrison
1
Albert Einstein
Alexander Hamilton
Vito Andolini
2
Discussion Section Adjustment
- Only 1 discussion section this Thursday:
-
1:30 PM
What about 3:25 section?
attend the 1:30 section
or
Make-up: next Tuesday, 4-4:50 (my office)
3
PS 0304 Int’l Pol Econ
•
Unit 1: Studying the Global Economy
–
Topic 1: Introductory
–
Topic 2: Perspectives on IPE
–
Topic 3: Explaining Foreign Economic Policy
•
Unit 2: Trading Goods & Services
–
Topic 4: Trade in Theory
–
Topic 5: Trade in Practice
•
Unit 3: The International Monetary System
–
Topic 6: The IMS in Theory
–
Topic 7: The IMS in Practice
•
•
✔
✔
✔
Unit 4: Migration
–
Economics of Migration
–
Politics of Migration
Unit 5: Special Topics in IPE
4
By comparison, students find
migration much less abstract than
money (or even trade).
This is partly because the material
itself is less esoteric (“price-specieflow,” “portfolio investment,” &c.).
And partly because many of you have
had personal experience with
international migration!
5
The Economics of Migration
I. The Basics of International Migration
II. Labor as a Factor of Production
III. Labor as a Special Factor
IV.Remittances
6
The Economics of Migration
I. The Basics of International Migration
II. Labor as a Factor of Production
III. Labor as a Special Factor
IV. Remittances
7
What is International Migration?
• International Migration: the movement of people
across political boundaries
• Duration of Stay
– Temporary: tourists, students, medical patients,
religious pilgrims
– Permanent: immigrants, refugees, migrant workers
• Direction
– Immigration: movement/relocation into a country
– Emigration: movement/relocation from a country
8
Why do people migrate?
9
We might think in terms of
“pushes” and “pulls.”
But the impetus is the same:
people migrate presumably
because leaving is preferable to
staying.
10
(But this is not to say that these
“choices” are not sometimes
coerced.)
11
What variables influence
migration patterns?
12
Influences on Migration
• Economic: wages, employment level,
quality of opportunities (including training)
• Non-Economic: war/conflict, violence,
corruption, freedom, quality of services,
familial ties, stability, cultural/ethnic ties
• Costs of Migrating: legal restraints,
transport costs, dislocation/disorientation,
persecution, loss of that which is left
behind
13
The Economics of Migration
I. The Basics of International Migration
II. Labor as a Factor of Production
III. Labor as a Special Factor
IV.Remittances
14
II. Labor as a Factor of Production
1. The Economic Effects of Migration
2. Combining Inputs, Distributing
Products
3. Have Trade and Factor Mobility been
Substitutes?
15
What are the economic effects
of migration?
16
Factor-Price-Equalization
A
B
High Labor
Low Wages
Low Labor
High Wages
There are incentives for migration until wages in country A
equal wages in country B.
A
Migration
B
Labor
Decreases
Labor
Increases
Wages Rise
Wages Fall
Stolper-Samuelson, again
• SS tells us that trade helps the abundant
factors but hurts the scarce factors
• Migration has similar effects:
Initial
Endowment
Labor
Rich/Capital
Poor
Labor
Poor/Capital
Rich
Return on Labor Return on
Capital
Rises
Falls
Falls
Rises
Distributional Effects of
Immigrants
• Greatest effect for Low Skill Labor
– Affect wages of high school dropouts (13% of US
Natives)
• Effects confined to small number of
industries
• Rising wage inequality seems to be
driven more by technological
advancements and trade than by
immigration
II. Labor as a Factor of Production
1. The Economic Effects of Migration
2. Combining Inputs, Distributing
Products
• Have Trade and Factor Mobility been
Substitutes?
20
Broadly conceived, there are two
major components to economic
activity:
(1) combine inputs (land, labor,
capital) to produce desirable
products
(2) distribute those products to
those who desire them
21
Of course, the inputs aren’t
always gathered together nicely.
Nor are the consumers
necessarily close to the
producers.
22
International economic
exchange is a means by which
factors and products can be
rearranged.
Migration might be considered
as a relocation of labor—a
factor of production.
23
Of course, there is more than
one way to skin a cat.
Rather than moving labor,
perhaps capital and/or products
could be moved.
These different options might be
substitutes.
24
We have two types of potential
substitutes:
(1) Substitutability of moving
various factors
(2) Substitutability of factor
mobility and trade
25
(1) Moving Factors as
Substitutes
• Assume: Inputs are disparately located
• Scenario 1: Bring Capital to Workers
– Capital is exported and invested in country
with workers
– Production occurs in workers’ home country
• Scenario 2: Bring Workers to Capital
– Workers migrate to country with capital
– Production occurs where capital lies
26
(2) Factor Mobility and Trade as
Substitutes
• Assume: producers are located away from
consumers
• Scenario 1: Factor Mobility with No Trade
– Inputs are relocated to country with consumers
– Products are produced within borders; trade is
unnecessary
• Scenario 2: Trade with Factor Immobility
– Inputs remain
– Products produced outside of consuming country
– Products traded to consuming country
27
II. Labor as a Factor of Production
1. The Economic Effects of Migration
2. Combining Inputs, Distributing
Products
3. Have Trade and Factor Mobility been
Substitutes?
28
The notion here is that moving
labor should have the same
effects as moving other inputs
and/or trading finished goods &
services.
Does this empirically hold true?
29
Collins, O’Rourke, & Williamson (1999)
empirically examine the substitutability
of factor mobility and trade across time.
 They find convincingly that factor
mobility and trade were not substitutes.
And policymakers never considered them
as such.
30
Why weren’t these things
substitutes?
Because labor isn’t just
another factor.
People are special.
31
The Economics of Migration
I. The Basics of International Migration
II. Labor as a Factor of Production
III. Labor as a Special Factor
IV.Remittances
32
Even considered strictly as a
factor of production, labor works
differently from other factors.
33
Labor is more mobile than land.
But it is far less mobile than
capital and than most goods
and services.
34
Of the things that can be
transported, labor is the hardest
to move—even when treated
with utter disregard.
A slave ship.
35
Migrants also affect the BoP
through remittances (sending
money back home).
And migrants frequently move
as “bundles” (as families).
36
Fiscal Implications of Migration
• Immigrants
– Need more schooling, health care, &
unemployment assistance
– Support social security, work more hours, pay
considerable taxes
• Emigrants: how to make them pay income
tax?
– All US citizens must pay income tax no matter
where they reside or earn income
 Overall fiscal effect is unclear but most
likely positive effect for host countries
37
The Economics of Migration
I. The Basics of International Migration
II. Labor as a Factor of Production
III. Labor as a Special Factor
IV.Remittances
38
A remittance is the transfer of
money across space, often
internationally.
39
IV. Remittances
1. Background on Remittances
2. The Political Economy of Remittances
40
Remittances: Then & Now
• Originally developed to finance overseas
purchases and investments
• Remittances have become a major means
by which individuals support families
abroad
• Remittances for everyone
– Wealthy: British “remittance man” supported
by family
– Poor: Migrant workers supporting family back
home
41
Extraordinary Growth Recently
• Kapur & McHale:
– 1980: $17.7bn
– 1990: $30.6bn
– 2002: $80bn
• World Bank 2008 remittances: $305bn
(nearly 2% of GDP for developing
countries)
– Philippines alone had $16.3bn!
• Recent financial crisis: down to $290bn for
2009
42
Top Sources of Remittances
43
Top Receivers of Remittances
44
Remittances dwarf foreign aid.
2001: remittances were twice
the value of foreign aid.
45
So, we know that the remittances that
follow from migration has huge
economic effects.
But migrants might also influence
patterns of foreign investment more
broadly...
46
David Leblang has just published
an article in the Amer Pol Sci
Review showing that “migrant
networks…promote both portfolio
and FDI.” (Leblang, 2010)
46
How might we explain this
effect?
Leblang: migrants mitigate
cross-border information
asymmetries.
You invest overseas where
friends & family can provide onthe-ground intel.
47
IV. Remittances
1. Background on Remittances
2. The Political Economy of Remittances
48
So, remittances matter.
In thinking about their effects,
we might consider a number of
issues…
49
(1) Should remittance-sending
nations consider remittances as
a substitute for foreign aid?
Should we allow more migration
and more capital flows so as to
encourage these processes?
50
(2) Should remittance-receiving
nations consider remittances as
a substitute industry and/or relief
measure?
(e.g. Some states in the southern US used to
distribute “welfare” in the form of one-way bus
tickets to Chicago and Detroit.)
51
(3) How should governments
regulate and tax remittances?
Can and should they use capital
restrictions? Or should we
create a new regime to perform
this function?
52
(4) What are the implications of
remittances for security?
Does this money go to fund
terrorists and/or militants?
53
Next time, we’ll consider the
politics of international
migration…
54