Transcript 2nd lecture (ppt presentation) File - e

Economics of International
Migration2
Jan Brzozowski, PhD
Cracow University of Economics
Theories of international migration
• Why people move? Who migrates?
• Neoclassical theory
• Criticism: wage disparities in world economy
• Segmented labor market
• New economics of labor migration
• Social networks
• Institutional theory
Why people move? Who migrates?
• Would you migrate to a different country upon
graduation?
• What factors do matter in this decision?
Neoclassical theory
• Explains migration from „top” and „down”
perspective
• Top (macro) – interplay of global imbalances in
world economy
• Down – explanation of individual behavior of
homo oeconomicus
Macroeconomic explanation
• Migration as the outcome of unequal
distribution of the factors of production across
countries
• Some countries have oversupply of labor in
relation to capital, while others the oversupply
of capital relative to labor
Home/sending countries
Host/destination countries
Abundance of labor
Scarcity of capital
Labor flow
Relative scarcity of labor
Economic underdevelopment
High level of economic
Development
Low wages
High return to capital
Abundance of capital
Capital flow
High wages
Low return on capital
What is the outcome?
• Short-term: decrease of wages at destination due to
increased competition, increase of wages at home,
decreased returns to capital at home, increased returns
to capital at destination
• Long-term: through adjustment the gradual
equalization of wages and capital remuneration in both
countries, equilibrium reached
• The gradual decrease of the intensity of capital and
labor movements in the long run, as the economies
become similar
Microeconomic explanation
• Migration modeled as a rational decision of an
individual (homo oeconomicus)
• Cost-benefit analysis, taking into the account current
and future income, employment/deportation
probability etc.
• Migation perceived as investment
• Migrants move to the destinations where the rate of
return to migration is the highest
E. Lee (1966) extension of this model
Predictions of neoclassical theory
• Migrants will move from LDCs to developed economies
• Capital will move in opposite direction
• Migrants will move between countries which have the
biggest disparity in terms of wages (they will maximise
their income)
• International migration flows will lead to gradual
convergence of global economy, equalization of wages
and decrease of labor mobility as prices are equal
wage disparities in world economy
Source:
Conference Board
Of Canada, 2011
There is no global convergence
• And international migration has a stake in this
process
Immigrants to US
(millions)
Trade as % of US GDP
Massey and Taylor, 2007
Lant Pritchett (2006) gives the example
• Zambia: GDP per capita in 2000 equals to 60% of the GDP
pc in 1964
• Of course this is mostly due to bad economic policy, but…
• The population in this period has grown three-fold, from
3.5 to 10 million
• For many poor countries the labor is the main „export
product”
• But they are unable to export their workforce
World Bank study (2006)
• A tiny liberalization in migration policies in the
high-income countries (3% increase of labour
force by 2025) would increase world GDP by
365 billions USD
• Average income pc in developing countries
would increase by 0.86% and in developed
countries by 0.36%
Why not?
• Political factor is the main limitation
• We have globalization and liberalization
processes within WTO, but not within ILO
• No free movement of people worldwide (with
the notable exeption of the EU)
Segmented labor market: dual labor
market theory (Piore, 1983)
Primary sector
Secondary sector
White-collar jobs
(managers, lawyers etc.)
White-collar
Pink-collar
Semi-skilled
jobs
3-D Jobs (difficult,
dirty&dangerous)
Pink-collar jobs
(clerks, secretaries)
3-D Jobs
(waiters, taxi drivcleaners)
Migrants
(miners, mechanics)
Natives
Blue-collar jobs
New economics of labor migration
• Decisions taken not by the individuals, but within the
household
• Households in developing economies are risk-avoiders:
instead of maximising income, they try to diversify the
sources of income
• Migration – way to allocate factors of production (i.e. labor)
and secure income by future remittance flows
• The decision to send a member of a household for
international migration might be taken to decrease the
relative deprivation
Relative deprivation (Stark, 1985)
• Feeling of deprivation is relative
• Even households with upper-midle income might
be affected by relative deprivation, if
international migration affects the income
structure in the sending region
• If poorer households send migrants and get
richer, the economic structure is changed, and
wealthier households are affected. They might be
forced to send their members to work abroad
Social networks
• Migration as an act which creates social capital
• Migration is more likely in regions which are
linked by cross-border ties, which bridge the host
and origin regions
• Networks provide a reliable framework for
bilateral flows of people (circular migration),
capital and information
Example
• Venda das casas: Governador Valadares, MG (Brazil)
• Home cleaning&cooking services in Boston, MA (US)
dominated by female migrants from Governador
Valadares
• Most of work undocumented/irregular
• When migrant returns to Brazil, she sells her working
place to a prospective migrant throug social network
Institutional theory
• Emphasises the role of intermediary agents,
linking supply and demand
• Professional recruitment agencies: operate as
representatives of national/regional goverments,
employer associations etc. For example:
nationally-induced immigration campaign in
Brazil and Argentina in late 19 century, medical
staff recruitment in UK after 2004
• Irregular agencies/intermediaries: document
forging, human trafficking/smuggling
• Mostly controlled by criminal organizaitons
• Migrant exploitation and victimization (slave
work, extortions/debt repayment, drug
smuggling)