GM 1208 International Migration LECTURE 3 Migration theory

GM 1208 International Migration LECTURE 3 Migration theory - Effects of migration on sending and receiving countries GM 1208 & EHA 128 International Migration

Brain drain – brain gain Human Capital Flight Post war: Scientists and technologists from Europe to the US (Royal Society) Later: From third world countries to Europe and the US From Eastern to Western Europe Main effect: Net loss of sending countries Net gain of receiving countries GM 1208 & EHA 128 International Migration

Brain drain – brain gain A Swedish experience in post war period Swedish recruitment of Finnish labour in the 1940 s Bilateral agreement – public employment officies GM 1208 & EHA 128 International Migration

Brain drain – brain gain Brain drain is the result of selective migration - self selection • • Skilled labour Transparency of human capital General or firm specific knowledge Wages and employment opportunities GM 1208 & EHA 128 International Migration

Brain drain – brain gain Brain gain – receiving country • No costs for education Example In 1973, 41 000 professionals and technicians immigrated into the US. If the cost of education was 20 000 US $, the world contributed to the development of the US about 800 million US $. (Source: Portes 1976) GM 1208 & EHA 128 International Migration

GM 1208 & EHA 128 International Migration

Brain drain – brain gain Brain drain and gain – sending country • Sunk costs (for education) • However, - remittances - return migration of skilled labour (HC accumulation abroad) GM 1208 & EHA 128 International Migration

Magnitude Remittances to developing countries (2010): $307 billion Largest remittance receiving countries (2010): India - $55 billion China - $51 billion Mexico - $22. 6 billion The Philippines - $21. 3 billion Measured as a share of GDP(2009): Tajikistan - 35% of GDP Tonga - 28% of GDP Lesotho - 25% of GDP Moldavia and Nepal - 23% of GDP GM 1208 & EHA 128 International Migration

Alejandro Portes summerizes literature on professional emigration to the US (1976) INTERNATIONAL LEVEL I. Emigration of elite occupations is a consequence of international imblances which permit advanced industrial nations to offer more attractive remunerations, work facitilities, social standing, and general life conditions to those whose skills and talents they need. STRUCTURE GM 1208 & EHA 128 International Migration

Alejandro Portes summerizes literature on professional emigration to the US (1976) NATIONAL LEVEL II. Professional emigration is a consequence of internal structural imbalances between the supply of professionals produced by the educational system of a society and the internal demand for their services. The greater the excess of supply in quantitative terms, the greater the emigration. BALANCE OF SUPPLY AND DEMAND GM 1208 & EHA 128 International Migration

Alejandro Portes summerizes literature on professional emigration to the US (1976) INDIVIDUAL LEVEL III. Professional emigration is a consequence of individual differences which have to do, among other things, with past training and achievments, current situation, and the network of social relationships surrounding the individual. The best trained, less encumbered, and more encouraged to leave the person is, the greater the probability of emigration. OBSERVED AND UNOBSERVED FEATURES GM 1208 & EHA 128 International Migration

Selective migration (Chiswick 1978, Borjas 1987) 1) Self-selection of migrants (vs. stayers) on human capital characteristics - age - educational level - unobservable features 2) Self-selection among migrants in choice of destination depending on human capital characteristics - wage differentials in the sending and receiving country influence who emigrates where - small in sending; large in receiving > positive selection (more high skilled) - large in sending; small in receiving > negative selection (more low skilled) GM 1208 & EHA 128 International Migration

Emigrants from Iran 1979 -85 in the US and Sweden 1990 (Haberfeld and Lundh, Self-Selection and Economic Assimilation of Immigrants, International Migration Review 2014) US Natives US Immigr. Sweden Natives Sweden Immigr. LFP rate 87% 91% 87% Self-employed 14% 29% 8% 8% Earnings per month (USD, SEK) 2, 876 3, 105 14, 786 8, 065 Years of schooling 13, 2 15, 7 10, 9 12, 2 BA+ 28% 72% 14% 19% GM 1208 & EHA 128 International Migration

Is there a general relationship between migration and economic development? 1. Development seems to have an impact on migration. The major sending countries are on average poorer than the major receiving countries. 2. Middle-income countries are more likely sources of out -migration than the poorest countries of the world. (Fischer, Martin and Straubhaar 1997) GM 1208 & EHA 128 International Migration

Is there a general relationship between migration and economic development? CORRELATION GM 1208 & EHA 128 International Migration r World 0. 46 Europe 0. 81 Africa 0. 43 America 0. 73 Middle East 0. 89 Far East, Australia 0. 73

Is there a general relationship between migration and economic development? Proportion of immigrants from countries with GDP per capita less than 80% of Sweden’s GDP per capita. (PPP) GM 1208 & EHA 128 International Migration

EFFECTS OF MIGRATION Economic growth: ΔGDP Y = F(C + L + ε) Y = F(C + L + h, t + ε) Y = GDP C = physical capital L = labour h = human capital t = technology/organisation ε = residual GM 1208 & EHA 128 International Migration

EFFECTS OF MIGRATION Migration leads to changes in input factors Medium- or long-term effects • Economic growth effect L Supply of labour - Level - Composition (HC) effects the labour market effects production - bottlenecks (skilled labour) - increases supply of unskilled labour (downward press on wages) - increase in productivity • Trade effect C Supply of Capital - investments - technology - relative prices – terms of trade • Structural change effect - example: Ohlsson 1978 GM 1208 & EHA 128 International Migration

EFFECTS OF MIGRATION Long-term effects • Theory of catch up - forerunners, latecomers - empirical evidence of convergence (example: Hatton & Williamson) - the role of migration GM 1208 EHA 140 & International EHA 128 International migration and immigrant Migration integration

Globalisation Jeffrey Williamson, Timothy Hatton, Patrick O’Brien Real wages 19 th century – WW 1 Interwar period Post-WW 2 period Convergence Divergence Convergence GM 1208 & EHA 128 International Migration

SHORT-TERM EFFECTS OF MIGRATION • Remittances (sending country) • Labour market effects - wages - unemployment • Production effects (receiving country) - firm level (bottle necks) - volume • - productivity • Public transfer effects GM 1208 & EHA 128 International Migration

SHORT-TERM EFFECTS OF MIGRATION • Public transfer effects - Taxes - Transfers - Consumption of public service - Cost-benefit estimates Transfers between immigrant population and native population Swedish studies Wadensjö 1972 - 1969: positive Ekberg 1983 - 1970: positive (1% of GDP) - 1976: positive Gustafsson et al 1990 - 1980 -1985: neutral Ekberg and Andersson 1995 - 1991: negative (1% of GDP) - 1995: negative (2% of GDP) GM 1208 & EHA 128 International Migration

Percent Foreign born Native GM 1208 & EHA 128 International Migration Age structure of the foreign born and native population in Sweden in 1996

EFFECTS OF IMMIGRATION ON PUBLIC SECTOR INCOME AND SPENDING • Age structure - education costs - health and elderly care, retirement • Labour market attachment - type of immigration - cohorts, periods: 1970 s vs. 1990 s and 2000 s Next lecture: Immigrant labour market careers GM 1208 & EHA 128 International Migration