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People and Capital on the Move. Lec 17 – Tuesday, 12 April 2011 J A Morrison. California Teamsters, 12 Feb 2008. Admin. Essay 2 Due this Wednesday, 10 PM Sample Essay Posted IP Wiki Goal: facilitate your discussion, reading, & understanding No posts due this week

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People and capital on the move

People and Capital on the Move

Lec 17 – Tuesday, 12 April 2011

J A Morrison

California Teamsters, 12 Feb 2008


Admin
Admin

  • Essay 2

    • Due this Wednesday, 10 PM

    • Sample Essay Posted

  • IP Wiki

    • Goal: facilitate your discussion, reading, & understanding

    • No posts due this week

    • Add to “wiki” portion if you have fallen behind


Lec 17 people capital on the move
Lec 17: People & Capital on the Move

  • Our Variables and Assumptions

  • Trade and Factor Relocation as Substitutes

  • Capital Movement

  • Migration as Labor Relocation


Lec 17 people capital on the move1
Lec 17: People & Capital on the Move

  • Our Variables and Assumptions

  • Trade and Factor Relocation as Substitutes

  • Capital Movement

  • Migration as Labor Relocation


The factors of production
The “Factors” of Production

  • Labor: You and Me

  • Capital: Resources required to produce additional resources

     These factors combine to produce goods & services (G&S)


We begin with a very large assumption: there is mobility.There is mobility both across borders and between industries.


International mobility
International Mobility

  • Low cost transfer of goods, services, and factors across borders

  • Some Exceptions:

    • Real Estate (e.g. Pebble Beach)

    • Some services: Fitting a cast (but not reading the X-ray!)


Inter industry mobility
Inter-Industry Mobility

  • Low cost transfer of factors of production across industries

  • Some Exceptions:

    • Unskilled labor to skilled jobs

    • Factories reconfigured (e.g. Ford  computer production)


Lec 17 people capital on the move2
Lec 17: People & Capital on the Move

  • Our Variables and Assumptions

  • Trade and Factor Relocation as Substitutes

  • Capital Movement

  • Migration as Labor Relocation



But as robert mundell suggested trade is only one way to realize the gains of economic integration
But, as Robert Mundell suggested, trade is only one way to realize the gains of economic integration.

Robert Mundell (1931--)


Rather than transferring finished goods and services across borders, we could, instead, transfer the productive inputs(labor and capital) from one country to another.


Economically speaking, trade of finished goods and the relocation of the factors of production are economic substitutes…


From the standpoint of relocation of the factors of production are economic prices of G&S and the returns on factors…It doesn’t matter whether we import/export G&S or the people and capital to produce them.


But that relocation of the factors of production are economic ’s in narrow economic terms: prices, wages, returns on capital.In a lot of other respects, though, there are big differences between trade and moving factors around.


Lec 17 people capital on the move3
Lec 17: People & Capital on the Move relocation of the factors of production are economic

  • Our Variables and Assumptions

  • Trade and Factor Relocation as Substitutes

  • Capital Movement

  • Migration as Labor Relocation


Our definition of capital was rather broad: relocation of the factors of production are economic “resources required to produce additional resources.”This definition can be traced back to Adam Smith’s conception of “saving” in The Wealth of Nations (1776).


Smith relocation of the factors of production are economic ’s notion was that investing capital into production—by mixing it with labor—would create greater quantities of capital which could then be reinvested.


We have both different types of capital and different forms of investment
We have both different relocation of the factors of production are economic types of capital and differentforms of investment.


Types of capital
Types of Capital relocation of the factors of production are economic

  • Conventional

    • Cash/Money

    • Land

    • Machinery, Equipment, Facilities

  • Less Common

    • Social Capital (connections, family name)

    • Individual Capital (singing voice)

    • Entrepreneurial/Organizational Capital


Forms of overseas investment
Forms of Overseas Investment relocation of the factors of production are economic

  • Foreign Direct Investment (FDI)

    • 10% investment stake  controlling interest

    • MNCs [MNEs]: Multinational Corporations/Enterprises

  • Portfolio

    • Less than 10%  stock ownership

    • E.g. Your IRA


Implications of fdi vs portfolio investment
Implications of FDI vs Portfolio Investment relocation of the factors of production are economic

  • Long-term vs short-term interest

    • FDI comes/goes more slowly

    • Portfolio investment is volatile--“flighty”

       FDI is more long-term

  • FDI brings additional benefits (buildings, training, &c.)

  • But foreigners also have more influence with FDI


Richard caves asks why do we have multinational corporations mncs why not just trade
Richard Caves asks: why do we have multinational corporations (MNCs)? Why not just trade?


Caves answer
Caves corporations (MNCs)? Why not just trade?’ Answer

  • Impacted Information: Firms have trouble pricing some products/inputs

  • Response: firms integrate (rather than trade)

  • Vertical Integration: acquire inputs

  • Horizontal Integration: leverage firm’s proprietary assets


What does this have to do with international politics
What does this have to do with international politics….? corporations (MNCs)? Why not just trade?


Susan strange
Susan Strange corporations (MNCs)? Why not just trade?

  • Econ integration has given states options beyond their home countries

  • States have to compete to attract FDI

  • MNCs now have more power to shape state policy

     Associated with “dependency theory”


David fieldhouse
David Fieldhouse corporations (MNCs)? Why not just trade?

  • Response to Dependency Theory

  • Conclusions

    • Dependence turns on ability to manage relations with MNC

    • Consider each case separately


…And there is a lot more we could say about corporations (MNCs)? Why not just trade?“speculative capital flows” chasing portfolio investment. We’ll talk about that next week when we turn to money.



Lec 17 people capital on the move4
Lec 17: People & Capital on the Move simply trading finished G&S.

  • Our Variables and Assumptions

  • Trade and Factor Relocation as Substitutes

  • Capital Movement

  • Migration as Labor Relocation


What is international migration
What is International Migration? simply trading finished G&S.

  • 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




Iv migration as labor relocation
IV. MIGRATION AS LABOR RELOCATION as social and political effects.

  • Economic Effects

  • Social & Political Effects


Effect on labor markets
Effect on Labor Markets as social and political effects.

  • Changes in Composition of Labor Pool: Skilled vs Unskilled

    • Competition for Jobs

    • Complementary Skill-Sets

  • Change in Quantity of Labor  Change in Wage Rates

    • Emigration  higher wage rates

    • Immigration  lower wage rates


Fiscal implications of migration
Fiscal Implications of Migration as social and political effects.

  • 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

       Over all fiscal effect is unclear but most likely positive effect for host countries


And of course there s the issue of remittances
And, of course, there as social and political effects.’s the issue of remittances.


A remittance is the transfer of money across space often internationally
A as social and political effects.remittanceis the transfer of money across space, often internationally.


Remittances then and now
Remittances Then and Now as social and political effects.

  • Originally developed to finance overseas purchases and investments

  • Remittances have become a major means by which individuals support families overseas

  • Remittances for everyone

    • Wealthy: British “remittance man” supported by family

    • Poor: Migrant workers supporting family back home


Kapur mchale on remittances
Kapur & McHale on Remittances as social and political effects.

  • Totaled $80bn in 2002; more than foreign aid!

  • Some countries’ largest export is labor

  • Infusion of wealth traded for brain drain

  • Reconfiguration of international relations

    • Symbiosis

    • Antagonism


Iv migration as labor relocation1
IV. MIGRATION AS LABOR RELOCATION as social and political effects.

  • Economic Effects

  • Social & Political Effects


The as social and political effects.social implications of increased migration garner at least as much attention.Sam Huntington has inserted himself at the center of this debate…


Huntington latin amer immigration is different
Huntington: Latin-Amer Immigration is Different as social and political effects.

  • Contiguity

  • Scale

  • Illegality

  • Regional concentration

  • Persistence

  • Historical presence



as social and political effects.In the end, the results could be similar: the creation of a large, distinct, Spanish-speaking community with economic and political resources sufficient to sustain its Hispanic identity apart from the national identity of other Americans and also able to influence U.S. politics, government, and society.”

– Samuel Huntington, The Hispanic Challenge



discourse…They will bring with them the principles of the government they leave…These principles, with their language, they will transmit to their children. In proportion to their numbers, they will share with us the legislation. They will infuse into it their spirit, warp and bias its direction, and render it a heterogeneous, incoherent mass”

– Thomas Jefferson, Notes on the State of Virginia 1784



Nick griffin
Nick Griffin suspect…

  • Chairman of the British National Party (BNP)

  • Member of the European Parliament for North West England

    (Griffin explains his surreptitious strategy. YouTube)


Discussion questions
Discussion Questions suspect…

  • Are we better off liberalizing trade or our factors of production? Do we have a choice?

  • Are multinationals evil?

  • Is L.A. Immigration a threat, as Huntington claims?


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