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Economics of Migration. Jan Fidrmuc Brunel University . Introduction. Important, and very contentious, aspect of economic integration and globalization 175mn (2.9%) int’l migrants in 2000, 190mn today (WB Migration Database, 2007) Most (37%) from LDC to DC; 24% LDC LDC, 16% DCDC

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economics of migration

Economics of Migration

Jan Fidrmuc

Brunel University

introduction
Introduction
  • Important, and very contentious, aspect of economic integration and globalization
    • 175mn (2.9%) int’l migrants in 2000, 190mn today (WB Migration Database, 2007)
    • Most (37%) from LDC to DC; 24% LDCLDC, 16% DCDC
    • Immigrants: 8-12% of population in US, Germany, France, UK; 18-21% Canada & Australia; 38% HK
    • Emigrants: 5-10% of Mexico, Afghanistan, Morocco, UK, Algeria, Italy, Germany, Bangladesh, Turkey; 0.5-0.9% China, US, India
introduction1
Introduction
  • EU Single Market: free movement of labor
  • Migrants (foreign born): 11.7% of EU15 population in 2005 (OECD)
    • Approximately 1/3 EU foreigners
  • EU enlargements in 2004 and 2007
    • Forecasted East-West migration 3-4 mn
    • Temporary restrictions imposed by most EU15 countries for up to 7 years
    • Large E-W influx to Austria, Germany, Spain, UK and Ireland
outline
Outline
  • Introduction
  • Models of migration
  • Economic Impact of migration: Theory and evidence
  • Brain Drain; Remittances
  • Labor-market Performance of Migrants
  • Politics of Immigration
  • EU Enlargement and East-West Migration
  • Conclusions
economics of migration1
Economics of Migration
  • Most common type of migration: LDC to DC
  • Revealed preference: migrants move iff they expect to be better off at destination
  • Yet, migrants often suffer occupational downgrading, end up in poorly-paid informal jobs or remain unemployed
  • Ex-ante vs ex-post: Harris-Todaro Model
    • Michael P. Todaro, AER 1969; and John R. Harris and Michael P. Todaro, AER 1970.
harris todaro model
Harris-Todaro Model
  • Original focus: rural-urban migration in LDC
  • Rural residents move to urban regions despite already high unemployment there
  • Puzzle: migration continues although it makes (some) rural migrants worse off
  • HT model: migrants motivated by expected returns
    • Expected returns may be different from actually realized returns
harris todaro model1
Harris-Todaro Model
  • Two regions: urban and rural
    • Rural wage: wR (farming)
    • Urban wage: wU>wR
  • Full employment in rural region
  • Involuntary urban unemployment
    • Fraction q of urban workers hold jobs
    • 1-q are unemployed and have zero earnings
  • Urban wages downward rigid
    • Minimum-wage rules, unionization, or b/c workers must acquire residence/work permits
harris todaro model2
Harris-Todaro Model
  • Workers are risk neutral
  • Migration continues as long as: wU*q>wR
  • Migration is optimal despite unemployment
  • Migration from LDC to DC similar case
harris todaro model implications
Harris-Todaro Model: Implications
  • Urban job creation (government spending) raises q migration more attractive
  • Improving education in rural areas may increase migration if educated rural worker face higher q
  • Rising rural wages reduce incentive to migrate to urban region
    • However, if migration costly, rising rural incomes may relieve liquidity constraints on migration
other models of migration beyond income differentials
Other Models of Migration: Beyond Income Differentials
  • Stark (The Migration of Labor, 1991)
  • Households vulnerable to idiosyncratic shocks that are region or sector-specific
  • Migration  household members exposed to different regional shocks
  • Risk diversification through pooling of household members’ income  remittances
  • Migration optimal even without income differentials if individuals risk averse  consumption smoothing through risk sharing
other models of migration roy borjas model
Other Models of Migration: Roy-Borjas Model
  • Roy (OEP 1951); Borjas (AER 1987)
  • Consider two countries, A and B
    • Identical mean earnings
    • Different income distributions: returns to human capital higher in A
  • Individual returns to migration depend on one’s skills
  • Skilled workers fare better in A
other models of migration roy borjas model1
Other Models of Migration: Roy-Borjas Model
  • Migration patterns:
    • Skilled migration to A
    • Unskilled migration to B
  • Returns to human capital important also when mean earnings not identical
    • DC – LDC migrants often highly skilled professionals and managers
economics of migration impact
Economics of Migration: Impact
  • Trade theory: free trade, free capital mobility and free labor mobility should have similar effects on the economy
  • Yet, migration more controversial than either free trade or capital mobility
  • Popular view: immigrants displace native workers and/or drive down wages
  • Is this consistent with theory and evidence?
economic impact of migration theory
Economic Impact of Migration: Theory
  • Dustmann et al., EJ 2005; Dustmann et al., OxRevEcPol 2008)
  • Two countries: Home and Foreign
  • One output good, price set at world market
  • Two types of labor: skilled and unskilled
    • Labor supplied inelastically
  • Supply of capital perfectly elastic
    • Interest rate set at world markets
economic impact of migration theory1
Economic Impact of Migration: Theory
  • If skill composition of immigration the same as that of natives
    • No labor-market effect of migration
    • This is because capital supply is elastic
    • Economy adjusts to immigration by importing capital  no change in relative endowments
  • Migrants in DC predominantly unskilled  compete with native unskilled workers only
    • Consider case with only unskilled immigrants
economic impact of migration theory2
Economic Impact of Migration: Theory
  • L and L* unskilled workers in Home and Foreign
  • Demand for labor given by MPL  initial wage w0 and w*0; w0>w*0
  • Migration equalizes wages: w1=w*1
  • Unskilled workers in Home worse off
  • Migrants and unskilled workers in Foreign better off
economic impact of migration theory3
Economic Impact of Migration: Theory

MPL

MPL*

w0

w1

w*0

o

L

L*

M

L+M

o*

economic impact of migration theory4
Economic Impact of Migration: Theory
  • What about overall impact on Home?
  • Capital supplied elastically  no impact for owners of capital
  • Skilled labor in Home becomes scarcer relative to unskilled labor
  • Skilled-wage premium goes up
  • Overall effect: average earnings go up
    • Immigration surplus: unskilled workers paid less than their marginal product
    • Net gain accrues to skilled workers
economic impact of migration theory5
Economic Impact of Migration: Theory

MPL

MPL*

Immigration surplus

w0

w1

w*0

o

L

L*

M

L+M

o*

economic impact of migration theory6
Economic Impact of Migration: Theory
  • Immigration has important distributional implications
    • This can have important political implications
    • Note: if labor supply flexible, migration leads to unemployment in addition to (or instead of) lower unskilled wages
  • Note: reverse holds for Foreign: skilled labor becomes less abundant and skilled workers lose out
economic impact of migration heckscher ohlin model
Economic Impact of Migration: Heckscher-Ohlin Model
  • Multiple heterogenous output goods
  • Free and competitive trade  goods prices set at world markets
  • All countries have access to the same technology
  • Skilled and unskilled labor, supplied inelasticly
  • Capital supply elastic
  • All immigrants unskilled
economic impact of migration heckscher ohlin model1
Economic Impact of Migration: Heckscher-Ohlin Model
  • Output mix determined by relative factor endowments
  • Immigration  pressure on unskilled wages to fall  output of goods produced by unskilled labor goes up
  • Wages of skilled and unskilled labor unchanged as long as goods prices constant
  • Immigration absorbed through changes in output mix (Rybczinski Theorem)
    • No labor-market impact at all
economic impact of migration evidence
Economic Impact of Migration: Evidence
  • Most studies: no or mildly negative impact of migration on natives’ wages or employment
    • Card (EJ 2005)US data, Dustmann et al. (EJ 2005; OxRevEP 2008)UK data
    • Borjas (QJE 2003, NBER WP 2005): labor-market impact of migration is mitigated by out-migration of natives (US data)
    • Card (EJ 2005): little evidence of natives’ migration being driven by immigration
economic impact of migration evidence1
Economic Impact of Migration: Evidence
  • Dustmann et al. (OxRevEP 2008)UK data
  • Immigrants predominantly low skilled  impact on wages different alongside natives’ wage distribution
  • Elasticity of natives’ wages with respect to immigration rate
    • Low-wage earners: -0.5 at 10th percentile
    • Positive for most: 0.6 at median, 0.35 on average
    • Insignificant for high-wage earners (from 95th percentile)
economic impact of migration evidence2
Economic Impact of Migration: Evidence
  • Impact on employment (Dustmann et al., EJ 2005) UK data: zero effect overall
  • Positive effect for high-educated natives (high-school diploma and higher)
  • Negative effect for intermediate-educated, negative but insignificant for unqualified
  • Effects for high and intermediate educated approximately cancel each other in aggregate
economic impact of migration evidence from natural experiments
Economic Impact of Migration: Evidence from Natural Experiments
  • Friedberg and Hunt (JEP 1995): Large-scale immigration episodes  little long-term impact on labor markets
    • French and Portuguese decolonization
    • Cuban immigration to the US during the Mariel boatlift
    • Russian-Jewish immigration to Israel in 1990s
economic impact of migration israel
Economic Impact of Migration: Israel
  • 1990s: more than 1 million ethnic Jews immigrated to Israel from the FSU
  • Israeli population in 1989: 4.6 million
  • Migration driven by economic hardship and political unrest
  • Approximately two-thirds of these immigrants highly skilled
economic impact of migration israel1
Economic Impact of Migration: Israel
  • FSU immigration  no long-term effect on wages or employment of natives
    • Friedberg (2001 QJE), Gandal, Hanson and Slaughter (2004 EER), and Cohen and Paserman (2004 CEPR DP 4640):
  • Cohen and Paserman (2004): negative short-term effect (elasticity -0.1 to -0.3) on wages (but not on employment)
    • Effect disappears in 4-7 years
economic impact of migration israel2
Economic Impact of Migration: Israel
  • Gandal et al.: global technology changes increased demand for skilled labor
  • This helped Israeli economy absorb immigrant influx
  • Cohen and Hsieh (2000 mimeo): immigration followed by large influx of capital (borrowing)
    • Consistent with standard neoclassical growth model
economic impact of migration israel3
Economic Impact of Migration: Israel
  • Eckstein and Weiss (2003 IZA DP 710): substantial initial occupational downgrading of FSU immigrants but wages increase rapidly
  • No return on their imported skills in short run
  • Lower return to education, same return to experience and higher return to unobserved skills, than native Israelis, in long run
  • Because of lower return to imported skills, immigrants’ wages never catch up with natives’ wages
economic impact of migration germany
Economic Impact of Migration: Germany
  • Re-unification of Germany  large migration flow from East to West
  • Frank (2007 mimeo): no overall effect on wages or unemployment in West Germany
  • But: important distributional effects
  • Employment of less educated workers, blue-collar workers and foreign nationals declined
  • Wages of workers in non-traded-goods and service sectors increased
immigration and crime
Immigration and Crime
  • Immigrants often associated with high crime rates
  • Theory: ambiguous relationship
    • Immigrants fare poorly in labor market, but:
    • face higher detection probability (prejudice)
    • and stricter punishment (sentence & deportation)
immigration and crime1
Immigration and Crime
  • Bianchi, Buonanno & Pinotti (2009 BI wp)
    • Immigration & crime in IT provinces, 1990-2003
  • OLS: elasticity of crime to immigration: 0.1
    • Especially for property crime (theft and robbery)
  • Result may be driven by endogeneity
    • Eg immigrants more to high-crime areas because of low cost of housing
  • IV: no significant effect on total crime or property crime, significant effect on robberies
    • Robberies 1.5% of total crime only
brain drain
Brain Drain
  • Migration of skilled workers from LDC to DC
  • Docquier et al. (IZA DP 2005): brain drain estimates, 1990-2000
    • World weighted-average skilled migration rate 5.3% vs unskilled rate 1.1%
    • LDC: 7% vs 0.3%
    • Latin America 11%, Africa 10.4%, Asia 5.5%
  • Traditional view: brain drain reduces stock of human capital  lower potential for growth
brain drain1
Brain Drain
  • Skilled immigrants often subject to occupational downgrading
  • But face better employment prospects than unskilled immigrants
  • Liquidity constraints
    • Migration is costly
    • Skilled migrants better able to afford the cost
brain drain reassessment
Brain Drain: Reassessment
  • Mountford (1997 JDE), Fan and Stark
  • Individuals under-invest in education because they ignore social returns
  • Education raises probability of emigration
    • Higher expected private return to education
    • Greater incentive to invest in education
  • Emigration uncertain  some skilled workers remain in LDC
  • Brain drain may raise LDC stock of human capital  better prospects for growth
remittances
Remittances
  • Large inflows, esp. for developing countries:
    • Remittances one third of exports and greater than FDI (Barajas et al., 2009, IMF WP09/153)
  • Top recipients in 2008: Mexico, China and India: $25-27bn
  • Mexico: remittances  1/3 of formal wage income in 2006 (Vargas-Silva, RDE 2009)
    • US: 18mn people of Mexican origin
  • Poland: 2mn Poles abroad  $6bn in 2007 (NBP report)
remittances1
Remittances
  • China: remittances of rural migrants large
    • 15% of agricultural income of selected provinces in 1992 (Wu & Zhou 2005)
  • 1995 survey in Jinan and Shandong (Liu & Reilley, Apllied Economics 2004)
    • Rural migrants remit RMB 2110 p.a.  36% of earnings
    • 85% of rural migrants transfer remittances
remittances impact
Remittances: Impact
  • Remittances increase household disposable income
  • Rozelle, Taylor and deBrauw (AER P&P 1999): remittances increase agricultural productivity in rural China (Hebei and Liaoning)
  • Adams and Page (WB WPS3179): remittances reduce poverty in LDC
    • Elasticity: -0.19 with respect to emigration rate and -0.16 with respect to remittances-to-GDP ratio
remittances impact1
Remittances: Impact
  • Barajas et al. (2009, IMF WP09/153):
    • Remittances to 84 countries over 1970-2004
    • Effect on growth is insignificant or even negative
    • Interpretation: remittances alleviate poverty and increase consumption but not investment
remittances and the dutch disease
Remittances and the Dutch Disease
  • DD typically associated with revenue from export of natural resources (origin: North-Sea natural gas exports in the Netherlands)
  • Large receipts of foreign currency  XR appreciates  loss of competitiveness  manufacturing exports fall while imports rise
  • Vargas-Silva (RDE 2009): remittances cause appreciation of real exchange rate in Mexico
politics of immigration
Politics of Immigration
  • Migration (and trade)  winners and losers among natives
  • If immigrants predominantly unskilled, unskilled natives lose out and skilled workers gain
  • Losers may need to be compensated (redistribution of gains from winners)
  • Otherwise, economic integration may not be politically feasible
politics of immigration1
Politics of Immigration
  • Wages reflect relative abundance of each factor of production
  • Consider again skilled vs unskilled labor
  • DC: skilled labor relatively abundant
    • Immigrants predominantly unskilled
    • Skilled workers likely to emigrate
  • LDC: unskilled labor relatively abundant
    • Immigrants predominantly skilled
    • Unskilled labor likely to emigrate
politics of immigration2
Politics of Immigration
  • Attitudes depend on relative factor endowments and redistributional impact of immigration
  • DC: immigrants predominantly unskilled
    • Skilled wage goes up
    • Unskilled wage falls
  • Skilled workers should favor immigration
  • Unskilled workers should oppose immigration
politics of immigration3
Politics of Immigration
  • LDC: immigrants predominantly skilled
  • Skilled workers should oppose immigration
  • Unskilled workers should be in favor
  • Attitudes on free trade determined similarly
politics of immigration4
Politics of Immigration
  • O’Rourke and Sinnott (2005 EJPE), Mayda and Rodrik (2005 EER) and Mayda (2005) use large multi-country individual-level survey dataset to investigate individual attitudes on trade and migration
  • Skilled individuals more in favor of immigration (free trade)
    • More so in rich countries
politics of emigration home country
Politics of Emigration: Home Country
  • Emigration experience may affect one’s political opinion and attitudes
  • Spilimbergo (CEPR DP 5934):
    • UNESCO database on international student flows: 1950-2003
  • Share of students studying abroad increases democracy in home country
  • But only if students study in democratic countries
politics of emigration home country1
Politics of Emigration: Home Country
  • Fidrmuc and Doyle (CEPR DP 4619):Voting behavior of Czech and Polish emigrants in home-country elections
  • Emigrant votes differ from home country votes and also across host countries
  • Votes for pro-reform and left-wing parties depend on host-country characteristics
  • Migrants adapt to institutional environment
    • Level and tradition of democracy
    • Extent of economic freedom
political impact of immigration
Political Impact of Immigration
  • Living in economically liberal and democratic countries should have a favourable impact on migrants from less developed countries
    • Migrants espouse liberal attitudes while living abroad
  • Autocratic regimes often restrict their citizens’ freedom to travel
    • North Korea, Turkmenistan, Zimbabwe
  • Autocracies that tolerate free travel often more liberal  former Yugoslavia
migrant s labor market performance
Migrant’s Labor-market Performance
  • Migrants typically subject to substantial occupational downgrading
  • Human capital poorly portable
    • Eastern European Jews in Israel: low return on imported education and experience (Friedberg JLE 2000; Eckstein and Weiss, 2003 IZA DP710)
    • Destination-country education raises return also to home-country education (Friedberg 2000)
  • Immigrants catch up slowly and imperfectly
migrant s labor market performance1
Migrant’s Labor-market Performance
  • US/UK: immigrants from Latin American and Eastern Europe suffer more downgrading than immigrants from industrialized countries
    • UK: Drinkwater et al. (2006 IZA DP2410)
    • US: Mattoo et al. (JDE 2008)
  • Language skills important
    • Immigrants who speak destination-country language earn up to 20% more (Chiswick and Miller, 2002 JPopE; 2007 IZA DP 2664)
eu enlargement and east west migration
EU Enlargement and East-West Migration
  • EU enlargements in May 2004 and Jan 2007
  • Pre-enlargement debate in academia, policy-making and popular press: fear of mass migration, welfare shopping and displacement effects in labor market
  • Result: transitional restrictions on free movement of workers (2+3+2 formula)
    • Exceptions in 2004: UK, Ireland and Sweden
    • More countries removed restrictions later
east west migration predictions zaiceva zimmerman oxrevep 2008
East-West Migration: Predictions (Zaiceva & Zimmerman, OxRevEP 2008)
  • Since early 1990s – more than 30 studies forecasting East-West migration
  • Predictions based on intentions to move to the West using surveys
  • Econometric models using historical data for countries other than CEECs(“double out-of-sample extrapolations”)
    • Migration experience after the Southern EU enlargement or other countries (e.g. immigration to Germany from a broad sample of countries)
east west migration predictions
East-West Migration: Predictions
  • Boeri and Bruecker (2000)
    • Estimate model of immigration to Germany over 1968-98
    • Use it to predict East-West migration to the EU
  • Total net immigration 335 ths to the EU15
  • Most predicted to go to Germany and Austria: 218 ths and 40.5 ths, respectively;
  • UK to receive some 15 ths.
east west migration predictions1
East-West Migration: Predictions
  • Surveys of willingness to migrate (WTM)
  • Drinkwater (2003): WTM to the EU highest among the young and those with high skills and foreign-language skills
  • Expected impact:
    • mainly positive impact for destination countries
    • potentially adverse impact on source countries (brain drain)
eu enlargement and east west migration zaiceva zimmerman oxrevep 20083
Actual migration flows difficult to estimate

UK and Ireland: no restrictions, large influx (Gilpin et al., 2006, Blanchflower et al., 2007, UK Home Office Accession Monitoring Reports; Doyle et al., 2006)

Sweden: no restrictions, little immigration

Austria, Germany: restrictions, large influx

Why? Push and pull factors: Economic factors, geographic proximity, language, networks, demand-driven (IE), re-directed from other countries…

EU Enlargement and East-West Migration (Zaiceva & Zimmerman, OxRevEP 2008)
eu enlargement and east west migration zaiceva zimmerman oxrevep 20085
EU Enlargement and East-West Migration (Zaiceva & Zimmerman, OxRevEP 2008)
  • Main sending countries:
    • UK: Poland, Slovakia, Lithuania,
    • Ireland: Poland, Lithuania, Latvia
    • Sweden: Poland, Lithuania, Estonia
  • Sectoral distribution of immigrants:
    • UK: hotels/catering, manufacturing, agriculture/construction
    • Ireland: construction, manufacturing, hotels/catering
    • Sweden: health care, trade, manufacturing
east west migration impact zaiceva zimmerman oxrevep 2008
East-West Migration: Impact (Zaiceva & Zimmerman, OxRevEP 2008)
  • No negative impact on receiving countries’ economies
  • Occupational downgrading common
  • No evidence of an impact on unemployment
  • If displacement of natives (Ireland)  no rise in aggregate unemployment but “upgrade” jobs for nationals
  • No wage pressure, not even in manufacturing sector  highest share of new immigrants
east west migration impact zaiceva zimmerman oxrevep 20081
East-West Migration: Impact (Zaiceva & Zimmerman, OxRevEP 2008)
  • Reduced or falling wage growth rates mainly follow pre-enlargement trends
  • UK: immigration has increased supply by more than it has increased demand
    • Lower inflationary pressures and lower natural rate of unemployment.
east west migration public perceptions blanchflower ej 2009
East-West Migration: Public Perceptions (Blanchflower, EJ 2009)

Balance

Per cent

Unemployment expectations over the next 12 months: EU15

60

12

(3 month average - advanced 12 months - LHS)

50

11

40

10

30

9

20

8

10

7

Unemployment

0

6

rate (RHS)

--- 1985-2007 average

-10

5

1985

1988

1991

1994

1997

2000

2003

2006

east west migration public perceptions
East-West Migration: Public Perceptions

Unemployment expectations over the next 12 months: Germany

Per cent

Balance

14

60

(3 month average - advanced 12 months - LHS)

50

12

40

10

30

8

20

6

10

4

0

Unemployment

2

-10

rate (RHS)

--- 1985-2007 average

0

-20

1985

1988

1991

1994

1997

2000

2003

2006

east west migration public perceptions1
East-West Migration: Public Perceptions

Balance

Per cent

Unemployment expectations over the next 12 months: UK

60

12

(3 month average - advanced 12 months - LHS)

11

50

10

40

9

30

8

20

7

6

10

5

0

4

Unemployment

-10

rate (RHS)

3

--- 1985-2007 average

-20

2

1985

1988

1991

1994

1997

2000

2003

2006

east west migration public perceptions2
East-West Migration: Public Perceptions

Balance

Per cent

Unemployment expectations over the next 12 months: Ireland

20

60

(3 month average - advanced 12 months - LHS)

50

40

15

30

20

10

10

0

-10

5

-20

Unemployment

-30

--- 1985-2007 average

rate (RHS)

-40

0

1985

1988

1991

1994

1997

2000

2003

2006

east west migration uk experience
East-West Migration: UK Experience
  • Annual gross inflow of A8 nationals over 200 ths
  • The stock of A8 migrants estimated to be around 500 ths by the end of 2006 (Blanchflower, Saleheen and Shadforth, 2007)
  • 65-70% of A8 immigrants are Polish
  • Most work in low-skilled occupations and earn low wages
  • 80% are below 35; 60% are males
east west migration uk experience1
East-West Migration: UK Experience
  • Unlike migrants from other countries, relatively low share come to London (around 10%)
    • Main destinations: Anglia, Midlands, London
  • Anecdotal evidence: some immigrants highly skilled
  • No welfare tourists: by 2007, less than 1,000 A8 nationals per quarter approved to receive income support and job-seekers allowance
east west migration uk experience2
East-West Migration: UK Experience

WRS registrations as a % of home population

WRS Registrations (000s)

U Rate (2004)

Emp Rate (2004)

GDP per head (2005)*

Czech Rep.

0.28

28.9

8.3

64.2

5,200 €

Estonia

0.47

6.2

9.7

63.0

4,000 €

Hungary

0.19

18.9

6.1

56.8

5,000 €

Latvia

1.43

32.8

10.4

62.3

3,100 €

Lithuania

1.85

62.8

11.4

61.2

2,500 €

Poland

1.02

394.2

19.0

51.7

4,200 €

Slovakia

1.13

61.2

18.2

57.0

4,200 €

Slovenia

0.03

0.6

6.3

65.3

11,400 €

Correlation

0.560

-0.257

-0.711

east west migration uk experience3
East-West Migration: UK Experience

Life Satisfaction

2004 2006

Bulgaria 2.06 1.99

Czech Rep 2.82 2.92

Estonia 2.74 2.74

Hungary2.44 2.50

Latvia 2.52 2.62

Lithuania2.55 2.62

Poland2.81 2.80

Romania2.32 2.33

Slovakia2.59 2.70

Slovenia3.17 3.09

UK3.22 3.18

east west migration uk experience4
East-West Migration: UK Experience

WRS Applications

12 months ending March 2007

Intended length of stay

Per cent

Less than 3 months

126,100

55%

3 to 5 months

3,840

2%

6 to 11 months

7,605

3%

1 to 2 years

10,520

5%

More than 2 years

21,225

9%

Do not know

58,480

26%

Total

227,770

100%

east west migration uk experience5
East-West Migration: UK Experience
  • 1-2% (at least) of Polish, Slovak, Latvian and Lithuanian populations lived and worked in the UK at some time between 2004 and 2007 (WRS statistics only)
  • East-West migration helped lower unemployment in A8 countries
    • Some caused labor shortages, especially in agriculture and construction
  • Gilpin et al. (2006, DWP WP 29): relationship between change in share of A8 migrants and change in regional unemployment
east west migration uk experience6
East-West Migration: UK Experience
  • Drinkwater, Eade and Garapich (2006 IZA DP2410):
  • A8 migrants highly skilled but have low returns to skills and experience
  • Wages increase with years since migration
  • A8 migrants earn 30% less than migrants from other European countries (those from English-speaking countries earn 30% more) when not controlling for occupation
  • No evidence as to whether the extent of occupational downgrading is falling over time
east west migration uk experience7
East-West Migration: UK Experience
  • If occupational downgrading persists:
    • Destination countries do not realize the migrants’ full contribution to their GDPs
    • Migrants fail to receive wages corresponding to their human capital
  • Occupational downgrading may become permanent and persist even upon return to the home country (scarring)
  • Source countries suffer brain drain
  • Overall, everyone loses
  • Time will show if this will be the case.
summary
Summary
  • Factors underlying patterns of migration flows:
    • Differentials in (expected) earnings
    • Returns to human capital
    • Risk sharing at household level
  • Economic impact of migration
    • Host country: little or none aggregate labor-market impact but important distributional implications
    • Home country: may be harmful because of brain drain and/or Dutch disease
summary1
Summary
  • Political impact
    • Host country: distributional implications  winners and losers  political backlash against labor mobility and integration
    • Home country: spread of liberal norms and values
  • EU enlargement
    • Large and unprecedented migration flows within Europe
    • Little or no negative labor-market impact on host countries (so far)