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Migration in Economics

Terms in this set (14)

What are the incentives influencing migration?
1. Push vs Pull (negative features of home country and positive features of destination country).

2. Stay vs Stay Away (positive features of the home country and negative features of the destination country).

3. Formal entry and exit barriers (legal barriers preventing in-migration or out-migration).

4. Cost if moving (affecting migration decision).
France increases the tax rate on the wealthiest 10% in the country.
Answer: It depends on who this potential migrant is. If the French migrant is in the wealthiest 10%, this would represent a push factor. If the migrant is not in the wealthiest 10%, this would likely represent a stay factor. This is because the tax on the wealthiest 10% probably implies some sort of redistribution to everybody else.
German unemployment decreases
Answer: This would represent a pull factor. There are good economic conditions and an availability of jobs in Germany.
European agreements improve the international transportability of pensions.
Answer: This would lower the incentive to stay.
France re-introduces mandatory military service
Push factor
Children in Germany no longer learn French in school.
Language barriers are a stay away factor.
Germany requires work permits for French migrants.
Formal barrier to entry.
It was discussed in class that immigration restrictions reduce output by preventing people from moving to where they are most productive. But this hinges on the assumption that productivity depends on where you live rather than who you are. To what extent do you think that this assumption is true? That is, if a worker moves from a low-labour-productivity country to a high-labour-productivity country, to what extent will that worker become more productive?
Answer: The literature does not have a clear answer for the magnitudes, but economists do believe that location-specific factors play a key role in generating productivity differences across countries. Countries with high labour productivity tend to have more capital (tools for workers), better legal environments, better technology, and so on. Every worker, no matter what, will become more productive in these environments.
On the other hand, productivity differences due to differences in human capital are embedded in the person. If an individual moves from one country to another, they do not automatically become better educated, for example. Furthermore, linguistic or cultural barriers might prevent immigrants from being as productive as their native counterparts.
What does the labour market model of immigration predict about wage convergence? Would you expect to see larger and more persistent wage differences within the United States or within Europe? Explain.
Answer: In the labour market model of immigration, all potential migrants are workers who will move when a higher wage is available in a different country. This reduces the supply of labour in the source country (raising the wage) and it increases the supply of labour in the destination country (lowering the wage). As a result, wages in the two countries will converge.
This wage convergence only goes so far, however. People will only move if the higher wage in the destination country outweighs the costs associated with immigrating. Within the United States, the cost of moving between regions is low. This is because there is a great deal of cultural similarity between states and there are no formal barriers to migrate. In the United States, we should therefore expect that any wage differences would be erased quite quickly as migration will be very responsive to wage differences.
Even though there are no formal migration barriers in most cases, Europeans immigrate much less than their American counterparts. This is because there are larger cultural differences between European countries. As a result, we should expect that wage differences will be more persistent within Europe.
Use the labour market model of immigration to predict migration patterns between the countries of Nativo and Destino. Assume that the wages in each country are initially the same. Use diagrams where appropriate.
a. Through government funded research grants, the production technology in Destino improves.
Answer: The improvement in technology will presumably increase the marginal productivity of labour in Destino. Recall that the demand for labour (The value of the marginal product of labour) is equal to the marginal product of labour times the price. This will increase the equilibrium wage in Destino. As a result, there will be migration from Nativo to Destino. This shifts labour supply in Nativo to the left and it will shift the supply of labour in Destino to the right.
b. The capital stock in Destino increases due to increased saving and investment.
Answer: The effects of this will be identical to part a. This is because an increase in the stock of capital raises the marginal productivity of labour. Essentially, each worker has more tools to work with, so each worker is more productive.
Due to the way in which the population pyramid in Nativo is structured, a huge number of young people enter the labour force all at once.
Answer: As a result of the increase in the labour force in Nativo, the labour supply curve will shift to the right. This will lower the equilibrium wage in Nativo. There will now be an incentive for Nativo workers to migrate to Destino. But because there are many stay and stay away factors, there won't be such extensive mass migration from Nativo to Destino and a wage gap will persist.
All workers are assumed to be identical in the labour market model of immigration presented in class. But in reality, workers are heterogeneous in many respects. For example, some workers are more skilled than others.
Suppose that our model had three factors of production: capital, skilled workers, and unskilled workers. In the destination country, who do you think will win and who do you think will lose as a result of unskilled immigration?
Capital owners in the destination country will unambiguously win because capital becomes relatively more abundant.
Unskilled workers in the destination country will unambiguously lose. This is because they will compete for the same jobs with the unskilled immigrants and their wages will fall.
The skilled workers may win or they may lose. This all depends on the degree of substitutability/complementarity between skilled and unskilled workers. If skilled workers and unskilled workers are complements in the production process (i.e. firms require both types of labour), then skilled workers will benefit from unskilled immigration for the same reason that capital owners benefit. But if skilled workers and unskilled workers are substitutable in the production process (i.e. firms can easily replace skilled workers with unskilled workers), then the skilled workers will lose from unskilled immigration.
Who is in favour and who is opposed to immigration? Is there any way in which the gains from the winners can be redistributed to compensate the losers?
Native labourers will be opposed to immigration and capital owners will be in favour of immigration. The gains to capital owners outweigh the losses to the native workers, however. Following immigration, one possible policy to redistribute these gains would be to increase taxes on capital in order to lower taxes on labour.
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