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Daniel Rauhut · Birgit Aigner-Walder
Rahel M. Schomaker
The Economics of
Immigration Beyond
the Cities
Theoretical Perspectives
and Empirical Insights
The Economics of Immigration Beyond the Cities
Daniel Rauhut
Birgit Aigner-Walder • Rahel M. Schomaker
The Economics of
Immigration Beyond
the Cities
Theoretical Perspectives and Empirical Insights
Daniel Rauhut Birgit Aigner-Walder
Centro de Estudos Geograficos Carinthia University of Applied
Universidade de Lisboa Sciences
Lisbon, Portugal Villach, Austria
Rahel M. Schomaker
Carinthia University of Applied
Sciences
Villach, Austria
ISBN 978-3-031-30967-0 ISBN 978-3-031-30968-7 (eBook)

https://doi.org/10.1007/978-3-031-30968-7
© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature
Switzerland AG 2023
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Preface
The initiative for this book was triggered by the MATILDE project, a
Horizon 2020 project coordinated by the University of Eastern Finland.
The aim of the MATILDE project was to analyse the economic and social
impacts of non-EU immigration to rural and mountainous regions. This
volume brings together two different developments. First, it looks beyond
the conventional categorisation of immigrants based on their cause of stay
(labour migrants, tied movers, students, refugees, asylum-seekers, etc.),
which is a categorisation that has difficulty in explaining if this new labour
is demanded or not on the labour market, or to what extent it is allowed
to work or not. Second, as economic structures differ geographically
within countries, the labour market integration of the new labour added
can be expected to display geographically different outcomes.
Within the MATILDE project, this volume has a special function.
While a major activity of the project was to collect data on the economic
implications of non-EU immigration to rural and mountainous regions in
selected case study regions, we have tried to identify the overarching key
questions regarding the economic consequences of non-EU immigration
to these areas beyond the cities. Notably, the economic effects of immigra-
tion to areas beyond major cities and metropolitan areas materialise differ-
ently than seen in the cities.
There are several excellent books that explore the economics of immi-
gration at a more technical and mathematical level, as well as many books
targeting specialised academic disciplines. This volume is intended to tar-
get a wider audience including practitioners and stakeholders. It should be
seen as an introductory non-technical book that lends an economic
v
vi PREFACE
perspective to the complex subjects of immigration, urban-rural differ-

ences, the functioning of the labour market and policy perspectives.
As always, there are several people other than the authors involved in a
book project. We want to thank Wyndham Hacket Pain for his help and
support during the different stages in the production process, together
with the Palgrave Macmillan production team. We also would like to thank
our research assistant Christina Lobnig for her help, Nicholas Rowe for
the language editing and the members of the MATILDE project for their
interesting and inspiring discussions.
Lastly, the financial support of the Horizon 2020 project ‘Migration
Impact Assessment to Enhance Integration and Local Development in
European Rural and Mountain Areas’ (MATILDE) under Grant
Agreement no. 870831 is gratefully acknowledged.
Lund, Sweden; Villach, Austria Daniel Rauhut

January 2023 Birgit Aigner-Walder
Rahel M. Schomaker
Contents
1 What
Is This Book About? Introductory Positioning 1
1.1 Trends in Migration Flows and Policies 1
1.2 Migration Flows and the Spatial Distribution of Immigrants 3
1.3 Economic Structure and Spatiality 5
1.4 The Economic Effects of Immigration 6
1.5 The Aim and Scope of This Book 10
1.6 Methodological Considerations and Personal Reflections 11
1.7 The Structure of the Book 12
References 13
2 Economic
Theory and Migration 21
2.1 Determinants of International Migration 21
2.2 Economic Effects of International Migration 24
Costs of Immigration 24
Benefits of Migration 26
Questioning the Assumptions 29
Other Aspects 31
2.3 Previous Empirical Results on the Effects of Immigration 33
Economic Consequences at an Aggregate Level 34
Economic Consequences at an Individual Level 40
2.4 Summary 43
References 44
vii
viii Contents
3 Migration
Beyond the Cities 51
3.1 Urban-Rural Divide 51
3.2 Attractiveness of Regions Beyond the Cities for Migrants 52
The Theoretical Perspective 52
Empirical Evidence on the Regional Preferences of Migrants 55
3.3 Effects of Migration on a Regional Level—Empirical
Evidence 57
3.4 Analytical Framework on the Effects of Migration in
Non-urban Areas 59
The Case of an Excess Demand for Labour 59
The Case of an Excess Supply for Labour 61
Other Aspects 65
3.5 Concluding Remarks and Guiding Research Questions 66
References 67
4 Data and Methods 71

4.1 Research Framework 71
4.2 Data 73
4.3 Indicators 74
4.4 Methods 81
4.5 Conclusion 81
References 81
5 Immigration
Beyond the Cities: An Analysis 83
5.1 Labour Market Needs in Rural Areas—An Ageing Europe 83
5.2 The Potential of Migrants—Educational Attainment Level
and Employment Situation 90
5.3 Migrants as Consumers—The Economic Situation of
Migrants 96
5.4 Migrants as Innovators?—A Way Out of a Potential Vicious
Circle of Underdevelopment 99
5.5 Overall Economic Effects of Migration—TCN and
Economic Growth104
5.6 Do Regions Beyond the Cities Gain Nevertheless?—The
Relevance of Fiscal Regulations110
5.7 Summary114
References115
Contents ix
6 Policy Considerations123
6.1 Existing Policies123
The Idea of an A-spatial Economic Structure 123
Immigrant Settlement Strategies 125
The Labour Market Situation for Immigrants 126
The Role of the European Union 129
6.2 The Needed Policy Design131
The Economic Heterogeneity of Immigrants 131
The Policy Actors 133
Policy Challenges to Address 135
6.3 Potential Ways Forward138
A New Classification for Migrants 138
A New System of Distribution of Refugees 140
The Chicken or the Egg: Which Came First? 141
6.4 Concluding Remarks142
References144
7 The
Multi-faceted Implications of Immigration:
Reflections and Conclusions155
7.1 What Are the Main Findings?155
7.2 Policy Options157
7.3 Looking Onwards and Outwards160
7.4 Conclusion163
References165
Index167
About the Authors
Daniel Rauhut holds a PhD in economic history and is Associate

Professor of regional planning. Rauhut’s research focuses on migration,
the integration of immigrants, welfare provision and the EU cohesion
policy. He is a co-editor of the volumes Poverty in the History of Economic
Thought (Routledge, 2020), Poverty in the Contemporary Economic
Thought (Routledge, 2021), EU Cohesion Policy and Spatial Governance
(Edward Elgar, 2021) and Assessing the Social Impact of Immigration in
Europe: Renegotiating remoteness (Edward Elgar, 2023). He recently
edited the volume New Methods and Theory on Immigrant Integration:
Insights from Remote and Peripheral Areas (Edward Elgar, 2023).
Birgit Aigner-Walder holds a doctoral degree at University of Klagenfurt,
Austria, is Professor of economics at the Carinthia University of Applied
Sciences (CUAS) since 2014 and is head of the department for
Demographic Change and Regional Development as well as part of the
scientific management team of the Institute for Applied Research on
Ageing since 2016. Her research focuses on demographic change and its
economic consequences, migration, regional economics and public
finance. She has worked for the Austrian economic research institutes IHS
Kärnten and WIFO, and been part of several regional, national and inter-
national research projects. At the moment she is involved in research proj-
ects funded under the EU Horizon 2020, Active Assisted Living (AAL)
and Interreg programme.
xi
xii ABOUT THE AUTHORS
Rahel M. Schomaker holds a doctoral degree in economic policy from

Münster University and a Habilitation with a venia legendi in economics
and public administration from Speyer University. Currently, she is
Professor of economics and public administration at the Carinthia
University of Applied Sciences, an adjunct professor at the German
University of Administrative Sciences Speyer as well as a senior fellow at
the German Research Institute for Public Administration. Her research
focuses on administrative change, crisis governance, institutional econom-
ics, migration and trust. She is involved in several research projects funded
under the EU Horizon 2020 programme; her work has appeared in a
variety of international journals in economics, political science and public
administration, and she serves as a senior advisor for the OECD, the EU
and different national governments.
List of Figures
Fig. 2.1 Effect of immigration on wages. (Source: Borjas (1999a,

p. 1701), adapted) 25
Fig. 2.2 Immigration surplus. (Source: Borjas (1995a), adapted) 26
Fig. 2.3 Immigration surplus in the presence of external effects.
(Source: Borjas (1995a), adapted) 28
Fig. 2.4 Gain from complete immigration in a two-region economy.
(Source: Borjas (2001a), adapted) 33
Fig. 3.1 Labour supply under an inelastic labour demand.
(Source: Own compilation) 60
Fig. 3.2 Migration in the case of an excess demand for labour.
(Source: Own elaboration) 62
Fig. 3.3 Migration and excess supply for labour. (Source: Own
compilation)63
Fig. 3.4 The vicious circle of regional underdevelopment.
(Source: Modified after Capello, 2016, p. 104) 64
Fig. 5.1 Share of TCN in and beyond the cities. (Source: Own
compilation)86
Fig. 5.2 Share of population 15–64 years old in metropolitan and
non-metropolitan regions (2019). (Source: Own compilation) 87
Fig. 5.3 GDP per capita at NUTS 2 regions by share in tertiary
education for all regions. (Source: Own elaboration) 88
Fig. 5.4 The share of population with tertiary education by type of
territory. (Source: Own elaboration) 92
Fig. 5.5 Primary income by type of territory. (Source: Own elaboration) 99
xiii
xiv List of Figures
Fig. 5.6 Company start-ups and share of non-EU28 population in

non-metropolitan regions. (Source: Own elaboration) 102
Fig. 5.7 GDP in PPS per inhabitant by regional category.
Fig. 5.8 Annual percentage change of gross value added (GVA).
Fig. 5.9 Unemployment rate by share of non-EU28 population with
primary education in non-metropolitan regions.
Fig. 5.10 Employment rate by share of non-EU28 population with
primary education in non-metropolitan regions.
Fig. 5.11 Economic growth and the share of non-EU28 population
with tertiary education in metropolitan regions.
Fig. 5.12 Economic growth and the share of non-EU28 population
with primary education in metropolitan regions.
Fig. 5.13 Fiscal effects in theory. (Source: Own elaboration) 111
Fig. 5.14 Age-specific net contributions to the Danish public finances
by origin in 2018 (thousands DKK). (Source: Danish
Ministry of Finance (2018)) 112
List of Tables
Table 3.1 Overview of existing theories on the determinants of

international migration for different spatial areas 53
Table 4.1 Overview of variables 75
Table 5.1 Population projection, EU countries, 2020–2050 84
Table 5.2 Source for population development, EU countries, 2020 85
Table 5.3 Educational attainment levels for the studied areas and
countries in 2019 (%) 91
Table 5.4 Unemployment by country of birth 2009 and 2019 (%) 93
Table 5.5 Median equivalised net incomes (€) 2009 and 2019 in the
analysed EU countries 97
Table 5.6 At-risk-of-poverty rates during 2009 and 2019 in the
analysed EU countries (%) 98
Table 5.7 Net business population growth in 2018 101
Table 5.8 GDP per capita and real growth rates in national economic
centres and rural, remote, peripheral and mountainous
regions studied in selected countries (2019) 106
Table 6.1 Alternative analytical dimensions 139
xv
CHAPTER 1
What Is This Book About? Introductory

Positioning
1.1 Trends in Migration Flows and Policies

For decades, migration has influenced the economies and societies of
Europe and the European Union. The number of labour migrants
increased in Europe until 2019, and for 2020 the number of labour
migrants dropped due to the Covid-19 pandemic. Family related migra-
tion dropped by ca. 30% between 2019 and 2020. Despite a similar drop
of ca. 30% in the number of asylum applications, asylum seeking also
remained at high levels during the pandemic (OECD, 2021). Trend wise,
immigration to Europe has increased over time and it is not expected to
decrease.
The share of asylum-seekers from countries outside Europe constitutes
a significant share of the migrants headed for Europe. In 2017, 3.1 million
first resident permits to non-EU citizens were issued by EU Member
States, and approximately half of them were granted due to work or stud-
ies (Hofmann, 2020). Countries such as France, the UK, Italy, Spain,
Germany, but also Portugal and Sweden, attract much of the immigration
flows (all types of immigrants) and will probably do so for quite some time
(McAuliffe & Triandafyllidou, 2021). The numbers of refugees, asylum-
seekers, internally displaced and stateless persons have more than doubled
globally between 2011 and 2021 from 42.7 million to 89.3 million, and
not since the end of World War II have these numbers been so high
(UNHCR, 2022). Although many politicians, practitioners and
© The Author(s), under exclusive license to Springer Nature 1

Switzerland AG 2023
D. Rauhut et al., The Economics of Immigration Beyond the Cities,
https://doi.org/10.1007/978-3-031-30968-7_1
2 D. RAUHUT ET AL.
stakeholders hope for a quick fix on how refugees become integrated into
the host community, historical experiences suggest that this process can
take quite some time. One example is that the last refugee camp in
Germany after World War II was not closed until 1960 (Rauhut, 2014).
Over the last 30 years, Europe has experienced several major refugee
flows, with a major impact on most Member States. The Yugoslavian civil
war in the early 1990s generated the biggest refugee flow in Europe since
World War II, with refugees spread across Europe (de Haas et al., 2016).
The 2015 ‘refugee crisis’ generated another major refugee flow. Its origin
is multifaceted. One issue deals with the inability to uphold and control
EU external borders, and a second relates to the fact that Turkey decided
to stop preventing refugees from crossing the border into the EU. This
was a protest against the EU closing the door on Turkey becoming an EU
candidate country. In this sense, the refugee crisis was predominantly a
political crisis (Laine, 2020). Thirdly, the recent refugee flow from Ukraine
has caused 7.8 million Ukrainians to seek refuge in EU countries, with a
further 6.9 million Ukrainians displaced in Ukraine. Although the Russian
war on Ukraine has not come to an end, the number of refugees to the EU
is already twice as high as the number of refugees in Europe after World
War II, but these numbers of refugees, asylum-seekers and displaced per-
sons are already obsolete (Rauhut et al., 2022).
Contrasting the trends and eventual turning points in migration to the
European Union against the immigration policies of the EU Member
States, immigration policies appear to have taken impression of these
developments. STEM-workers (science, technology, engineering, mathe-
matics) and other highly skilled labour are attracted in most countries.
Many countries apply separate visa rules for this kind of labour, and as
English is the lingua franca within these branches, STEM-workers are
highly mobile (Chiswick, 2019; Hogarth, 2021). To attract highly inter-
national and mobile labour, not only the construction of visa rules is an
important aspect. Tax rules (e.g., Portugal—see Silva, 2022) and welfare
services (e.g., Sweden—Swedish Ministry of Foreign Affairs, 2005) are
examples of tools that have been employed to attract this labour. In many
cases, international students who have studied science, technology, engi-
neering and mathematics are welcome to stay in the country of study after
graduation (e.g., the US—Chiswick, 2019), which is another tool used to
attract this demanded labour.
Over the last few decades, immigration policy has changed for these
types of potential immigrants. The applied changes aim at simplifying
1 WHAT IS THIS BOOK ABOUT? INTRODUCTORY POSITIONING 3
immigration for highly attractive labour and are a response to the high
demand for this kind of labour (Hogarth, 2021; Rothwell & Ruiz, 2013).
Asylum-seekers and refugees have also experienced changes in the immi-
gration policies, but in the opposite direction. In most cases, countries
have made it more difficult for asylum-seekers and refugees to enter a
country (del Guercio, 2019), and it is felt that the return rate of asylum-
seekers who have had their applications rejected and of irregular migrants
should be increased (Ataç & Schütze, 2020). This is a parallel develop-
ment to the increasing global trend in refugees (UNHCR, 2022; OECD,
2021). For tied movers and family reunification, the ability to be provided
with appropriate housing and subsistence by family already residing in the
country is an important consideration to be granted a visa (European
Union, 2003).1 Consequently, family reunification for low-income house-
holds is difficult as they have difficulties in meeting the economic require-
ments for obtaining a visa in many countries (MIPEX, 2020).
1.2 Migration Flows and the Spatial Distribution

of Immigrants
Europe and the countries within the European Union have experienced
significant changes in international migration trends over the last decades.
Some scholars argue that the period between 1950 to the mid-1970s is
characterised by labour migration and migration flows related to decolo-
nisation, the period between the mid-1970s to the end of 1980s is charac-
terised by the oil crisis and migration control, while the migration flows
since the 1990s are dominated by refugees (Van Mol & de Valk, 2013).
During the period up to the 1990s, low-skilled labour was headed for the
big cities, as the prospects of finding a low-productive and labour-intensive
job were highest in the cities. At the same time, the metropolitan areas
attracted the well-educated labour, and most countries also experienced
an urbanisation process during this period, which meant that native labour
left rural areas in favour of urban areas (Vandermotten et al., 2004). To
large extent, these demographic changes reflected a changing economic
geography of Europe (Champion et al., 1996).
1
Most EU Member States and European Free Trade Association (EFTA) States are subject
to the EU’s Family Reunification Directive. However, Denmark, Iceland, Ireland, Norway,
Switzerland and the UK permitted family reunification for refugees along similar lines, but
with extra requirements (UNHCR, 2015).
4 D. RAUHUT ET AL.
However, refugees have constituted a steady migration flow to the

Western Europe ever since World War II. Immediately after the war, the
refugees were of German and East European origin, and the East European
refugees came in a steady flow until the collapse of the Communist system
in the late 1980s. Most of the non-European immigration originated in
the former colonies of countries such as the UK, France, Spain, Portugal,
the Netherlands and Belgium (Fassmann & Münz, 1994). Besides the
significance of East-to-West migration within Europe (Fassmann, 2009),
South-to-North migration flows were also significant (de Haas et al.,
2016). Since the late 1960s and early 1970s, major global refugee flows
originating in the Middle East, Africa and Latin America have reached
Europe. The main refugee flows during the 2010s also originated from
these regions (de Haas et al., 2016). Since the late 1980s, attempts have
been made to limit the extra-European immigration to West European
countries (Van der Kaa, 1993; de Haas et al., 2016). In the wake of the
financial crises in the EU Member States during 2008/2009, a new wave
of migration from southern Europe to northern Europe emerged (Lafleur
& Stanek, 2017).
This is a story of migration flows between countries. However, the immi-
grants were not evenly distributed within the countries of destination. In
many countries, refugees were used as an instrument to create a counter-
urbanisation in the 1980s to mitigate the rural exodus that had been seen
from the 1960s and 1970s (Champion et al., 1996). In some countries,
refugees were only allowed to settle down outside cities after World War II
until the end of the 1950s (Rauhut, 2014). Today, the high share of
asylum- seekers in rural regions in countries such as Austria, Finland,
Germany, Italy, Norway and Sweden are a result of dispersal policies that
distribute asylum-seekers purposefully or due to existing federal re-
allocation schemes to rural and mountain areas (Weidinger, 2018). In
most countries, refugees and asylum-seekers are accommodated in periph-
eral areas during the asylum process (Proietti & Veneri, 2019). The avail-
ability of accommodation is an aspect that is considered when resettling
refugees in peripheral locations (Tardis, 2019; Gauci, 2020). Consequently,
small labour markets with a limited demand for labour will suddenly host
an excess supply of labour.
1.3 Economic Structure and Spatiality

Several prominent economists (e.g., Adam Smith, Alfred Marshall and
Alfred Weber) studied the relationship between cities and urbanisation, on
the one hand, and economic activity and innovation, on the other, since
the late eighteenth century until the early twentieth century. So did the
German geographers Walter Christaller and August Lösch in the 1930s
(Rauhut & Hatti, 2017). In the 1980s, a renewed interest in the causality
between cities and economic growth emerged. As the urban environment
stimulates economic diversification and a cross-pollination between peo-
ple and various economic activities, cities were considered to be an impor-
tant driver behind economic growth. Jacobs (1984) termed these entities
as urbanisation economies. The theoretical argument was that the ability
to share resources, quicker and better matching, more learning, and inno-
vative activities within close distances were seen as the drivers of higher
productivity, and employment and economic growth were more advanced
in cities (Duranton, 2014).
The New Theory of Economic Growth and the New Economic
Geography emerged in the 1980s, focusing on the endogenous factors of
economic growth. Following the argument put forward by these theories,
cities played an important role in economic growth (Romer, 1986, 1994;
Lucas, 1988; Krugman, 1991a, 1993). During the 1990s and early 2000s,
scholars such as Porter (1990), Castells (1996), Sassen (1991), Florida
(2002) and Dickens (2003), to mention a few, argue for the central role
that cities play in economic growth, but from different perspectives and
scientific disciplines. Foreign direct investments (hereafter FDIs) as well as
bigger domestic investments usually go to areas located close to the mar-
ket, with good access to available labour of the correct type, and good
opportunities for quick returns on investment. Hence, cities and urban
agglomerations are favoured, and peripheral and remote areas are disfa-
voured (Tewdwr-Jones & Morais Mourato, 2005). This is especially so
when talking about the post-industrial society, globalisation and the ICT
revolution.
Within the European Union about 80% of the territory is classified as
predominantly rural, and the population residing in rural areas represents
about 30% of the overall population. Most of the rural areas have a GDP
per capita significantly below the EU average, and many are among the
least favoured regions in the EU (CEC, 2021)—being what Rodríguez-
Pose (2018) calls ‘the places that don’t matter’. Many rural regions,
6 D. RAUHUT ET AL.
especially in southern Europe, have suffered from economic stagnation

since the financial crisis in 2008 (Rauhut & Costa, 2021a; CEC, 2022). A
similar development is to be found in rural and peripheral Finnish and
Swedish regions due to extremely sparsely populated areas, and the de-
industrialisation and decline in the primary sector have not been counter-
balanced by an expanding market demand in the service sector (Rauhut &
Costa, 2021b). OECD (2018) argues that structural shifts in manufactur-
ing and natural resource-based industries combined with population loss
and ageing have caused some rural communities to be left behind, some-
thing which has fuelled discontent. Accordingly, the capacity of govern-
ments to effectively address these challenges and generate opportunities to
turn the development around is crucial (OECD, 2018).
The Rural Agenda of the European Union (CEC, 2021) aims to help
rural regions grow and raise employment and living standards by improv-
ing the competitiveness of agriculture, achieving a sustainable manage-
ment of natural resources and climate action, and a balanced territorial
development of rural areas. Despite the rather massive empirical evidence
that the economic conditions, economic activities and economic structure
differ between different types of territory, the economic potential of
peripheral, remote, mountainous and rural regions is recurringly overesti-
mated and is based on the belief that economic activities are a-spatial.
When seen from this perspective, however, these regions constitute an
underutilised economic resource (Membretti et al., 2017; Perlik &
Membretti, 2018) and immigration will help to revitalise these regions
economically and mitigate the problems associated with population age-
ing (Perlik et al., 2019; Rye & O’Reilly, 2020; Przytuła & Sułkowski,
2020). However, these claims have been questioned in other studies
(Poot, 2008; Gaspar et al., 2005; Coppel et al., 2001), and the OECD,
2021emphasises that immigration can both mitigate and aggravate these
problems, but not solve them.
1.4 The Economic Effects of Immigration

Few topics have been debated as much as the economic consequences of
immigration. The topic is highly ideological and causes much contention.
The findings of such debates suggest results that point in all kinds of direc-
tions, depending on what assumptions and premises the analyses are built
on. Based on neoclassical economic theory, immigration is always eco-
nomically beneficial for the host country (Simon, 1998), which is the same
position advocated by the currently popular economic theory of the New

Left, Modern Monetary Theory (MMT), (Hansen, 2021; Kelton, 2020).2
While Simon (1998) represents a libertarian view on the effects of immi-
gration, the MMT represents the opposite: as long as countries control
their own currency, they can ignore budget deficits and use the money for
refugee reception. As refugees are also consumers, this will stimulate the
economy and hence refugee reception will be beneficial for all (Hansen,
2021; Kelton, 2020).3 On the other hand, the OECD concludes that
immigration may—given a set of assumptions—mitigate some of the
labour shortage that an ageing population causes, but it cannot solve the
budgetary implications of ageing populations (Coppel et al., 2001;
Bodvarsson & Van den Berg, 2013). The more favourable results of the
economic consequences are based on the premise that restrictions are
raised against low-skilled immigrants (Kondoh, 2017). While labour
immigrants have a job waiting for them upon arrival, far from all refugees
find a job and are hence dependent on welfare transfers. In many countries
this is a costly consequence of immigration (Bodvarsson & Van den Berg,
2013; Bansak et al., 2021), and although there is a huge variation between
different countries, immigrant integration programmes and integration
policies consume significant resources in the host countries (Doomernik
& Bruquetas-Callejo, 2016).
In the economic literature, the economic consequences of immigration
are seen as a function of issues such as the immigrants’ human capital,
language proficiency, welfare use, economic mobility and impact on the
labour market in the host country (Borjas, 2001, 2019; Chiswick, 2019).
The most significant economic consequences of immigration are found in
labour market and fiscal issues (Mayr, 2012). Moreover, there are also dif-
ferences in the economic impact of permanent and temporary migrant
workers (Dustmann & Görlach, 2016), which highlights the need to bear
in mind that immigrants are a heterogeneous group. Furthermore, not all
immigrants migrate due to economic incentives. Bodvarsson and van den
Berg (2013, p. 305) point at a key issue when observing that:
2
The heterodox economic theory of MMT is based on the assumption that the govern-
ment can produce a just provision of social welfare by raising taxes and printing more money.
Its critics argue that it is a political ideology rather than a concise and coherent economic
theory (Drumetz & Pfister, 2021a, 2021b).
3
Unfortunately, no country controls its currency 100%, which makes MMT unrealistic in
its premises.
8 D. RAUHUT ET AL.
a group of international migrants that do not fit the standard model of

immigration very well are asylum seekers and refugees. These are people who
have left their home countries to escape actual or feared political, religious
or social persecution, or other threats to their safety and well-being. They
are not so much responding to the economic pull of higher incomes over-
seas as they are being pushed or driven out of their native countries by war
or intolerable political and social conditions. (italics in original)
Refugees differ from labour migrants, and so does their labour market
success relative to labour migrants in the new host country (Hatton,
2013). The resettlement of refugees within the host countries is usually
arbitrary (Bansak et al., 2021), and in many countries refugees are mechan-
ically resettled to peripheral regions to level out population imbalances,
adding labour to regions struggling with declining populations
(Golebiowska et al., 2011). As refugees have not been selected economi-
cally in the same way that labour immigrants have, their labour market
situation is fundamentally different than of labour immigrants. Brell et al.
(2020, p. 94) conclude that ‘refugees typically arrive in a host country
with less locally applicable human capital, including language and job
skills, than economic migrants and consequently are likely to start at sig-
nificantly lower levels of wages and employability’. To put refugees into
work is a challenge (OECD, 2016), and because of a marginal position on
the labour market, many immigrants, both labour immigrants and refu-
gees, become self-employed (Stark, 1991).
As delineated, economic activities are not evenly spread across a coun-
try, nor is the demographic structure and its socio-economic profile iden-
tical in all regions and municipalities. But immigrants are not usually
evenly distributed in the host country. Hence, it can be assumed that the
economic consequences of immigration will vary depending both on the
characteristics of the regional/local economic structure and on the socio-
economic profile of the immigrants themselves. Notwithstanding this, an
overwhelming majority of all the studies on the economic consequences of
immigration focus on the national level (e.g., Brell et al., 2020; Peri,
2016; Kondoh, 2017; Borjas, 2019; Chiswick, 2019; Bodvarsson & Van
den Berg, 2013; Bansak et al., 2021; Nijkamp et al., 2012; Artal-Tur
et al., 2014). Some studies have been carried out regarding the economic
impact of immigration to cities. This literature is, however, very focused
on the US (Ottaviano & Peri, 2013; Lewis & Peri, 2014; Card, 2007;
Kemeny, 2014). It is not a bold assumption to make that the two extreme
examples of cities and peripheral/remote places in Europe have completely

different possibilities for utilising the potential that immigration can bring.
Nor can we assume that the findings from the US cities are readily trans-
ferable to European cities and even less to peripheral, remote, rural and
mountainous regions. But hitherto, this is largely unexplored in economic
research.
Over the last few years, an increasing amount of literature has emerged
on how immigrants in general, and especially refugees, can economically
revitalise rural, remote, peripheral and mountainous regions. This litera-
ture has some distinct characteristics. First, the studies are done by soci-
ologists, anthropologists, ethnographers, geographers, spatial planners
and political scientists (e.g., Perlik et al., 2019; Rye & O’Reilly, 2020;
Przytuła & Sułkowski, 2020; Hansen, 2021; ESPON, 2019), although a
few economists have also studied this issue (Erol & Unal, 2022, Brell
et al., 2020; Bansak et al., 2021; Bodvarsson & Van den Berg, 2013).
Second, most of the studies arguing that refugees will revitalise these
regions are based on the logic of the lifestyle migration theory, in which
well-off persons with significant economic and non-economic resources
move to these regions to enjoy self-perceived well-being and quality of life
(Kordel et al., 2018; Kordel & Weidinger, 2020; Perlik et al., 2019).
Originally, the lifestyle migration theory has been related to retirement
migration, seasonal migration and residential tourism (O’Reilly, 2001;
Benson, 2011; Benson & O’Reilly, 2009; Benson & Osbaldiston, 2014;
Rodríguez, 2001, Torkington et al., 2015). But to us, it seems a bold
assumption to use such theory when analysing the economic consequences
of refugee immigration to rural areas, and it remains to be seen to what
extent this bold assumption can stand up to empirical test. Third, most of
the studies arguing that immigration can economically revitalise rural,
remote, peripheral and mountainous regions are based only on qualitative
methods and data (Perlik et al., 2019; Galera et al., 2018; Bianchi et al.,
2021; Kordel & Weidinger, 2020; ESPON, 2019). Fourth, this literature
does not always distinguish between different types of immigration, for
example refugees and labour migrants (Kordel & Weidinger, 2018; Rye &
O’Reilly, 2020; Galera et al., 2018; Bianchi et al., 2021), and as noted
above, different types of immigrants will perform differently. Fifth, no
distinction is made between EU citizens and extra-EU citizens (e.g.,
Galera et al., 2018; Rye & O’Reilly, 2020; Kordel & Weidinger, 2018),
which is a remarkable shortcoming, especially as the legal status of the two
different groups is fundamentally different (e.g., Mügge & van der Haar,
10 D. RAUHUT ET AL.
2016). In other words, in the current literature, an intra-EU labour migra-

tion of EU citizens is analysed in the same way as for refugees from out-
side the EU.
In an analysis on the economic consequences of immigration, these
aspects must be handled in a different way. For the time being, the num-
ber of economic studies on the economic consequences of immigration at
sub-national levels are few, and it is generally considered difficult to place
refugees into the migration logic based on labour migrants. However, in
the wider social science field, many studies on the economic consequences
of immigration have been made by non-economists. The strength of these
studies is that they approach the question at sub-national levels, but on the
downside, fundamental aspects such as the different types of immigrants
and at what level the consequences materialise are blurred. Moreover,
intra-EU labour migrants are lumped together with extra-EU refugees,
which creates a significant degree of bias when analysing the economic
consequences of immigration (see also Dustmann et al., 2016).
1.5 The Aim and Scope of This Book

This volume discusses what economic consequences immigration will have
on rural, peripheral, remote and mountainous regions—that is places
beyond the cities. As the economic consequences usually are discussed at
a national level, but most consequences materialise at sub-national levels,
we want to highlight a certain type of territory. Economic activities are not
a-aspatial, and consequently, neither are the economic consequences of
immigration. The analysis will be carried out in two ways: (1) We under-
take quantitative analyses based on Eurostat data for all regions in the
European Union, and the findings are compared and contrasted against
previous research findings. (2) We zoom into a set of EU countries
(Austria, Bulgaria, Finland, Germany, Italy, Spain and Sweden) in places
beyond the cities (i.e., non-metropolitan regions).
A key question in this study is who an immigrant is. According to the
Maastricht Treaty 1992 (European Union, 1992), EU citizens have the
same civic rights as natives in another EU country with the exception that
they are not allowed to vote in the national parliament. Hence, an EU citi-
zen is to be considered as a native in another EU Member State and is not
subject to any integration policies in the EU country in which they reside
(Mügge & van der Haar, 2016). Moreover, the free mobility of labour
and the integration of the EU labour market are to a larger extent driven
by political ambitions to deepen the integration of the EU’s inner market

than on actual labour demands (Zaiceva & Zimmermann, 2008; Straubhaar
& Wolter, 1997).4 Consequently, we only focus on non-EU citizens when we
talk about immigrants. Within our study, the term third country nationals
(hereafter TCN) is also used for non-EU citizens.
In this study we focus on areas ‘beyond the cities’, which means that we
define what is a city and also what is beyond the cities. Instead of following
the urban-rural typology offered by Dijkstra and Poelmann (2008), we
use the metropolitan/non-metropolitan regions typology offered by
Eurostat (2023). In short, in this typology, metropolitan regions are
approximations of functional urban areas of 250,000 or more inhabitants
including the commuting zones. Several types of metro-regions can be
distinguished: (1) the capital metro-region includes the national capital;
(2) second-tier metro-regions are regions including the largest cities in a
country, excluding the capital; (3) smaller metro-regions can have a rela-
tively low population and be placed far away from the capital and the
second-tier metro-regions. Consequently, the smaller-tier metro-regions
are not considered as metro-regions due to their population size. The
regions which do not belong to a metro-region are simply considered
non-metro-regions.
1.6 Methodological Considerations

and Personal Reflections
The empirical material consists of both qualitative and quantitative data.

The qualitative data originates from the different deliverables from the
Horizon 2020 funded project ‘Matilde’.5 This part of the data consists of
interviews and focus groups of stakeholders (public sector, private sector
and third sector), TCN who have immigrated to regions beyond the cities
in the EU and experts in the related fields.6 It also consists of qualitative
4
This argument is developed further in Straubhaar (1988, 2001). With the exception of a
few countries, the relative unwillingness to move to another EU country supports the argu-
ment that the free trade of goods will make free movement of labour less important.
5
For details on the project, see https://matilde-migration.eu.
6
For an overview, see the project reports by, for example, Bianchi et al. (2021), Aigner-
Walder et al. (2021), Laine and Rauhut (2021), Laine (2021), Caputo et al. (2021),
Membretti (2022), Gilli and Membretti (2022).
12 D. RAUHUT ET AL.
assessments of statistical data (Aigner-Walder et al., 2021; Laine & Rauhut,

2021). The quantitative data used for the analysis is mainly based on
Eurostat data, to guarantee a comparability between countries and regions.
Migrants are not identical. The qualifications of migrants are different,
and hence they will perform differently in the labour market. Moreover,
depending on their legal status, not all of them are (immediately) allowed
to work. Additionally, the location of their settlement matters, and while
some regions might urgently need labour, migrants will cause an excess
supply of labour in others. Economic activities are not space neural, nor is
the distribution of migrants. Furthermore, the economic consequences of
migration are not uniform throughout the economy. We can expect to see
macroeconomic consequences (e.g., in the form of tax revenues, net trans-
fers and social spending) and company-related consequences (e.g., labour
supply, structural change and competitiveness), as well as consequences at
an individual level (e.g., unemployment, welfare dependency and wage
levels).
1.7 The Structure of the Book

This book contains seven chapters. Chapter 2 discusses the economic
effects of migration in general. The existing theoretical approaches as well
as previous empirical results are presented and discussed within this chap-
ter. In Chap. 3 we discuss the effects of migration beyond the cities and
outline a theoretical framework to explain what happens on the labour
market in the case of an excess supply or an excess demand of labour.
Methodological considerations and data are reflected on in Chap. 4. In
Chap. 5 we discuss the empirical economic consequences in cities and
beyond the cities both qualitatively and quantitatively. The focus is on the
regional level (NUTS 2) in the EU, with a specific consideration of seven
selected countries and additional case study regions. How policies can be
designed to optimise the economic consequences of immigration by dif-
ferent types of immigrants is discussed and contrasted against the current
policy design in Chap. 6. Chapter 7 discusses the findings of the study,
what can be learnt from it and what the added value is, and outlines ave-
nues for future research.
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CHAPTER 2
Economic Theory and Migration
2.1 Determinants of International Migration

The determinants of international migration are extensively discussed in
theory, although under differing perspectives and assumptions. While
some analyse the decision to migrate in terms of individuals or house-
holds, others consider migration flows between countries or examine insti-
tutional aspects of relevance. There are also various existing sources which
present and discuss different concepts and theories (e.g., Massey et al.,
1993; Schoorl, 1995).
From a micro perspective, an individual or a household who is considering
an out-migration might incorporate various aspects when making a decision.
Lee (1966) distinguished between factors that push individuals or house-
holds away from their home country (e.g., poverty, low wages), and pull
factors such as personal freedom or high wages that make the receiving coun-
try attractive. Conversely, stay factors within the host country (e.g., family ties
or property) as well as ‘stay away’ factors of the receiving country (e.g., lan-
guage or cultural barriers) could hinder an out-migration. Moreover, the
costs of moving (e.g., transportation costs or travel time) as well as potential
formal barriers to migration (e.g., entry visa) have to be considered (see
Bodvarsson & van den Berg, 2013 for a graphical depiction of various rele-
vant factors). In this context, the difference between refugees, labour migrants
and other migrants has to be scrutinised, as the single theories presented
below have a different explanatory power for different forms of migration.
© The Author(s), under exclusive license to Springer Nature 21

Switzerland AG 2023
D. Rauhut et al., The Economics of Immigration Beyond the Cities,
https://doi.org/10.1007/978-3-031-30968-7_2
22 D. RAUHUT ET AL.
According to the neoclassical migration theory, individuals are ratio-

nal actors who aim to maximise their income in the long run.
Consequently, costs and potential risks as well as the expected wage
level are considered as relevant factors in taking a migration decision
(Sjaastad, 1962; Todaro, 1969, 1976; Borjas, 1990). Transferred to a
macro perspective, migration is a consequence of differences in the
labour markets in different countries, leading to a long-run equilibrium
of labour markets (see Sect. 2.3). Accordingly, this implies that there
would be no migration between countries if no wage differential exists
(Ranis & Fei, 1961; Harris & Todaro, 1970).1
The assumptions of the neoclassical model are criticised by the new
economics of migration insofar that decisions are not taken on an individual
level, but the societal dimension is of relevance (Stark, 1978, 1991; Stark
& Bloom, 1985). A household has the potential to spread risks by allocat-
ing its resources, and where different sources of income could come from
different countries. A stable income from a receiving country would offer
security in the case of a deterioration of the income in the home country,
especially as there are low insurance and credit possibilities existing in
developing countries. This implies that wage differentials are not abso-
lutely necessary for migration.
The labour market is also focused in the dual or segmented labour mar-
ket theory (Piore, 1979; Morokvasic, 1984; Kofman, 1999), which states
that the demand for workers in developed countries is a pulling factor for
international migration. The domestic supply of low-level workers is lim-
ited, often due to the unstable conditions and low prestige of these jobs,
and raising the wage as an incentive would lead to a more expensive struc-
tural inflation,2 which makes migrants attractive. The consequence would
be a segmented labour market, with migrants employed in low-paid jobs
and worse working conditions than natives.
The migration systems or networks theory states that over time, migration
systems are evolving. For example, trade or cultural relationships between
countries can motivate stable migration flows/international migration sys-
tems between the country of origin and the host country (Mabogunje,
1970). The formation of networks in the receiving countries makes
1
In classical economics, W. Arthur Lewis (1954) and Adam Smith (Rauhut, 2010) con-
sider wage differences and unemployment as drivers of migration.
2
To raise the wage of low-level jobs would have implications for the total hierarchy (accep-
tance, status), with the need for a proportional increase of all wages, which is known as
structural inflation.
2 ECONOMIC THEORY AND MIGRATION 23
migration even more attractive, as it lowers risks and may ease the access
to labour markets. The consequence is a self-reinforcing process, where
the existing networks motivate people to migrate, which leads to an even
bigger network and incentive in the future.
The world systems theory (Wallerstein, 1974) considers international
migration more globally, and peripheral developing countries are of inter-
est for capital owners in order to raise their profits (e.g., by way of existing
natural resources, new consumer markets or access to cheap labour). As a
consequence, productivity in agriculture increases, leading to a decrease in
demand for manual/low-wage labour. In the search for new opportuni-
ties, these workers could migrate, and migration to the origin countries of
capital is easier due to existing links (e.g., transportation, communica-
tion). This makes migration more likely between colonially connected
countries.
The theory of cumulative causation (Myrdal, 1957; Massey, 1990)
describes migration as a dynamic process. Families who receive remit-
tances achieve higher incomes, making other families feel relatively
deprived. This further motivates people to migrate, creating even more
income inequality in the country of origin. Having these higher incomes,
migrants buy land which is withdrawn from production due to the low
productivity when compared to working abroad. With less jobs in agricul-
ture, out-migration increases again. Hence, a culture of migration evolves.
But migrants are also needed within the receiving countries, as the jobs
they take over are labelled as migrant jobs, being less attractive for natives.
A different perspective is proffered by institutional theory (Massey
et al., 1993), as the relevance of institutions for migration is in focus.
There are institutions present that encourage migration, and a market for
migration exists. For example, smugglers, transportation businesses, agen-
cies, and so on, all make a profit out of migration and ease entering the
labour market for migrants, making other sources of migration less rele-
vant. Moreover, humanitarian organisations fight for the rights and assis-
tance of migrants.
Finally, mobility transition theory (Zelinsky, 1971) considers demo-
graphic and societal transition processes. First, within developing coun-
tries it expects migration from rural to urban areas in a period of strong
demographic growth. Secondly, migration to developed countries follows.
As the demographic growth in advanced economies shrinks, an urban-to-
urban mobility follows. Moreover, the need to import low-skilled labour
leads to a circular migration.
24 D. RAUHUT ET AL.
2.2 Economic Effects of International Migration

After discussing the question of the motives for migration based on the
economic theories of the determinants of migration, the second relevant
question is one focusing on the effects of migration. Here, we focus on the
economic effects of migration in the receiving country. The elementary
model for a discussion of the economic effects of migration is the basic
labour market model. Due to migration, we would expect an increase in
total income in the receiving country. With the move of migrants to a new
country and their shift in consumption expenditures, a consequence of a
higher demand for labour may also be seen. Wages in the receiving coun-
try might fall due to a higher supply of labour. In the long run, dynamic
growth effects are also expected, as immigrants are an additional source of
innovation or they might be active as entrepreneurs, so economies of scale
could be used (Bodvarsson & van den Berg, 2013, p. 22f). But the pre-
sented effects are not that clear-cut, and any assumptions have to be dis-
cussed in detail.
Costs of Immigration
Decrease in Wages
In regard to wages, we follow the argument put forward by Borjas (1999a).
We assume a simple model of an economy whose production depends on
capital and labour, with a workforce consisting of native and immigrant
workers. Moreover, we assume that all workers are perfect substitutes and
that capital is owned only by natives. Additionally, labour and capital are
inelastic, and due to constant returns of the production function, the out-
put of the economy is fully distributed to workers and capital owners.
Figure 2.1 presents the effects of immigration on wages. MPL is the
marginal product of labour. Without immigration/with natives (N) only
on the labour market, the wage would be at the level w0. The entry of
immigrant workers (M) on the labour market shifts the supply curve to the
right, as more workers are available (L=N+M). Consequently, the market
wage is lowered to w1.
Hence, this basic labour market model implies a decrease in wages in
the receiving country due to a higher competition in the labour market,
based on the well-known and simple supply and demand principle (for
details, see Pindyck & Rubinfeld, 2017 or Mankiw & Taylor, 2020). As
Fig. 2.1 Effect of immigration on wages. (Source: Borjas (1999a, p. 1701),

adapted)
migrants enter the market and supply their labour, prices fall. Due to the
shift in labour supply, the real wage of competing native workers is low-
ered. But, as we will see later on, the ‘natives on the whole gain substan-
tially from immigration’ (Borjas, 1999a, p. 1702), and the assumptions of
this model are very unrealistic.
Costs of Integration
A second aspect to be considered as costs of immigration (and which is
often much more present in public debates than the effects on wages) is
the public costs of integration. For the integration of migrants, one would
most likely expect increased costs in the fields of education or social wel-
fare programmes. But besides the costs of services for migrants, the taxes
paid by migrants also have to be considered (Borjas, 2019; Chiswick, 2019).
Johnson (1980) argues that the immigration of low-skilled migrants
could have negative effects (also for high-skilled migrants and capital own-
ers) if it leads to the unemployment of low-skilled natives who then depend
on unemployment compensation. Hence, in the case of a progressive tax
system, those with higher incomes as capital owners or high-skilled work-
ers will bear the majority of the burden in regard to the higher fiscal costs.
26 D. RAUHUT ET AL.
Immigration may also increase ‘congestion in public services such as

schools, roads, sewers, electric power systems and parks (…) crime, pollu-
tion, and the destruction of traditional culture’ (Bodvarsson & van den
Berg, 2013, p. 182). Subsequently, xenophobia can also be considered as
an externality to immigration (Layard et al., 1992), making aspirations for
integration even more important.
Benefits of Migration
he Immigration Surplus
T
Besides the described costs, there are also benefits from migration that
may be expected. Borjas (1995a) argues that under a competitive frame-
work (market clearance and full employment), according to welfare eco-
nomics and free trade principles, a movement of factors of production
should increase welfare and efficiency. First, we again consider an aggre-
gate production function with the two inputs of capital and labour.
Secondly, we once more assume that capital is solely owned by native
workers and that immigrants and natives are perfect substitutes, as well as
a perfectly inelastic supply of capital.
Figure 2.2 shows the effects of immigration on total output. MPL is the
marginal product of labour, and the area under the curve presents the
Fig. 2.2 Immigration surplus. (Source: Borjas (1995a), adapted)

economy’s output. Hence, without immigration, the national income to

natives (N) is the area ABN0. As soon as immigrants enter the labour
market, the supply curse shifts to the right with the consequence of a
lower market wage and a higher national income which is now presented
by the area ACL0. A part of the income increase is distributed to immi-
grants as they receive income for their work. The part of the income
increase which goes to natives is shown under BCD.
Borjas argues that an immigration surplus only arises in the case of a
falling wage for natives. The losses by the lower wage are more than offset
by an increase of income of capitalists, as rental prices for capital increase.
If the wages of natives hardly react to immigration, the surplus would be
close to zero. In the case of a great reduction in wage, the native popula-
tion in total would gain in welfare. But, Borjas also highlights with a cal-
culation for the US, that the immigration surplus would be very small
(0.1% of GDP). Although the overall economic effects would be rather
small, immigration would lead to a fairly large redistribution of wealth
from labour to capital. Additionally, it has to be considered that the total
immigration surplus depends on the costs expended for the integration of
immigrants.
I ncrease in Market Size

As Borjas (1995a, p. 11) argues, ‘Immigration expands the size of the
market.’ The expansion of the market also leads to a higher level of com-
petition, which might result in productivity increases. Additionally, new
exchanges between workers and firms might lead to new knowledge, again
resulting in increasing returns. Growing markets may also enable the
exploitation of economies of scale and a stimulation of specialisation
(Bodvarsson & van den Berg, 2013). The shifting of the marginal product
of the labour curve from MPL to MP´L can increase the size of the immi-
gration surplus substantially. In the following figure, the change in the
national income of natives is shown by the sum of the triangle BCD and
the trapezoid ABEF (Fig. 2.3).
Natives could also profit from lower product prices due to lower labour
costs induced by migration. These potential effects are subsumed as
demand effects of immigration (Bodvarsson & van den Berg, 2013,
p. 125ff). But Borjas (1995a) also questions the relevance of these exter-
nal effects of immigration and argues that an increase in congestion as well
as decreasing returns to scale might be consequences of immigration, as
other production factors remain fixed.
28 D. RAUHUT ET AL.
Fig. 2.3 Immigration surplus in the presence of external effects. (Source: Borjas
(1995a), adapted)
I ncrease in Local Consumption

One additional aspect subsumed under the demand effect is an increase in
(local) demand due to immigration. The higher number of people leads to
more consumption. Hence, positive economic effects are expected in the
receiving country. Immigrants consume as soon as they arrive (e.g., food,
transportation, housing), with or without them having a job.
As wages fall, while native workers would not gain from the ‘immigra-
tion surplus’, mainly migrants and capital owners would profit, which, as
mentioned before, would lead to an income redistribution from workers
to capital owners. But the negative effects on workers could be reduced if
migrants consume the local output. Especially, a demand for goods which
are not tradeable (i.e., many services) would lead to an increased product
demand where workers are located. Hence, migration also leads to a shift
in the demands of consumers. These demand shifts stimulate the demand
for labour and increase the product supply from which native consumers
also benefit (see Bodvarsson & van den Berg, 2013, p. 124ff for a detailed
discussion on the effects on consumption).
The extent of the effect depends on the propensity of migrants to con-
sume compared to natives, as well as their possibilities to find a job. The
stimulation of demand may lead to an increase in product prices, but
production costs and domestic prices may also decrease due to a higher
supply of labour. Which of these price effects dominate depends on elas-
ticities of wages and prices, the participation rate of migrants in the goods
and labour market, as well as the output shares of labour and capital.
Moreover, the rate of migrants’ remittances and whether the migration
movements are demand-pulled or supply pushed play a role, with more
positive effects to be expected in the case of demand-pulled migration.
In general, the negative effects on earnings of both natives and immi-
grants or the out-migration of natives would reduce demand and so cause
a fall in product price, while the effect of more consumers would increase
prices. Hence, the effect on wages depends on the substitution of natives
by immigrants, with a negative effect on wages, on the one hand, and
potential positive effects on wages due to more local consumer demand,
on the other. Importantly, the demand effect could also be the reason why
only a low effect of immigration has been seen on wages in destination
countries (Bodvarsson & van den Berg, 2013, p. 127ff).
Questioning the Assumptions

The delineated developments are based on strict assumptions, wherein the
model assumes fixed capital which is owned by natives and a perfect sub-
stitution between natives and immigrants (for a detailed description, see
Bodvarsson & van den Berg, 2013, p. 110ff). However, these assumptions
are rather unrealistic, and consequently, different variations are now
discussed.
o Fixed Capital
N
First of all, in the case of variable capital there might be no immigration
surplus. If immigrants bring in capital, the immigration surplus for natives
might be smaller or even zero, as immigrants get the returns for their
product (Borjas, 1995a). Moreover, a high return to capital could moti-
vate inflows of capital from other countries. This would increase the
demand for labour with the consequence of raising wages. The prelimi-
nary negative effects of immigration on workers would be reduced.
However, the inflow of capital would stop as soon as the return for capital
reaches world level, so leaving wages at the level present before immigra-
tion. The described development would only take place in small countries
which do not influence the overall capital market on the world and also in
the case of a perfect elastic capital supply. But as capital is not perfectly
30 D. RAUHUT ET AL.
elastic, an immigration surplus is to be expected. Additionally, this implies

that the immigration surplus might only be temporary in small countries,
and the gains to immigrants are greater if capital flows flexibly between
countries (Bodvarsson & van den Berg, 2013).
o Perfect Substitution
N
The assumption of a perfect substitution between immigrants and natives
is unrealistic. Differentials in skills exist within the native as well as the
immigrant populations. The type of migration inflow in the sense of the
composition of skills effects the size of the immigration surplus. For a
simple case, we assume only two types of skills—skilled and unskilled
labour, a perfectly inelastic labour supply, no external effects and ignore
the role of capital in production. If the skill composition of immigrants is
equal to that of natives, then the wages of both skilled and unskilled work-
ers would be unaffected by immigration (under the condition of a produc-
tion function with constant returns to scale), with the consequence of no
welfare gains being seen from immigration.
If the skill composition of immigrants is different compared to those of
natives, the highest immigration surplus can be generated under the cir-
cumstance of a complete differentiation in skills. For example, if the native
population is relatively skilled, the immigration of unskilled people would
maximise the immigration surplus (Borjas, 1995a). From a distributional
point of view, if immigrants were more skilled, the wages of more skilled
natives would fall and those of the unskilled increase. Consequently,
besides capital owners, those natives that are not present within the group
of migrants will be seen to gain in wage (Bodvarsson & van den Berg,
2013, p. 118ff).
Taking into account the role of capital within the economy and assum-
ing that it is solely owned by natives, we again see an immigration surplus
as long as the immigration of skilled workers leads to a reduction in wages
for skilled persons, as well as if the immigration of unskilled workers
reduces the wages of unskilled natives. Borjas (1995a) argues that the
immigration surplus may be larger if skilled workers immigrate, as their
wages respond more extensively to shifts in supply. The greater immigra-
tion surplus can partly also lead back to the existence of production com-
plementarities between skilled labour and capital. Moreover, it can be
expected that the costs of unskilled migration are larger, as unskilled
migrants are more likely to use additional services, as well as pay lower taxes.
But, within this overall discussion, it has to be highlighted that even

within a certain skill group, perfect substitution is not to be expected as
differences in language, education or culture might be of relevance (for a
discussion, see Ottaviano & Peri, 2005).
Other Aspects
echnical Progress and Product Mix

T
Acemoglu (1998) points out that the structure of the labour force affects
the market for technologies. A high proportion of skilled labour would
lead to technologies which are complementary. Hence, immigration could
even affect the use of technology, insofar that a higher amount of low-
skilled workers could slow down automatisation processes, or vice versa,
automatisation could be increased in the case of the immigration of pri-
marily high-skilled workers.
According to the Rybczynski theorem of international trade, also the
sector which profits from the reduction of the wages of unskilled workers
will increase returns, with the consequence of an expansion, and a higher
demand and wage for unskilled labour. Wages could return to the previous
level, but the product mix within the region would be changed. Hence,
immigration could also lead to a differing product mix (for a discussion of
existing literature, see Bodvarsson & van den Berg, 2013, p. 123f).
Growth models focusing on technical progress ‘see people as the
resource that thinks of new ideas, develops new technologies, and applies
new methods and procedures’ (Bodvarsson & van den Berg, 2013,
p. 231). Hence, immigrants can be seen as a resource for innovation, be it
as entrepreneur or worker. Moreover, immigration could be a driver for
technological progress, to overcome diminishing returns. Additionally,
technology transfer between countries could be simplified due to existing
communication channels and favourable individual characteristics (such as
language skills, cultural knowledge, etc.) (Bodvarsson & van den Berg,
2013, p. 231ff).
I ncrease of Internal Migration

There is the further question of whether migration really has a negative
effect on the wages of natives. The local labour market cannot be seen as
closed market, as potentially the free movement of labour, capital and
goods might well equalise factor prices. If native workers or firms are
32 D. RAUHUT ET AL.
moving to other localities with better opportunities, then the effects of

immigration on wages might be low (Borjas, 1995a).
In an additional article, Borjas (2006) focuses on the internal migration
flows of natives as a consequence of migration. The fall of wages as a con-
sequence of immigration could lead to an out-migration of natives to
other regions. This would set off labour market effects of migration in the
long-term. Moreover, the capital of natives could be moved to other local-
ities until returns to capital are again equal between regions. This would
also happen without migration, in the case of excess demand, supply of
workers or capital.
Borjas argues that as a consequence of these adaptation processes,
regional analyses of the economic effects of migration might come up with
little effects. However, this does not mean that immigration had no effect
on the (regional) economy. According to this argumentation, one would
expect that regions with a high inflow of migrants would experience a
comparable high out-migration of natives, and in regions with a low level
of migrants, an in-migration of natives would be high. These adaptations
would reduce the effects of migration on wages in regions. But a presump-
tion of these adaptations furnishes perfect information of workers in the
context of regional wage differences (Borjas, 1999b).
ecrease of Regional Wage Differentials

D
Regional differences in wages should lead to labour flows between regions
which would improve labour market efficiency. Borjas (2001a) argues that
even in the US, labour mobility is not sufficient to get rid of regional dif-
ferentials in wages. Immigrants are likely to cluster in regions where wages
are higher and could subsequently support equalising wages and opportu-
nities throughout a country. Native workers might fail to utilise regional
wage differentials, especially in the case of high migration costs (e.g., leav-
ing family and friends behind). As a consequence, their marginal product
is lower than it could be, in the case of a movement to a region with higher
economic perspectives. On the other hand, migrants have already taken
the decision to accept the costs of migration, and the costs for choosing
another region or state within the country might be only a little higher.
Hence, for migrants, the chance is higher that they will arrive in regions
with the highest wages. In that way, immigration speeds up the regional
convergence in wages, with the effect of an improved economic efficiency.
The following figures show the gains of immigration in a multi-region
economy, with higher wages in region 1 in the initial equilibrium. N is the
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Spirits, characters of intoxication from,
591
Spleen, changes in, in chronic alcoholism,
607
Springs, Hot, value of, in spinal sclerosis,
900
Staggering, significance, in nervous diseases,
49

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The Economics of Immigration Beyond

the Cities: Theoretical Perspectives and

ISBN 978-3-031-30967-0 ISBN 978-3-031-30968-7 (eBook)

perspective to the complex subjects of immigration, urban-rural differ-

Lund, Sweden; Villach, Austria Daniel Rauhut

4 Data and Methods 71

Daniel Rauhut holds a PhD in economic history and is Associate

Rahel M. Schomaker holds a doctoral degree in economic policy from

Fig. 2.1 Effect of immigration on wages. (Source: Borjas (1999a,

Fig. 5.6 Company start-ups and share of non-EU28 population in

Table 3.1 Overview of existing theories on the determinants of

What Is This Book About? Introductory

1.1 Trends in Migration Flows and Policies

© The Author(s), under exclusive license to Springer Nature 1

1.2 Migration Flows and the Spatial Distribution

However, refugees have constituted a steady migration flow to the

1.3 Economic Structure and Spatiality

especially in southern Europe, have suffered from economic stagnation

1.4 The Economic Effects of Immigration

position advocated by the currently popular economic theory of the New

a group of international migrants that do not fit the standard model of

examples of cities and peripheral/remote places in Europe have completely

2016). In other words, in the current literature, an intra-EU labour migra-

1.5 The Aim and Scope of This Book

by political ambitions to deepen the integration of the EU’s inner market

1.6 Methodological Considerations

The empirical material consists of both qualitative and quantitative data.

assessments of statistical data (Aigner-Walder et al., 2021; Laine & Rauhut,

1.7 The Structure of the Book

Mayr, K. (2012). Die ökonomischen Auswirkungen von internationaler Migration.

Tewdwr-Jones, M., & Morais Mourato, J. (2005). Territorial cohesion, economic

Economic Theory and Migration

2.1 Determinants of International Migration

© The Author(s), under exclusive license to Springer Nature 21

According to the neoclassical migration theory, individuals are ratio-

2.2 Economic Effects of International Migration

Fig. 2.1 Effect of immigration on wages. (Source: Borjas (1999a, p. 1701),

Immigration may also increase ‘congestion in public services such as

Fig. 2.2 Immigration surplus. (Source: Borjas (1995a), adapted)

economy’s output. Hence, without immigration, the national income to

I ncrease in Market Size

I ncrease in Local Consumption

Questioning the Assumptions

elastic, an immigration surplus is to be expected. Additionally, this implies

But, within this overall discussion, it has to be highlighted that even

 echnical Progress and Product Mix

I ncrease of Internal Migration

moving to other localities with better opportunities, then the effects of

 ecrease of Regional Wage Differentials

in spinal hemorrhage and embolism,

Spasm and twitching of muscles in tumors of spinal cord,

characters and seat in writers' cramp,

Spasms, general, in hysteria,

in tumors of the brain,

Varieties, in nervous diseases,

Spastic spinal paralysis,

Speech, development of,

Speech, disorders of, in amyotrophic lateral spinal sclerosis,

Lund, Sweden; Villach, Austria Daniel Rauhut

4 Data and Methods 71

Table 3.1 Overview of existing theories on the determinants of

I ncrease in Market Size

I ncrease in Local Consumption

echnical Progress and Product Mix

I ncrease of Internal Migration

ecrease of Regional Wage Differentials