I NTRODUCTION W HY MOVING ?

O UTCOMES E FFECTS

L ABOUR E CONOMICS
M IGRATION

Costanza Naguib
(University of Geneva)
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

Q UESTIONS W E ’ LL I NVESTIGATE

1. Migration in Europe (data).

2. Why moving? The theory.

3. Empirical evidence.

4. Effects on the destination country:

I Do migrants steal jobs from natives?

I Migrants grease the wheels of the labour market.

I Immigrants and the welfare state.

I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

A F EW N UMBERS , 1

I According to the World Bank in 2013 there were

247,245,059 migrants in the world.

I That’s about 3.5% of the entire World population.

I In absolute values the country with the highest

number of immigrants is the US, followed by Saudi
Arabia.

I India and Mexico are the countries with the highest

number of emigrants.
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

A F EW N UMBERS , 2

Immigrants Emigrants
United States 46,136,362 India 13,885,099
Saudi Arabia 14,600,521 Mexico 13,220,345
Germany 11,110,943 Russian Federation 10,910,492
Russian Federation 11,048,064 China 9,651,150
United Arab Emirates 8,001,674 Bangladesh 7,572,135
United Kingdom 7,838,837 Pakistan 6,170,411
France 7,456,145 Philippines 6,001,696
Canada 7,404,179 Afghanistan 5,632,196
Spain 6,618,000 Ukraine 5,583,90
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A F EW N UMBERS , 3

However in percentage terms the picture is very different:

% Immigrants % Emigrants
Qatar 0.908 West Bank and Gaza 0.964
United Arab Emirates 0.885 Antigua and Barbuda 0.632
American Samoa 0.757 Guyana 0.608
Sint Maarten (Dutch part) 0.738 Samoa 0.602
Kuwait 0.721 Sint Maarten (Dutch) 0.596
Monaco 0.647 St. Vincent and the Gren. 0.554
Virgin Islands (U.S.) 0.604 Grenada 0.547
Andorra 0.594 Tonga 0.536
Macao SAR, China 0.587 St. Kitts and Nevis 0.535

See Also
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION – P ERCEPTIONS VS R EALITY

Source: Sides and Citrin, 2007

I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

W HY MOVING ?

I One moves if the benefits outweight the costs

I The benefits expands over time so one needs to look

at the PDV:
T  
X Bjt − Bot
PDV = −C
(1 + r )t
t=1

Where:
I Bjt = utility in country j at time t

I Bot = utility in country o (origin) at time t

I T = expected time of migration

I r = discount rate

I C = migration costs
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

I MPLICATIONS

Migration is more likely:

I if the costs are lower (geographical but also cultural

distance, et.);

I if the difference in real wages is larger;

I if it is easy to find jobs at destination and difficult at

origin;

I the longer the expected duration of migration.

I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION C OSTS – 1

I Housing ⇒ house owners move less;

I Family links ⇒ couples move less than singles;

I Social contacts ⇒ clusters and waves of migration,

the longer one stays the less likely to move back
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION C OSTS – 2

I Transports ⇒ commuting vs migration;

I Information ⇒ Risk Aversion;

I Language, culture, religion;

I Transferability of social rights ⇒ pensions.

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E CONOMIC VS . P OLITICAL M IGRANTS – 1

I Political migrants (“refugees”) differ from economic

migrants with respect to the motivations of their
migration choice.

I But do they earn more or less then the economic

ones?

I The empirical evidence suggests that a few years

after the migration, political migrants earn more than
the economic ones.

I Why?
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

E CONOMIC VS . P OLITICAL M IGRANTS – 2

I Typically political migrants have little chances to go

back to their country of origin.

I Moreover, they often have to flee their countries

leaving their assets behind.

I Therefore, they have higher incentive to fully integrate

in their new countries.

I Political migrants invest more than economic ones in

human capital, relationships and cultural assets in the
new countries.

I In the long run, these investments pay back, in terms

of higher wages.
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION AND U NEMPLOYMENT

I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION AND L ABOUR M ARKET O UTCOMES

Source: Jonathan Wadsworth, “Immigration and the UK Labour Market”, CEP/LSE,

http://cep.lse.ac.uk/pubs/download/ea019.pdf.
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION AND L ABOUR M ARKET O UTCOMES

Source: Jonathan Wadsworth, “Immigration and the UK Labour Market”, CEP/LSE,

http://cep.lse.ac.uk/pubs/download/ea019.pdf.
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION AND L ABOUR M ARKET O UTCOMES

Source: Jonathan Wadsworth, “Immigration and the UK Labour Market”, CEP/LSE,

http://cep.lse.ac.uk/pubs/download/ea019.pdf.
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION AND L ABOUR M ARKET O UTCOMES

Source: Jonathan Wadsworth, “Immigration and the UK Labour Market”, CEP/LSE,

http://cep.lse.ac.uk/pubs/download/ea019.pdf.
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION AND E DUCATION

Earnings

Country B
High Inequality

Country A
Low Inequality

Education/Skills
e∗
Stay in Country A Move to Country B
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION F ROM E ASTERN E UROPE

Formal education levels of employees in the EU (without Sweden), 1995

I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

E FFECTS OF MIGRATION ON THE DESTINATION COUNTRY

1. Do immigrants steal the jobs of natives?

2. Do migrant grease the wheels of the labour market?

3. Migration and the welfare state

I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

D O IMMIGRANTS STEAL JOBS ? – 1

Wages

Domestic Labour Supply

Total Labour Supply

W1 A

B C
W1

Labour Demand

Number of Workers
N3 N1 N2
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

D O IMMIGRANTS STEAL JOBS ? – 2

I Migrants increase the supply of labour;

I but only for those jobs where they are substitutes to

natives.

I Hence, they lower the wages (from W1 to W2 ) and the

employment of natives (from N1 to N3 );

I But the effect is not one-to-one:

I the jobs in N1-N3 are taken by migrants;

I but the jobs N2-N1 are new.

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D O IMMIGRANTS STEAL JOBS ? – 3

I If migrants are complement to natives...

I Migration actually increases the demand for natives.

I Employment increases and wages increase.

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D O IMMIGRANTS STEAL JOBS ? – 4

Wages

Labour Supply

W1

W0

New Labour Demand

Labour Demand

Number of Workers
N0 N1
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D O IMMIGRANTS STEAL JOBS ? – 5

I If migrants are complement to natives...

I Migration actually increases the demand for natives.

I Employment increases and wages increase.

I And there might be also important effects from the

point of view of the consumers... – Let’s see!
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

M IGRATION GREASES THE WHEELS OF THE LABOUR

MARKET – 1

I With regional disparities in wages and

unemployment, workers should move from areas with
low wages and high unemployment to areas with high
wages and low unemployment;

I However, only 1/200 EU citizens change residence

from one year to the next.

I But, 7/100 non-EU citizens change residence in the

EU from one year to the next.
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

WAGE CONVERGENCE AND MIGRATION

Source: Borjas (2001). Each observation represents a convergence coefficient estimated in a particular decade for
a particular skill group. The measure of immigrant penetration gives the log of the number of immigrants in a
particular skill group who arrived during a particular decade relative to the number of natives in that skill group at the
beginning of the decade. The points on the scatter diagram are weighted by the inverse of the squared of the
standard error of the convergence coefficient.
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

W HO GAINS ?

So, can we identify some groups that benefit from

migration?

I Migrants;
I Consumers;
I Employers;
I Pensioners;
I Some workers:
I skilled/complementary workers;
I unskilled/substitutable workers: migration prevents
relocation
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

I MMIGRATION AND THE WELFARE STATE – 1

I Welfare subsidies change the distribution of earnings

and make it more compressed.

I This in turn affects the composition of migrants.

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I MMIGRATION AND THE WELFARE STATE – 2

Earnings

Country B
Low Inequality

Country A
Low Inequality

Education/Skills
e∗
Stay in Country A Move to Country B
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

I MMIGRATION AND THE WELFARE STATE – 3

Earnings

Country B
High Inequality

Country A
Low Inequality

Education/Skills
e∗ e∗∗
Move to Country B Move to Country B
I NTRODUCTION W HY MOVING ? O UTCOMES E FFECTS

I MMIGRATION AND THE WELFARE STATE – 3

Earnings

Country B
High Inequality

Country A
Low Inequality

Education/Skills
e∗ e∗∗
Stay in Country A