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Economics of Migration

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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
       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
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

1.   Introduction
2.   Models of migration
3.   Economic Impact of migration: Theory and
     evidence
4.   Brain Drain; Remittances
5.   Labor-market Performance of Migrants
6.   Politics of Immigration
7.   EU Enlargement and East-West Migration
8.   Conclusions
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

   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 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 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

1.       Urban job creation (government spending)
         raises q  migration more attractive
2.       Improving education in rural areas may
         increase migration if educated rural worker
         face higher q
3.       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
   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
   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 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

   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

   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: 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: 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: Theory


     MPL


                               MPL*




w0
w1
                                      w*0
o            L L*   M   L+M           o*
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: Theory


     MPL


                        Immigration   MPL*
                          surplus




w0
w1
                                             w*0
o            L L*   M     L+M                o*
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
   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 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
   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:
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:
Evidence (Dustmann et al., 2008)
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
   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

   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: 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: 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: 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
   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

   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 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

   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 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

   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

   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)
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 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: 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

   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

   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 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 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 Immigration

   LDC: immigrants predominantly skilled
   Skilled workers should oppose immigration
   Unskilled workers should be in favor
   Attitudes on free trade determined similarly
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

   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 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

   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

   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
Occupational Downgrading: UK
(Dustmann et al., 2008)
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 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
EU Enlargement and East-West Migration
(Zaiceva & Zimmerman, OxRevEP 2008)
   Fear of mass migration: high unemployment:
                     Harmonised unemployment rate, 2000-2006

         14

         12

         10

         8

         6

         4

         2

         0
              2000    2001     2002      2003         2004     2005          2006

                     EU15     AC8     Cyprus, Malta      Bulgaria, Romania
EU Enlargement and East-West Migration
(Zaiceva & Zimmerman, OxRevEP 2008)
   Fear of mass migration: low wages:
                       Gross monthly wages in the AC10, Bulgaria and Romania,
                                                2004


       60

       50

       40

       30

       20

       10

       0
            CZ   EST       HU         LV        LT        PL        SK          SL   BG   RO

                                in % of the EU15 wages   in % of German wages
East-West Migration: Predictions
(Zaiceva & Zimmerman, OxRevEP 2008)
    Since early 1990s – more than 30 studies
     forecasting East-West migration
1.   Predictions based on intentions to move to
     the West using surveys
2.   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

   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.
     EU Enlargement and East-West Migration
     (Zaiceva & Zimmerman, OxRevEP 2008)

                                Selected studies on migration potential after the EU enlargement:
                              Actual and predicted number of foreign residents from AC in Germany


2.000.000
                                                                                                              Sinn et al. (2001)
1.800.000
                                                                                                             Dustm ann (2003)
1.600.000                                                                                              "Econom ic 04" scenario

1.400.000
                                                                                                    Boeri and Brücker (2000)
1.200.000
                                                                                                             Dustm ann (2003)
1.000.000
                                                                                                       "Econom ic 01" scenario
 800.000                                                                                                         Zaiceva (2006)
 600.000 Actual number
                                                                                                             Dustm ann (2003)
         of residents from AC8                                                                          "Baseline 01" scenario
 400.000

 200.000

       0
       1995    1996    1997      1998   1999   2000   2001   2002   2003   2004   2005   2006   2007      2008     2009     2010
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 2008)
   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)

       Proportion of immigrants of different nationalities from the ten new member
                                          states,
                                           2005


100%

 80%

 60%

 40%

 20%

 0%
                   Germany             Sweden           Spain           Finland

                               other   Romanians   Polish   Estonians
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
EU Enlargement and East-West Migration
(Zaiceva & Zimmerman, OxRevEP 2008)

                      Harmonised unemployment rate, monthly data, seasonally adjusted:
                                        2004 January-2007 March

  9
  8
  7
  6
  5
  4
  3
  2
  1
  0
      2004Jan   2004May      2005Jan       2005May        2006Jan        2006May         2007Jan   2007May

                                             Ireland   Sweden       UK
EU Enlargement and East-West Migration
(Zaiceva & Zimmerman, OxRevEP 2008)

                 Wages and salaries: Labour Cost Index: 2000=100.
                 Industry and services (excl. public administation)


  125

  120

  115

  110

  105

  100

  95
        2004Q1            2005Q1                               2006Q1   2007Q1

                                 Ireland     Sweden      UK
EU Enlargement and East-West Migration
(Zaiceva & Zimmerman, OxRevEP 2008)

                 Wages and salaries: Labour Cost Index: 2000=100.
                                 Manufacturing

  125

  120

  115

  110

  105

  100

  95
        2004Q1           2005Q1                             2006Q1   2007Q1

                                  Ireland   Sweden     UK
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 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
      (Zaiceva & Zimmerman, OxRevEP 2008)
          Attitudes: Was migration between old and new EU members important or limited after the EU
                                enlargement? (1=very important, 4=very limited)
                                                 2006. Means

SE                                                                                                               2,76
FI                                                                                                        2,65
DK                                                                                                     2,6
                                                                                                      2,56
AT
                                                                                                   2,52
NL
DE                                                                                          2,25
BE                                                                                          2,24
FR                                                                                          2,24
LU                                                                                     2,19
IT                                                                                     2,17
                                                                                     2,12
PT
                                                                                2,05
ES
                                                                              1,98
GR
                                                                       1,86
GB
                                                           1,54
 IE
      East-West Migration: Public Perceptions
      (Blanchflower, EJ 2009)
Balance
60         Unemployment expectations over the next 12 months: EU15          Per cent
                                                                                 12
              (3 month average - advanced 12 months - LHS)
50                                                                              11

40                                                                              10

30                                                                              9

20                                                                              8

10                                                                              7
                                                       Unemployment
  0                                                                             6
       --- 1985-2007 average                                 rate (RHS)
-10                                                                             5
  1985     1988      1991      1994    1997     2000     2003        2006
      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
-20                                                                             0

  1985     1988      1991      1994   1997      2000     2003        2006
      East-West Migration: Public Perceptions
Balance                                                                    Per cent
 60               Unemployment expectations over the next 12 months: UK         12
                     (3 month average - advanced 12 months - LHS)              11
50
                                                                               10
40
                                                                               9
30                                                                             8
20                                                                             7

10                                                                             6
                                                                               5
 0
                                                        Unemployment           4
-10                                                        rate (RHS)          3
       --- 1985-2007 average
-20                                                                            2
  1985     1988      1991      1994    1997      2000     2003      2006
      East-West Migration: Public Perceptions
Balance         Unemployment expectations over the next 12 months: Ireland Per cent
60                                                                              20
                    (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
   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 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 Experience
            WRS registrations as    WRS
              a % of home        Registrations   U Rate   Emp Rate   GDP per head
               population           (000s)       (2004)    (2004)      (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 Experience
            Life Satisfaction

            2004         2006
Bulgaria    2.06         1.99
Czech Rep   2.82         2.92
Estonia     2.74         2.74
Hungary     2.44         2.50
Latvia      2.52         2.62
Lithuania   2.55         2.62
Poland      2.81         2.80
Romania     2.32         2.33
Slovakia    2.59         2.70
Slovenia    3.17         3.09
UK          3.22         3.18
East-West Migration: UK Experience

  WRS Applications

                            12 months ending
  Intended length of stay      March 2007      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 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 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 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

   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
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)

				
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