Theories of International Mobility and the Incorporation of Immigrants

Class 2: Economic Determinants of Migration

John Palmer

Economics

the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses

- Lionel Robbins (1935)

the study of how people interact with each other and with their natural surroundings in producing their livelihoods, and how this changes over time

- The Economy, CORE Project (2015)

Microeconomics

individual agents and markets


Macroeconomics

entire economy

Economist's view of migration

 
 
 
 

Determinants of Migration

Lee's model

Borjas (1989)

In the neoclassical model, why do individuals migrate?

How much information do individuals have about their future earnings?

How much information do employers have about job candidates?

What are the predictions from this model that you found most interesting and/or surprising?

How do employers decide what to pay workers?

An economist is a man who states the obvious in terms of the incomprehensible.

- Alfred A. Knopf

Are all of the findings here obvious?

Explain the earnings functions

$$\log w_0 = \textrm{X}\delta_0 + \epsilon_0$$ $$\log w_1 = \textrm{X}\delta_1 + \epsilon_1$$

What is $\epsilon$?

What does it mean for $\epsilon$ to be uncorrelated with X?

What does the earnings distribution look like?

$$\epsilon_0 \sim \mathcal{N}\left(0, \sigma^2_0\right)$$

The immigration market

What is the immigration market? Is this a useful concept?

  • Has Borjas proved that migrants are rational income-maximizers?
  • Has he proved that there is an "immigration market"?

observed characteristics

$$\textrm{X} = \mu_{\textrm{X}} + \epsilon_{\textrm{X}}$$

Conditional Expectation of Migrants' Observed Characteristics

$$\textrm{E}(\textrm{X} | I > 0) = \mu_{\textrm{X}} + k(\delta_1 - \delta_0)$$
  • When will the mean of migrant's education be above the source country average?
  • When will the mean of migrant's education be below the source country average?
  • When will the mean of migrant's education be the same as the source country average?
  • How important should selectivity based on observed characteristics be?

Conditional Expectation of Unobserved Characteristics

$$\textrm{Q}_0 = \textrm{E}(\epsilon_0 | X, I > 0)$$
$$\textrm{Q}_1 = \textrm{E}(\epsilon_1 | X, I > 0)$$
  • How does positive selection occur?
  • How does negative selection occur?
  • How does refugee sorting occur?

How does social structure fit into our decision-making model?

How does risk fit into our decision-making model?

New Economics of Labor Migration

    Whereas owners of production inputs or commodities . . . can ordinarily ship them away . . . while themselves staying put, owners of labor must usually move along with their labor.


    - Oded Stark & David E. Bloom, The New Economics of Labor Migration, American Economic Review (1985).
    Furthermore, owners of labor have both feelings and independent wills.


    - Oded Stark & David E. Bloom, The New Economics of Labor Migration, American Economic Review (1985).

Relative Deprivation

  • Village A family incomes: 20, 30, 40, 50, 60
  • Village B family incomes: 20, 60, 65, 70, 75, 80

Skill Levels and Asymmetric Information

$$W_P(S)$$ $$W_R(S)$$
    R employers cannot observe true skill of S workers, but they know the distribution and pay based on the average productivity

Migrant-Non-Migrant Decision-Making

  • Remittances and intertemporal contract
  • Family cohesion
  • Mutual interdependence

Risk Handling

  • Low or negative earnings correlation
  • Local Market Failures