The New Economics of Migration

1. The New Economics of Migration

2. This is a theory that is more applicable to LDCs than to advanced economies. Basic proposition: Migration decisions are not made by isolated individuals, but rather are made by larger groups of related people, most often families and households. The individuals in the groups act collectively to 1. maximize income,2. minimize risks, and3. loosen constraints associated with market failure.

3. Maximize incomeWage differentials may not be enough to encourage migration.Relative income as opposed to absolute income may be important in encouraging migration.Falling wage/income differentials may not discourage migration.

4. Minimize risksPlacing family or community members in foreign labor markets may reduce the risks associated with local production if economic conditions in the foreign markets are not correlated with those in local markets.Remittances are critical here because they provide a buffer between poor local outcomes and family/community well-being.In years when local conditions are good, the remittances may be used for many purposes, such as purchasing more land, machinery, fertilizers, herbicides, insecticides, and better seeds.(In developed countries, private insurance markets and government programs mitigate risks, but these frequently are unavailable in less developed countries.)

5. Loosen constraints associated with market failureRelated to the points noted above, in LDCs well-functioning insurance, credit, and labor markets are often nonexistent, so remittances play a major role loosening production constraints.

6. SummaryThe new economics of migration places migration within a broader community context.It focuses on the household/family as the relevant decision-making unit rather than the individual.It ties migrant remittance behavior and remittance use with the migration decision itself.

7. Some hypotheses that result from the new economics of migration:1. Someone who has migrated internationally once is more likely to do so again.2. International migration should be more likely for someone who is related to an earlier international migrant. Persons in households with an international migrant are more likely to migrate internationally. Sons are more likely to migrate if their fathers migrated earlier.3. International migration requires that more barriers be overcome (e.g., language, religion, customs, papers/documents/visas), so networks are more important in international migration. 4. International migration is more likely from communities that have had many international migrants in the past. 5. Migrants from any given origin community are likely to initially locate in destination communities where their relatives and friends have located in the past.6. Cumulative migration is more likely when the motivation to migrate comes from families/communities.

8. Cumulative migrationWhat factors underlie cumulative migration?1. Distribution of income. As a household’s sense of relative deprivation increases, the motive to migrate also may increase. The first migrants from a community may be in the middle to upper income ranges. When those with lower incomes see how well the migrant families do, they wish to migrate themselves. Note here that the key is the household’s relative position in the communities income distribution and not its absolute position.

9. 2. Distribution of land. A spending target for migrants may be land. Land is frequently purchased for prestige value or as a source of retirement income. Since the migrants are abroad, they often leave their newly acquired land fallow. When they do this, the demand for farm labor declines. As a consequence, the farm laborers migrate out.3. Organization of agrarian production. When migrant households own the land they farm, they are more likely to use capital-intensive farming techniques, such as machinery, irrigation, fertilizers, herbicides, and better seeds. Such practices also could displace farm laborers, and make them more likely to migrate out.

10. 4. Culture of migration. Those who migrate once are more likely to migrate again. Migrant values may become part of the community’s values. Migration may become part of a “right of passage,” especially for young men and especially if their fathers and other relatives have migrated in the past. ● The cost of migration falls as more and more people who share a common language, culture, and religion concentrate at a given destination. ● “Migration capital” builds as more and more people concentrate in the destination. “Migrant capital” refers to contacts in the destination, as well as just knowing how to get things done. ● Past migrants provide miniature social benefits to new migrants.Past migrants may provide food and shelter to the newcomers until they can find a job. Past migrants also may inform the newcomers about various social programs that may be available to them.

11. 5. Distribution of human capital. If the most talented and best educated depart, those left behind may be worse off as labor demand and labor income fall. As able-bodied men leave the community, women and children are left in many cases to fend for themselves. More out- migration may then occur as even younger men and women depart.6. Social labeling. Certain jobs in the destination may become labeled as “migrant jobs.” Natives may be reluctant to fill such jobs, which shifts the demand for such jobs to immigrants.