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Migration versus Delocation : The Neoclassical Approach

Migration versus Delocation : The Neoclassical Approach. Cristina Procházková Ilinitchi Department of World Econom y Faculty of International Relations University of Economics, Prague Email: xilic01@vse.cz. General terms and ideas.

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Migration versus Delocation : The Neoclassical Approach

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  1. Migration versus Delocation: The Neoclassical Approach Cristina Procházková Ilinitchi Department of World Economy Faculty of International Relations University of Economics, Prague Email: xilic01@vse.cz

  2. General terms and ideas • Migration: thedisplacementof a person wholeaves his/her placeofbirth/residence foranotherplace • Delocation: migrationofcompanies (capital) • Modelatingmigration: howandwhy? • It ispossible to deductthemainfactorswhichhave a significant influence on migrationflows • These factorscanbeintegratedwithinmiscellaneous (mathematical) models • Theconclusionscanbeused (mainly) by thegovernments (migrationpolicies, FDI, etc.)

  3. Some of the main approaches • Gravitation models • state that the volume of migration is inversely proportional to the distance travelled and directly proportional to the relative size of the origin and destination places • Neoclassical approach • Wi - wages at place i; Wj– wagesat place j, Cij- migration costs • wage differentialsare the primary factors driving migration • prospective migrants maximize their income • In the Todaro model wages are replaced by expected incomes • Behavioral models • in the 1980s research emphasis shifted from aggregate models to behavioral models that focus on individuals • anindividual n at place i will migrate to place j if thenet benefits from migration exceed the migrationcosts

  4. The neoclassical approach – fundamental assupmtions • People are rational • Individuals and firms maximize utility or profit • Individuals behave independently and with full information • As a result, free markets usually bring about an efficient allocation of resources

  5. LABOR LABOR CAPITAL CAPITAL Labour vs. capital mobility in the neoclassical approach • International migration is caused by geographical differences in the supply and demand of labor • The wage differential will cause workers from the low-wage regions to move to the high-wage region low wage region high wage region • As a resultofthemovement, thesupplyoflaborwilldecreaseandwageswillrise in thecapital-poor region, whilethesupplyoflaborwillincreaseandwageswillfall in thecapital-rich region • Ifcapitalandlabor are perfectly mobile, in the long run market forces create a new equilibrium where wages have thesame levels in all regions

  6. Labour vs. capital mobility in the neoclassical approach

  7. The evolution of net FDI inflows and the impact on net migration • Do FDI flows influence the migration flows? – first basic empirical study

  8. Conclusions and further research • The main goal is to show a possible connection between delocation and migration • Hypothesis: netFDI inflows are negatively correlated withthe country’s net emigration (in theEasthernEuropecountries) • Furtherempiricalresearchis to confirmor to rejectthisassumption

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