THE MACRO (ECONOMIC) DETERMINANTS OF INTERNATIONAL MIGRATION: A SURVEY by Michael J. Greenwood

1. THE MACRO (ECONOMIC) DETERMINANTS OF INTERNATIONAL MIGRATION: A SURVEY by Michael J. Greenwood University of Colorado at Boulder

2. What do we mean by the 'determinants' of migration? ANSWER: The determinants of migration are those factors that influence migration decisions, including the magnitudes of the various influences. In the context of international migration, the term usually refers to those factors that influence decisions to cross international boundaries and presumably to settle more or less permanently in the receiving country. Duration of the Move permanent temporary seasonal International Migration

3. Many potential perspectives from which to study the determinants of international migration: 1. Disciplinary Perspective: a. Historical b. Political c. Social d. Economics (this is ours)‏ e. Others (e.g., geography)‏

4. 2. Time period • Long Run • studies long sweeps of history (e.g., 1820-1920 movements from Europe to North America)‏ • (often from a source to a destination)‏ • typically uses (lengthy) time-series data • VERSUS • Short Run • studies the determinants as of a given year • typically uses a cross-sectional data • frequently fairly contemporary • VERSUS

5. Intermediate Run pools cross-sectional and time-series data, where the time series is fairly short (5, 10, perhaps 20 years).

6. 3. Country of Immigration (Demand for labor)‏ • VERSUS • Country of Emigration (Supply of labor)‏ • These perspectives are almost never mixed due to data limitations. The formation of a matrix of international migration flows, which is commonly done in studies of internal migration, is almost never done in studies of international migration because almost every country has a unique method of: • (a) defining an international migrant • (b) measuring migration across borders

7. Therefore, the typical approach is to use data from a given country and study: • (a) the determinants of immigration to that country • or • (b) the determinants of emigration from that country. • NOTE: This perspective could extend to broad areas, such as immigration to North America or Europe, emigration from Asia, etc.

8. 4. Micro Perspective individuals or families VERSUS Macro Perspective aggregate flows or aggregate characteristics of a nation Our macro perspective: Studies using (a) Aggregate flows of immigrants or emigrants (as a dependent variable in a regression analysis). Could involve aggregate flows of specific types of migrants (e.g., males, person over 50 years of age.)‏ (b) Aggregate characteristics of origin and/or destination countries (e.g., per capita GDP, Average Manufacturing Wages). (c) Aggregate characteristics of regions in the receiving country. (This practice is common in the study of immigrant settlement patterns.)‏ NOTE: Such characteristics are not uncommonly used when microdata are used as a dependent variable. (Such aggregate characteristics often distinguish person from place attributes.)‏

9. 5. Bilateral(One-way) flows between a given pair of countries (Sometimes these studies include among the independent variables some indicator of the attractiveness of an alternative destination.)‏ VERSUS

10. Multilateral (One-way) flows between many countries (e.g., flows from many origins to a given destination; flows from a given origin to many destinations)‏ (Occasionally, but not frequently, these studies use some indicator of the attractiveness of an alternative destination.)‏

11. Other distinctions between immigrants are frequently important: • 1. Characteristics of the movers • Professional and technical (PTK) workers • (Sometimes studied from the point of view of the 'brain drain,' or the migration of high-level human capital from the less-developed to more developed countries.)‏

12. Males/Females (Presumably because of the idea that men are more likely to be 'economic migrants' due to their higher labor force participation rates; perhaps also because men are thought to be more likely to compete for jobs in the destination.)‏

13. Age specific flows of immigrants • -- Young labor force members • (Who are likely to compete for jobs)‏ • -- Older persons • (Who may enjoy social benefits without having paid taxes to the country during their working years.)‏

14. 2. Admittance policy in destination country: • New entrants/Adjustments of status • (Those who adjust are said to be (legally) indirect immigrants.)‏ • Principals/Beneficiaries • Exempt from quota limits/Subject to quota limits • Those who enter under 'occupational' preferences/Those who enter under 'family preferences' • Legal/Illegal

15. 3. Those who become citizens of the destination country/Those who do not 4. Geographically direct/Geographically indirect (Infrequently studied due to lack of data or trouble in getting to the data.)‏ 5. Voluntary/Involuntary

16. Two main 'vectors' of variables to explain (voluntary) international migration: 1. Differential economic opportunity 2. Costs of transferring occupational skills Broadly speaking, these are the key forces underlying the economic approach to or economic model of international migration → An individual (family) maximizes utility subject to a budget constraint (and in international migration subject to all sorts of legal constraints). Thus, benefits and costs become critical to the decision.

17. Legal constraints could prevent potential migrants from 1. leaving (emigrating)‏ 2. entering 3. moving when they wish, or 4. with who they wish Such constraints have not frequently been taken into account in empirical models of international migration, but they are very important. Failure to account for them can severely bias estimated parameters.

18. Differential Economic Opportunity • Depending upon exactly who is migrating, differential economic opportunity could be (and has been) proxied by: • Wage rates (typically manufacturing)‏ • Annual earnings levels • Per capita GDP • All converted to a common currency and measured in real terms (i.e., some sort of cost-of-living adjustment)‏ • Tax rates • Availability and magnitude of public programs/transfer payments

19. Unemployment rates • Employment growth rates • Some measure of real national growth that presumably reflects labor demand

20. Differential Economic Opportunity • 1. Historical studies • Between 1815 and 1914, 60 million Europeans left their homes to settle elsewhere. This was 20% of Europe's 1850 population. • Much on migration from Europe to the U.S., Canada, and Australia • “Push” forces of European origin versus • “Pull” forces of North American origin • Relative wages versus relative employment opportunities

21. 2. Contemporary studies • i. Cross-sectional studies • ii. Time-series studies • iii. Studies based on pooled cross-section and time- series data • iv. Special groups • Highly skilled or educated • Those who adjusted status • Less-skilled/unskilled workers • Older persons

22. 3. Immigrant settlement patterns (U.S.)‏ • i. Late nineteenth and early twentieth century immigrants • ii. Contemporary immigrants • Responsive to economic incentives • Have a strong tendency to locate near people from their home country

23. Costs of Transferring Occupational Skills Direct Costs Out of pocket costs (e.g., transportation costs) Indirect Costs Less than perfect transferability of skills (e.g., schooling in a different language, opportunity costs) These costs can be overcome by human capital investments, but they represent real costs

24. Costs of transferring Occupational Skills • A. Direct Costs • i. Distance • ii. Information • Quality of Information -- distance • -- same language • -- (U.S.)‏military base -- number of prior migrants from a given country • -- Voice-of-America broadcast in native language • -- literacy rate • -- official offices

25. B. Indirect Costs i. Language Similarity ii. Attending School in the Destination Country iii. Source Country Level of Development iv. Level of Education v. Influence of Past Migration vi. Political Conditions in Source Country vii. Importance of Alternative Destinations

26. Historical Literature Major Question: Were migration flows from Europe to North America driven (caused) by economic conditions in Europe or by economic conditions in the U.S. and Canada? The debate focuses mainly on the period up to about 1920 when the U.S. imposed entry restrictions. Thus, the period in question was characterized by “laissez-faire” (no major institutional impediments) with regard to international migration. A related question: Were differential job opportunities more or less important than differential wages in determining the volume of the flows?

27. Jerome (1926) studied migration from Europe to the U.S. over approximately a 100-year period prior to the 1920s. He concludes that: economic conditions in the U.S. rather than in Europe were primarily responsible for “short-cycle” movements. Thus, “pull” as opposed to “push” forces were dominant. Kelley (1965) studied migration from Britain to Australia, 1865- 1935, and also concludes that pull factors (low unemployment rates) were primarily responsible for the flows.

28. However, Thomas (1973) studies so-called “long swings” and concludes that before 1870 conditions in Europe were probably more important, but after 1870 conditions in the Americas were more important. Kuznets (1958) argues for pull factors, even in connection with long swings: “Since it is highly unlikely that the timing of either both cycles or 'push' elements was the same in so many different parts of the world, the similarity must be ascribed to some 'pull' factors.”

29. D.S. Thomas (1941) studied Swedish migration to the U.S. during the late 19th and early 20th centuries and concludes that economic conditions in Sweden were more important than those in the U.S. But more recently (1967), Wilkinson claims to show the reverse. Quigley (1972), however, comes down on the side of D.S. Thomas regarding Swedish flows. Industrial wages in the U.S. appeared to him to be the key factor.

30. Gallaway & Vedder (1971) argue that forces on both sides of the Atlantic were of some importance, but the pull of employment opportunities and high wages in the U.S. were most important. Greenwood

31. More recently, a number of studies have focused on fairly contemporary flows to the U.S. and Canada. For the U.S. wage rates are frequently found to be important, but the same does not seem to be true for Canada in several similar studies. Demand for entry/Supply of immigrants

32. Potential problems in contemporary studies: 1) Institutional impediments to the free international flow of labor blunt the importance of economic incentives and make it difficult to judge how important differential economic opportunity really is. 2) Those who actually move and are measured as such do not reflect everyone who would like to move. We might like to study applications for admission rather than or in addition to actual admissions.

33. 3) A delay occurs between application for admission and actual admission. Economic conditions might be different at the time of admission than at the time an application was made for admission.4) Data are frequently suspect for many reasons.

34. Greenwood and McDowell (1991) consider several types of variables in their study of migration to the U.S. and Canada: 1) Differential economic advantage a. Wi/Wj where Wi = wage in source country Wj = wage in U.S./Canada b. GRGDPi/GRGDPj 2) Costs of transferring occupational skills a. DISTij b. LANGi c. EDUi d. (DISTij) (TIME)‏

35. 3) Level of development and political conditions a. URBPOPi (% urban population)‏ b. MAN% (% manufacturing employment i)‏ c. INDij (index of industrial similarity)‏ d. POLIT (index of political rights i)‏ e. CRISES (international crisis or war)‏ 4) U.S./Canadian immigration policy controls Data: 18 major source countries 1962-1984

36. For the U.S.: 1) Higher origin wage rates compared to those in U.S. discourage migration to the U.S. 2) Migration falls off sharply with distance. 3) Migration from these countries has fallen over time. 4) English language encourages skill transfer. 5) Education encourages skill transfer. 6) Political repression causes more movement to U.S. 7) % urban population, % manufacturing employment cause more. 8) U.S. immigration policy has been critical.

37. For Canada: 1) Higher origin wage rates discourage migration. 2) Migration falls with distance. 3) Migration from these countries has risen over time. 4) English/French language is important. 5) Canadian immigration policy has been critical.