Defying the Law of Gravity: The Political Economy of International Immigration

1. Defying the Law of Gravity:The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald University of Colorado Jessica Teets University of Colorado

2. Question • What determines international flows of labor? • “Ignored” aspect of globalization • Scholarly: much work on trade and investment • Policy: barriers to commodities and capital have been dismantled • Existing scholarship focuses on effects of immigration • Integration/assimilation of migrants • Response of natives—Rise of Right; Citizenship Policies

3. Context

4. Context • Variation across destination • Traditional countries of immigration: US, CA, AU, NZ • New countries of immigration: SP, PT, GR • Variation over time • Changes in labor market conditions • Alterations in citizenship policy

5. The Argument • Migrants minimize risk • Move to places where there are prospects for economic gain • Move to places where political risks are minimal • Social networks – linkages between co-ethnic groups in origin and destination countries – provide support and information functions • These networks can work to decrease traditional barriers to migration

6. Neoclassical Story • Migration is costly “it appears evidently from experience that man is of all sorts of luggage the most difficult to be transported” (Adam Smith, Wealth of Nations, 1776) “differences in net economic advantages, chiefly differences in wages, are the main causes of migration” (Sir John Hicks, Theory of Wages, 1932) Borjas; Hatton & Williamson

7. New Economics of Migration • Focus on minimization of risk for economic unit (family). • Migration is a mechanism to diversify risk. • Consistent with neo-classical view if we broaden individual’s utility function beyond wages • We conceive of three kinds of risk

8. Economic/Labor Market Risk • Migration flows to destinations with relatively higher wages. • Net of transactions costs, of course. • Migrants are drawn to destinations with higher probabilities of employment. • Migrants are drawn to destinations with better social safety nets—protection in the event of labor market shocks (welfare magnet)

9. Social Risk • Migrant (co-ethnic) networks produce social capital which provides information, reduces information costs, and generally decreases the costs of migration. • Support Function: networks increase destination specific utility (financial, housing, employment and assimilation assistance). • Information Function: allows individuals to update their subjective distribution of returns to migration & decreases ex ante costs associated with migration.

10. Political Risk • Political incorporation provides migrant with • The opportunity to influence future policy • Access to labor market and welfare benefits • Rights for children born in destination • We conceive of these as parts of the “citizenship” offers made by competing destinations

11. Political Risk (con’t) • But, citizenship rights do not ensure acceptance & toleration—they are incomplete indicator of the political climate • Migrants weight risks across various destinations by observing support for extreme right wing parties. • This is a signal regarding hospitality/hostility of destination.

12. Empirical Challenge:Endogeneity • Citizenship Policy: Inflows of foreign workers can generate either a demand for increased incorporation or a backlash against these policies • Support for Extreme Right Parties: Support increases when there are larger migrant populations.

13. Lack of Instruments • Instruments must be relevant and must meet the exclusion restriction. • No shortage of relevant instruments—exploit literatures on citizenship and radical right (as well as the factors that cause them). • BUT • Almost all determinants of these variables also influence migration flows or • Are structural—temporally invariant.

14. Solution • Policy Convergence Literature: OECD countries (destinations) exhibit convergence tendencies • Citizenship policies have converged • Right wing support: demonstration effect, platform innovation across countries. • Use lagged average for all countries as the instrument • Excludable—only influences migration through country i

15. Empirical Model • Flowijt = migrant flow from i into j at time t • i=destination (19 OECD countries) • j=source (165 countries) • t=time (1960-2005) • Sample>50,000

16. “Control” Variables • Transactions costs • Distance between i & j • Common border between i & j • Common official/legal language between i & j • Colonial relationship between i & j • Income (GDPPC) in sending country • Destination dummy variables • Captures differences in migration policy • Accounts for differences in measuring migrant flow

17. Economic Risk • Destination Characteristics: • Relative Real GDP Per Capita PPP: (Destination/Source) • Unemployment Rate for active population • Government Spending/GDP (logged)

18. Social Risk • Two measures of migrant networks • Migrant Stock from country j living in country i at time t • Migrant Flow from country j living in country i at time t-1 • Measures friends and family effect • Inclusion of lagged dependent variable allows for interpretation as a partial adjustment model.

19. Political Risk • Citizenship Policy Index • Residency requirement (years) • Right to vote for any level of government • Allowance of dual citizenship • Citizenship by birth (rather than by blood) • Right wing party support (% gained by ‘relevant’ party) • Years that a ”relevant” party has been in existence & competing.

20. Methodology • Instrumental variable (two-stage least squares) regression. • Standard errors clustered by country-pair • Results robust • Tobit • Treatment of unemployment and welfare spending as endogenous

21. IV Results

22. IV Results

23. IV Results

24. IV Results

25. Results • Restrict sample • Poor (non-industrialized) to Rich (industrialized) countries • Limited to within Europe • Results almost identical

26. Role of Social Networks • Recall: Social networks increase migration by decreasing transaction costs and increasing social support. • Test by creating interactions between bilateral migrant stock and • Political Risk: Citizenship policy, right wing vote • Transactions Costs: Distance, income in origin country • Labor Market Risk: Wage ratio, unemployment

33. Discussion • “Unpacked” Citizenship Policy • No component was insignificant; all part of general set of policies that attract migrants • Further consideration of Sending country characteristics • Democracy, human rights, etc • Ambiguous effect for labor migrants (contract with refugees)

34. External Voting Rights

35. Conclusions • Given networks of co-ethnics you cannot stop immigrants, you can only hope to contain them • Increase wages in origin relative to destination • Limit employment, citizenship rights & access to welfare in receiving countries. • Numerous countries have institutionalized “friends and family” connections • US policy provides 75% of annual visas for purpose of family (re)-unification

36. Extensions • Three Rs • Recruitment: who leaves • Return: who returns • Remittances: capital flows • Linkages to other international flows • Financial transactions • Linkages to other Policy Changes • Rise of external voting