Lecture 10 Migration

Lecture 10Migration Econ 340

News: Feb 10-16 • Data on China's trade are questioned -- WSJ: 2/13 | Proquest | FT: 2/13 | CTools • China reported exports up in January by 10.6% and imports up by 10%. This was unexpected, leading analysts to question the data. • This is not unusual, as China's reports of data in February are often strange and hard to interpret. The reason is the week-long holiday of the lunar calendar, which moves around from year to year. Economic activity responds to this holiday, but in unpredictable ways. This is partly because of a mass migration of workers to their homes for the holiday. • Another explanation, however, is that exporting firms were "over-invoicing" export shipments in order to circumvent capital controls (thus disguising capital inflows as receipts for exports). • Switzerland votes to restrict immigration -- WSJ: 2/10 | Proquest | NYT: 2/10 | Proquest | FT: 2/10 | CTools • 50.3% of voters voted to extend a quota system on non-EU immigrants to cover EU immigrants as well. The Swiss government had opposed this initiative, but it was pushed by the ultraconservative Swiss People’s Party. The referendum does not specify the size of quotas, which might perhaps be set high enough not to bind. • Swiss net immigration has been about 1% of population for the last seven years. This has caused concern about competition for jobs and has been said to push up property prices and rents and to congest the local transport system. • This is contrary to a 1999 agreement that Switzerland signed to allow Swiss and EU nationals to move freely. That agreement also included access to other important markets, which this will invalidate, and may make it harder for Swiss businesses to operate in the EU. • Kazakhstan devalues currency by close to 20% -- WSJ: 2/12 | Proquest | NYT: 2/12 | Proquest | FT: 2/12 | CTools • The Kazakh central bank, the National Bank of Kazakhstan, devalued its currency, the tenge, by almost 20% on Tuesday. • This came as a surprise, as the economy was doing well and its international reserves were not declining. • The move is an effort to remain competitive with currencies in nearby countries, including Russia, Ukraine, and Turkey. But these and other changes are widely attributed to the US "tapering" of monetary expansion. • US gray-market car exports to China -- NYT: 2/12 | Proquest • US is trying to crack down on "gray market" exports: Goods bought at retail in the US and sold abroad at higher prices, contrary to the wishes of their producers. A spokesman for BMW says: "Illegal exports deny legitimate customers here in the U.S. the popular vehicles, which are in high demand." • A stark example is a Florida businessman who buys luxury cars in the US for $55,000-$75,000 and sells them in China for three times those prices. "We’re taking advantage of a legitimate arbitrage situation," he said. This trade amounts to an estimated 35,000 cars per year. • These exports violate the policies of the car manufacturers, and the US government, through the Secret Service and federal prosecutors, attempts to enforce those policies, especially when the traders make false claims in order to purchase and ship the cars. The Florida man claims there is no law against this, however, and is fighting it. Lecture 10: Migration

News: Feb 10-16 • Data on China's trade are questioned • China reported exports up in January by 10.6% and imports up by 10%. This was unexpected, leading analysts to question the data. • This is not unusual, as China's reports of data in February are often strange and hard to interpret. The reason is the week-long holiday of the lunar calendar, which moves around from year to year. Economic activity responds to this holiday, but in unpredictable ways. This is partly because of a mass migration of workers to their homes for the holiday. • Another explanation, however, is that exporting firms were "over-invoicing" export shipments in order to circumvent capital controls (thus disguising capital inflows as receipts for exports). Lecture 10: Migration

Lecture 10: Migration

News: Feb 10-16 • Switzerland votes to restrict immigration • 50.3% of voters voted to extend a quota system on non-EU immigrants to cover EU immigrants as well. The Swiss government had opposed this initiative, but it was pushed by the ultraconservative Swiss People’s Party. The referendum does not specify the size of quotas, which might perhaps be set high enough not to bind. • Swiss net immigration has been about 1% of population for the last seven years. This has caused concern about competition for jobs and has been said to push up property prices and rents and to congest the local transport system. • This is contrary to a 1999 agreement that Switzerland signed to allow Swiss and EU nationals to move freely. That agreement also included access to other important markets, which this will invalidate, and may make it harder for Swiss businesses to operate in the EU. Lecture 10: Migration

News: Feb 10-16 • Kazakhstan devalues currency by close to 20% • The Kazakh central bank, the National Bank of Kazakhstan, devalued its currency, the tenge, by almost 20% on Tuesday. • This came as a surprise, as the economy was doing well and its international reserves were not declining. • The move is an effort to remain competitive with currencies in nearby countries, including Russia, Ukraine, and Turkey. But these and other changes are widely attributed to the US "tapering" of monetary expansion. Lecture 10: Migration

News: Feb 10-16 • US gray-market car exports to China • US is trying to crack down on "gray market" exports: Goods bought at retail in the US and sold abroad at higher prices, contrary to the wishes of their producers. A spokesman for BMW says: "Illegal exports deny legitimate customers here in the U.S. the popular vehicles, which are in high demand." • A stark example is a Florida businessman who buys luxury cars in the US for $55,000-$75,000 and sells them in China for three times those prices. "We’re taking advantage of a legitimate arbitrage situation," he said. This trade amounts to an estimated 35,000 cars per year. • These exports violate the policies of the car manufacturers, and the US government, through the Secret Service and federal prosecutors, attempts to enforce those policies, especially when the traders make false claims in order to purchase and ship the cars. The Florida man claims there is no law against this, however, and is fighting it. Lecture 10: Migration

Outline: Migration • Why People Migrate • Why Wages Differ across Countries • Effects of Migration • On Payments to Factors • Labor • Other • Other Effects • Policies to Affect Migration • The U.S. Experience Lecture 10: Migration

Why People Migrate • Main Reason for Migration: Better Wages • Other Reasons • Better living conditions • Freedom/Persecution • Climate Lecture 10: Migration

Why Wages Differ across Countries (Mostly these are the same reasons we’ve seen before, for why countries trade) • Relative Factor Endowments • Of labor relative to other factors, such as land, capital, natural resources • Countries that have an abundance of these other factors tend to have • High demand for labor, and thus • High wage • They are likely to attract migration Lecture 10: Migration

Why Wages Differ across Countries • Differences in Technology • Advanced technology makes labor more productive • Causes higher wages, and attracts migration Lecture 10: Migration

Why Wages Differ across Countries • Other causes for a country to have high wages • Infrastructure • Competitive and efficient markets • Strong institutions (“Intangible wealth”) • trust among people in a society • an efficient judicial system • clear property rights • effective government Lecture 10: Migration

Why Wages Differ across Countries • Labor Unions? Do these contribute to high wages and thus attract migration? • This cuts both ways: • Labor unions do seek to increase wages and improve working conditions for their members • But one way to do that is to keep out migrant labor Lecture 10: Migration

Effects of Migration (See Deardorff “Migration”) • Look at supply and demand • In two countries with different wages • What happens when labor migrates? Lecture 10: Migration

Effects of Migration Labor markets in two countries before migration Mexico U.S. wM wU SM0 SU0 wU0 Incentive to migrate from Mexico to US DU wM0 DM L L Lecture 10: Migration

Effects of Migration Effect of migration on labor supplies Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 DU wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration Effect of migration on wages Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 wU1 DU wM1 Migration pulls wages closer together Migration pulls wages closer together wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration Effect of migration on welfare Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 d e wU1 c DU wM1 a b wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration: Labor Gain to migrants Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 d e wU1 c DU wM1 a b wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration: Labor Gain to workers left behind Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 d e wU1 c DU wM1 a b wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration: Labor Loss to competing workers already in US Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 d e wU1 c DU wM1 a b wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration: Other Loss to factors other than labor in Mexico Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 d e wU1 c DU wM1 a b wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration: Other Gain to factors other than labor in US Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 d e wU1 c DU wM1 a b wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration: All Mexico U.S. Mexico Workers who migrate +(b+c) Workers who don’t migrate +a Other factors in Mexico−(a+b) Mexico as a whole +c US Workers −d Other factors in US +(d+e) US as a whole +e World +(c+e) d e c DU a b DM Lecture 10: Migration

Effects of Migration: Mexico Gain to Mexico as a whole, including migrants Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 d e wU1 c DU wM1 a b wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration: US Gain to US as a whole, excluding migrants Mexico U.S. wM wU SM1 SM0 SU0 SU1 wU0 d e wU1 c DU wM1 a b wM0 DM L L −L +L Lecture 10: Migration

Effects of Migration • Losers from migration • In country of emigration: owners of factors other than labor • Their productivity and incomes are reduced by having less labor to work with • In the country of immigration: workers • They compete with the incoming workers and their wage falls Note that there may be different kinds of labor. Only those most similar to the immigrants lose. • These tend to be unskilled workers in the most common cases Lecture 10: Migration

Effects of Migration • Other effects, not in this simple model • Migrants • Pay taxes • Use government services • Which is larger? There is debate on this • Griswold cites study saying • Typical immigrants and their offspring will pay $80,000 more in taxes than they will collect in government services during their lifetimes Lecture 10: Migration

Effects of Migration • Other effects, not in this simple model • Migration changes population density; may cause congestion • Eldredge blames immigration for “overcrowded schools, congested highways, deteriorating ecology and lagging infrastructure” • Diversity: presence of immigrants adds • Cultural enrichment • Cultural (ethnic) frictions • Xenophobia (fear or dislike of “others”) Lecture 10: Migration

Effects of Migration • Other effects, not in this simple model • Many migrants carry wealth with them out of their country of origin • Financial • Human capital • Raising concern about a “brain drain” • But see Economics Focus • Possibility of emigration provides incentive to acquire more education • Leads to more education even at home Lecture 10: Migration

Effects of Migration • Other effects, not in this simple model • Many migrants send money back to their country of origin • Such “remittances” provide important income for poor countries Lecture 10: Migration

Effects of Migration • Other effects, not in this simple model • Demographic effects • Immigrants tend to be young and have large families • This provides a larger young generation, whose earnings can support the elderly • Aging population is less of a problem for the US than for Europe and Japan, because of immigration Lecture 10: Migration

Population Pyramid: US Lecture 10: Migration

Population Pyramid: Japan Lecture 10: Migration

Policies to Affect Migration • Immigration Quotas, based on • Race • Country of origin • Income, wealth, skill • Family connections • “Guest worker” Programs • Permit workers to enter temporarily to fill a labor-market need • Hard to enforce “temporary” Lecture 10: Migration

Policies to Affect Migration • Trade Policies • Recall Factor Price Equalization • If this works, it reduces the incentive for migration • This was one motive for NAFTA: raise wages in Mexico so that fewer will try to enter the US Lecture 10: Migration

Policies to Affect Migration • Encourage high-income immigration • Provide larger quotas for workers likely to earn high incomes • Deny welfare benefits to recent immigrants, so poor won’t be tempted to come (See Stelzer) Lecture 10: Migration

Policies to Affect Migration • Control the border • Make it hard for illegal immigrants to enter • But note the costs of doing this (See Skerry and Rockwell) • Encourages organized crime to smuggle migrants • These make life worse for the migrants Lecture 10: Migration

Facts about US Immigration (See Stelzer) • In 1994, US had 800,000 legal immigrants 2-300,000 illegal immigrants That’s about 4 per 1000 population • Is that a lot? • In 1913 we had 13 per 1000 population! • (These should be 4% and 13%. See below.) Lecture 10: Migration

Lecture 10 Migration

Lecture 10 Migration

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Lecture 10

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Evolution Lecture 10: Population Genetics:Mutation, Migration and Drift

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