Economics of Migration

1
Economics of Migration

• Jan Fidrmuc
• Brunel University

2
Introduction

• Important, and very contentious, aspect of
  economic integration and globalization
• 175mn (2.9) intl migrants in 2000, 190mn today
  (WB Migration Database, 2007)
• Most (37) from LDC to DC 24 LDC?LDC, 16 DC?DC
• Immigrants 8-12 of population in US, Germany,
  France, UK 18-21 Canada Australia 38 HK
• Emigrants 5-10 of Mexico, Afghanistan, Morocco,
  UK, Algeria, Italy, Germany, Bangladesh, Turkey
  0.5-0.9 China, US, India

3
Introduction

• EU Single Market free movement of labor
• Migrants (foreign born) 11.7 of EU15 population
  in 2005 (OECD)
• Approximately 1/3 EU foreigners
• EU enlargements in 2004 and 2007
• Forecasted East-West migration 3-4 mn
• Temporary restrictions imposed by most EU15
  countries for up to 7 years
• Large E-W influx to Austria, Germany, Spain, UK
  and Ireland

4
Outline

1. Introduction
2. Models of migration
3. Economic Impact of migration Theory and evidence
4. Brain Drain Remittances
5. Labor-market Performance of Migrants
6. Politics of Immigration
7. EU Enlargement and East-West Migration
8. Conclusions

5
Economics of Migration

• Most common type of migration LDC to DC
• Revealed preference migrants move iff they
  expect to be better off at destination
• Yet, migrants often suffer occupational
  downgrading, end up in poorly-paid informal jobs
  or remain unemployed
• Ex-ante vs ex-post Harris-Todaro Model
• Michael P. Todaro, AER 1969 and John R. Harris
  and Michael P. Todaro, AER 1970.

6
Harris-Todaro Model

• Original focus rural-urban migration in LDC
• Rural residents move to urban regions despite
  already high unemployment there
• Puzzle migration continues although it makes
  (some) rural migrants worse off
• HT model migrants motivated by expected returns
• Expected returns may be different from actually
  realized returns

7
Harris-Todaro Model

• Two regions urban and rural
• Rural wage wR (farming)
• Urban wage wUgtwR
• Full employment in rural region
• Involuntary urban unemployment
• Fraction q of urban workers hold jobs
• 1-q are unemployed and have zero earnings
• Urban wages downward rigid
• Minimum-wage rules, unionization, or b/c workers
  must acquire residence/work permits

8
Harris-Todaro Model

• Workers are risk neutral
• Migration continues as long as wUqgtwR
• Migration is optimal despite unemployment
• Migration from LDC to DC similar case

9
Harris-Todaro Model Implications

• Urban job creation (government spending) raises q
  ? migration more attractive
• Improving education in rural areas may increase
  migration if educated rural worker face higher q
• Rising rural wages reduce incentive to migrate to
  urban region
• However, if migration costly, rising rural
  incomes may relieve liquidity constraints on
  migration

10
Other Models of Migration Beyond Income
Differentials

• Stark (The Migration of Labor, 1991)
• Households vulnerable to idiosyncratic shocks
  that are region or sector-specific
• Migration ? household members exposed to
  different regional shocks
• Risk diversification through pooling of household
  members income ? remittances
• Migration optimal even without income
  differentials if individuals risk averse ?
  consumption smoothing through risk sharing

11
Other Models of Migration Roy-Borjas Model

• Roy (OEP 1951) Borjas (AER 1987)
• Consider two countries, A and B
• Identical mean earnings
• Different income distributions returns to human
  capital higher in A
• Individual returns to migration depend on ones
  skills
• Skilled workers fare better in A

12
Other Models of Migration Roy-Borjas Model

• Migration patterns
• Skilled migration to A
• Unskilled migration to B
• Returns to human capital important also when mean
  earnings not identical
• DC LDC migrants often highly skilled
  professionals and managers

13
Economics of Migration Impact

• Trade theory free trade, free capital mobility
  and free labor mobility should have similar
  effects on the economy
• Yet, migration more controversial than either
  free trade or capital mobility
• Popular view immigrants displace native workers
  and/or drive down wages
• Is this consistent with theory and evidence?

14
Economic Impact of Migration Theory

• Dustmann et al., EJ 2005 Dustmann et al.,
  OxRevEcPol 2008)
• Two countries Home and Foreign
• One output good, price set at world market
• Two types of labor skilled and unskilled
• Labor supplied inelastically
• Supply of capital perfectly elastic
• Interest rate set at world markets

15
Economic Impact of Migration Theory

• If skill composition of immigration the same as
  that of natives
• No labor-market effect of migration
• This is because capital supply is elastic
• Economy adjusts to immigration by importing
  capital ? no change in relative endowments
• Migrants in DC predominantly unskilled ? compete
  with native unskilled workers only
• Consider case with only unskilled immigrants

16
Economic Impact of Migration Theory

• L and L unskilled workers in Home and Foreign
• Demand for labor given by MPL ? initial wage w0
  and w0 w0gtw0
• Migration equalizes wages w1w1
• Unskilled workers in Home worse off
• Migrants and unskilled workers in Foreign better
  off

17
Economic Impact of Migration Theory
MPL
MPL
w0
w1
w0
o
o
L
L
LM
M
18
Economic Impact of Migration Theory

• What about overall impact on Home?
• Capital supplied elastically ? no impact for
  owners of capital
• Skilled labor in Home becomes scarcer relative to
  unskilled labor
• Skilled-wage premium goes up
• Overall effect average earnings go up
• Immigration surplus unskilled workers paid less
  than their marginal product
• Net gain accrues to skilled workers

19
Economic Impact of Migration Theory
MPL
MPL
Immigration surplus
w0
w1
w0
o
o
L
L
LM
M
20
Economic Impact of Migration Theory

• Immigration has important distributional
  implications
• This can have important political implications
• Note if labor supply flexible, migration leads
  to unemployment in addition to (or instead of)
  lower unskilled wages
• Note reverse holds for Foreign skilled labor
  becomes less abundant and skilled workers lose out

21
Economic Impact of Migration Heckscher-Ohlin
Model

• Multiple heterogenous output goods
• Free and competitive trade ? goods prices set at
  world markets
• All countries have access to the same technology
• Skilled and unskilled labor, supplied inelasticly
• Capital supply elastic
• All immigrants unskilled

22
Economic Impact of Migration Heckscher-Ohlin
Model

• Output mix determined by relative factor
  endowments
• Immigration ? pressure on unskilled wages to fall
  ? output of goods produced by unskilled labor
  goes up
• Wages of skilled and unskilled labor unchanged as
  long as goods prices constant
• Immigration absorbed through changes in output
  mix (Rybczinski Theorem)
• No labor-market impact at all

23
Economic Impact of Migration Evidence

• Most studies no or mildly negative impact of
  migration on natives wages or employment
• Card (EJ 2005)?US data, Dustmann et al. (EJ 2005
  OxRevEP 2008)?UK data
• Borjas (QJE 2003, NBER WP 2005) labor-market
  impact of migration is mitigated by out-migration
  of natives (US data)
• Card (EJ 2005) little evidence of natives
  migration being driven by immigration

24
Economic Impact of Migration Evidence

• Dustmann et al. (OxRevEP 2008)?UK data
• Immigrants predominantly low skilled ? impact on
  wages different alongside natives wage
  distribution
• Elasticity of natives wages with respect to
  immigration rate
• Low-wage earners -0.5 at 10th percentile
• Positive for most 0.6 at median, 0.35 on average
  
• Insignificant for high-wage earners (from 95th
  percentile)

25
Economic Impact of Migration Evidence (Dustmann
et al., 2008)
26
Economic Impact of Migration Evidence

• Impact on employment (Dustmann et al., EJ 2005)?
  UK data zero effect overall
• Positive effect for high-educated natives
  (high-school diploma and higher)
• Negative effect for intermediate-educated,
  negative but insignificant for unqualified
• Effects for high and intermediate educated
  approximately cancel each other in aggregate

27
Economic Impact of Migration Evidence from
Natural Experiments

• Friedberg and Hunt (JEP 1995) Large-scale
  immigration episodes ? little long-term impact on
  labor markets
• French and Portuguese decolonization
• Cuban immigration to the US during the Mariel
  boatlift
• Russian-Jewish immigration to Israel in 1990s

28
Economic Impact of Migration Israel

• 1990s more than 1 million ethnic Jews immigrated
  to Israel from the FSU
• Israeli population in 1989 4.6 million
• Migration driven by economic hardship and
  political unrest
• Approximately two-thirds of these immigrants
  highly skilled

29
Economic Impact of Migration Israel

• FSU immigration ? no long-term effect on wages or
  employment of natives
• Friedberg (2001 QJE), Gandal, Hanson and
  Slaughter (2004 EER), and Cohen and Paserman
  (2004 CEPR DP 4640)
• Cohen and Paserman (2004) negative short-term
  effect (elasticity -0.1 to -0.3) on wages (but
  not on employment)
• Effect disappears in 4-7 years

30
Economic Impact of Migration Israel

• Gandal et al. global technology changes
  increased demand for skilled labor
• This helped Israeli economy absorb immigrant
  influx
• Cohen and Hsieh (2000 mimeo) immigration
  followed by large influx of capital (borrowing)
• Consistent with standard neoclassical growth
  model

31
Economic Impact of Migration Israel

• Eckstein and Weiss (2003 IZA DP 710) substantial
  initial occupational downgrading of FSU
  immigrants but wages increase rapidly
• No return on their imported skills in short run
• Lower return to education, same return to
  experience and higher return to unobserved
  skills, than native Israelis, in long run
• Because of lower return to imported skills,
  immigrants wages never catch up with natives
  wages

32
Economic Impact of Migration Germany

• Re-unification of Germany ? large migration flow
  from East to West
• Frank (2007 mimeo) no overall effect on wages or
  unemployment in West Germany
• But important distributional effects
• Employment of less educated workers, blue-collar
  workers and foreign nationals declined
• Wages of workers in non-traded-goods and service
  sectors increased

33
Immigration and Crime

• Immigrants often associated with high crime rates
• Theory ambiguous relationship
• Immigrants fare poorly in labor market, but
• face higher detection probability (prejudice)
• and stricter punishment (sentence deportation)

34
Immigration and Crime

• Bianchi, Buonanno Pinotti (2009 BI wp)
• Immigration crime in IT provinces, 1990-2003
• OLS elasticity of crime to immigration 0.1
• Especially for property crime (theft and robbery)
  
• Result may be driven by endogeneity
• Eg immigrants more to high-crime areas because of
  low cost of housing
• IV no significant effect on total crime or
  property crime, significant effect on robberies
• Robberies 1.5 of total crime only

35
Brain Drain

• Migration of skilled workers from LDC to DC
• Docquier et al. (IZA DP 2005) brain drain
  estimates, 1990-2000
• World weighted-average skilled migration rate
  5.3 vs unskilled rate 1.1
• LDC 7 vs 0.3
• Latin America 11, Africa 10.4, Asia 5.5
• Traditional view brain drain reduces stock of
  human capital ? lower potential for growth

36
Brain Drain

• Skilled immigrants often subject to occupational
  downgrading
• But face better employment prospects than
  unskilled immigrants
• Liquidity constraints
• Migration is costly
• Skilled migrants better able to afford the cost

37
Brain Drain Reassessment

• Mountford (1997 JDE), Fan and Stark
• Individuals under-invest in education because
  they ignore social returns
• Education raises probability of emigration
• Higher expected private return to education
• Greater incentive to invest in education
• Emigration uncertain ? some skilled workers
  remain in LDC
• Brain drain may raise LDC stock of human capital
  ? better prospects for growth

38
Remittances

• Large inflows, esp. for developing countries
• Remittances one third of exports and greater than
  FDI (Barajas et al., 2009, IMF WP09/153)
• Top recipients in 2008 Mexico, China and India
  25-27bn
• Mexico remittances ? 1/3 of formal wage income
  in 2006 (Vargas-Silva, RDE 2009)
• US 18mn people of Mexican origin
• Poland 2mn Poles abroad ? 6bn in 2007 (NBP
  report)

39
Remittances

• China remittances of rural migrants large
• 15 of agricultural income of selected provinces
  in 1992 (Wu Zhou 2005)
• 1995 survey in Jinan and Shandong (Liu Reilley,
  Apllied Economics 2004)
• Rural migrants remit RMB 2110 p.a. ? 36 of
  earnings
• 85 of rural migrants transfer remittances

40
Remittances Impact

• Remittances increase household disposable income
• Rozelle, Taylor and deBrauw (AER PP 1999)
  remittances increase agricultural productivity in
  rural China (Hebei and Liaoning)
• Adams and Page (WB WPS3179) remittances reduce
  poverty in LDC
• Elasticity -0.19 with respect to emigration rate
  and -0.16 with respect to remittances-to-GDP ratio

41
Remittances Impact

• Barajas et al. (2009, IMF WP09/153)
• Remittances to 84 countries over 1970-2004
• Effect on growth is insignificant or even
  negative
• Interpretation remittances alleviate poverty and
  increase consumption but not investment

42
Remittances and the Dutch Disease

• DD typically associated with revenue from export
  of natural resources (origin North-Sea natural
  gas exports in the Netherlands)
• Large receipts of foreign currency ? XR
  appreciates ? loss of competitiveness ?
  manufacturing exports fall while imports rise
• Vargas-Silva (RDE 2009) remittances cause
  appreciation of real exchange rate in Mexico

43
Politics of Immigration

• Migration (and trade) ? winners and losers among
  natives
• If immigrants predominantly unskilled, unskilled
  natives lose out and skilled workers gain
• Losers may need to be compensated (redistribution
  of gains from winners)
• Otherwise, economic integration may not be
  politically feasible

44
Politics of Immigration

• Wages reflect relative abundance of each factor
  of production
• Consider again skilled vs unskilled labor
• DC skilled labor relatively abundant
• Immigrants predominantly unskilled
• Skilled workers likely to emigrate
• LDC unskilled labor relatively abundant
• Immigrants predominantly skilled
• Unskilled labor likely to emigrate

45
Politics of Immigration

• Attitudes depend on relative factor endowments
  and redistributional impact of immigration
• DC immigrants predominantly unskilled
• Skilled wage goes up
• Unskilled wage falls
• Skilled workers should favor immigration
• Unskilled workers should oppose immigration

46
Politics of Immigration

• LDC immigrants predominantly skilled
• Skilled workers should oppose immigration
• Unskilled workers should be in favor
• Attitudes on free trade determined similarly

47
Politics of Immigration

• ORourke and Sinnott (2005 EJPE), Mayda and
  Rodrik (2005 EER) and Mayda (2005) use large
  multi-country individual-level survey dataset to
  investigate individual attitudes on trade and
  migration
• Skilled individuals more in favor of immigration
  (free trade)
• More so in rich countries

48
Politics of Emigration Home Country

• Emigration experience may affect ones political
  opinion and attitudes
• Spilimbergo (CEPR DP 5934)
• UNESCO database on international student flows
  1950-2003
• Share of students studying abroad increases
  democracy in home country
• But only if students study in democratic
  countries

49
Politics of Emigration Home Country

• Fidrmuc and Doyle (CEPR DP 4619)Voting behavior
  of Czech and Polish emigrants in home-country
  elections
• Emigrant votes differ from home country votes and
  also across host countries
• Votes for pro-reform and left-wing parties depend
  on host-country characteristics
• Migrants adapt to institutional environment
• Level and tradition of democracy
• Extent of economic freedom

50
Political Impact of Immigration

• Living in economically liberal and democratic
  countries should have a favourable impact on
  migrants from less developed countries
• Migrants espouse liberal attitudes while living
  abroad
• Autocratic regimes often restrict their citizens
  freedom to travel
• North Korea, Turkmenistan, Zimbabwe
• Autocracies that tolerate free travel often more
  liberal ? former Yugoslavia

51
Migrants Labor-market Performance

• Migrants typically subject to substantial
  occupational downgrading
• Human capital poorly portable
• Eastern European Jews in Israel low return on
  imported education and experience (Friedberg JLE
  2000 Eckstein and Weiss, 2003 IZA DP710)
• Destination-country education raises return also
  to home-country education (Friedberg 2000)
• Immigrants catch up slowly and imperfectly

52
Occupational Downgrading UK (Dustmann et al.,
2008)
53
Migrants Labor-market Performance

• US/UK immigrants from Latin American and Eastern
  Europe suffer more downgrading than immigrants
  from industrialized countries
• UK Drinkwater et al. (2006 IZA DP2410)
• US Mattoo et al. (JDE 2008)
• Language skills important
• Immigrants who speak destination-country language
  earn up to 20 more (Chiswick and Miller, 2002
  JPopE 2007 IZA DP 2664)

54
EU Enlargement and East-West Migration

• EU enlargements in May 2004 and Jan 2007
• Pre-enlargement debate in academia, policy-making
  and popular press fear of mass migration,
  welfare shopping and displacement effects in
  labor market
• Result transitional restrictions on free
  movement of workers (232 formula)
• Exceptions in 2004 UK, Ireland and Sweden
• More countries removed restrictions later

55
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)

• Fear of mass migration high unemployment

56
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)

• Fear of mass migration low wages

57
East-West Migration Predictions (Zaiceva
Zimmerman, OxRevEP 2008)

• Since early 1990s more than 30 studies
  forecasting East-West migration
• Predictions based on intentions to move to the
  West using surveys
• Econometric models using historical data for
  countries other than CEECs (double out-of-sample
  extrapolations)
• Migration experience after the Southern EU
  enlargement or other countries (e.g. immigration
  to Germany from a broad sample of countries)

58
East-West Migration Predictions

• Boeri and Bruecker (2000)
• Estimate model of immigration to Germany over
  1968-98
• Use it to predict East-West migration to the EU
• Total net immigration 335 ths to the EU15
• Most predicted to go to Germany and Austria 218
  ths and 40.5 ths, respectively
• UK to receive some 15 ths.

59
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)
60
East-West Migration Predictions

• Surveys of willingness to migrate (WTM)
• Drinkwater (2003) WTM to the EU highest among
  the young and those with high skills and
  foreign-language skills
• Expected impact
• mainly positive impact for destination countries
• potentially adverse impact on source countries
  (brain drain)

61
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)

• Actual migration flows difficult to estimate
• UK and Ireland no restrictions, large influx
  (Gilpin et al., 2006, Blanchflower et al., 2007,
  UK Home Office Accession Monitoring Reports
  Doyle et al., 2006)
• Sweden no restrictions, little immigration
• Austria, Germany restrictions, large influx
• Why? Push and pull factors Economic factors,
  geographic proximity, language, networks,
  demand-driven (IE), re-directed from other
  countries

62
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)
63
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)

• Main sending countries
• UK Poland, Slovakia, Lithuania,
• Ireland Poland, Lithuania, Latvia
• Sweden Poland, Lithuania, Estonia
• Sectoral distribution of immigrants
• UK hotels/catering, manufacturing,
  agriculture/construction
• Ireland construction, manufacturing,
  hotels/catering
• Sweden health care, trade, manufacturing

64
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)
65
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)
66
EU Enlargement and East-West Migration (Zaiceva
Zimmerman, OxRevEP 2008)
67
East-West Migration Impact (Zaiceva
Zimmerman, OxRevEP 2008)

• No negative impact on receiving countries
  economies
• Occupational downgrading common
• No evidence of an impact on unemployment
• If displacement of natives (Ireland) ? no rise in
  aggregate unemployment but upgrade jobs for
  nationals
• No wage pressure, not even in manufacturing
  sector ? highest share of new immigrants

68
East-West Migration Impact (Zaiceva Zimmerman,
OxRevEP 2008)

• Reduced or falling wage growth rates mainly
  follow pre-enlargement trends
• UK immigration has increased supply by more than
  it has increased demand
• Lower inflationary pressures and lower natural
  rate of unemployment.

69
East-West Migration Public Perceptions (Zaiceva
Zimmerman, OxRevEP 2008)
70
East-West Migration Public Perceptions
(Blanchflower, EJ 2009)
Balance
Per cent
Unemployment expectations over the next 12
months EU15
60
12
(3 month average - advanced 12 months - LHS)
50
11
40
10
30
9
20
8
10
7
Unemployment
0
6
rate (RHS)
--- 1985-2007 average
-10
5
1985
1988
1991
1994
1997
2000
2003
2006
71
East-West Migration Public Perceptions
Unemployment expectations over the next 12
months Germany
Per cent
Balance
14
60
(3 month average - advanced 12 months - LHS)
50
12
40
10
30
8
20
6
10
4
0
Unemployment
2
-10
rate (RHS)
--- 1985-2007 average
0
-20
1985
1988
1991
1994
1997
2000
2003
2006
72
East-West Migration Public Perceptions
Balance
Per cent
Unemployment expectations over the next 12
months UK
12
60
(3 month average - advanced 12 months - LHS)
11
50
10
40
9
30
8
7
20
6
10
5
0
4
Unemployment
-10
3
rate (RHS)
--- 1985-2007 average
2
-20
1985
1988
1991
1994
1997
2000
2003
2006
73
East-West Migration Public Perceptions
Balance
Per cent
Unemployment expectations over the next 12
months Ireland
20
60
(3 month average - advanced 12 months - LHS)
50
40
15
30
20
10
10
0
-10
5
-20
Unemployment
-30
--- 1985-2007 average
rate (RHS)
-40
0
1985
1988
1991
1994
1997
2000
2003
2006
74
East-West Migration UK Experience

• Annual gross inflow of A8 nationals over 200 ths
• The stock of A8 migrants estimated to be around
  500 ths by the end of 2006 (Blanchflower,
  Saleheen and Shadforth, 2007)
• 65-70 of A8 immigrants are Polish
• Most work in low-skilled occupations and earn low
  wages
• 80 are below 35 60 are males

75
East-West Migration UK Experience

• Unlike migrants from other countries, relatively
  low share come to London (around 10)
• Main destinations Anglia, Midlands, London
• Anecdotal evidence some immigrants highly
  skilled
• No welfare tourists by 2007, less than 1,000 A8
  nationals per quarter approved to receive income
  support and job-seekers allowance

76
East-West Migration UK Experience
WRS registrations as a of home population
WRS Registrations (000s)
U Rate (2004)
Emp Rate (2004)
GDP per head (2005)







Czech Rep.

0.28

28.9

8.3

64.2

5,200

Estonia

0.47

6.2

9.7

63.0

4,000

Hungary

0.19

18.9

6.1

56.8

5,000

Latvia
1.43

32.8

10.4

62.3

3,100

Lithuania

1.85

62.8

11.4

61.2

2,500

Poland

1.02

394.2

19.0

51.7

4,200


Slovakia

1.13

61.2

18.2

57.0

4,200






Slovenia

0.03

0.6

6.3

65.3

11,400

Correlation



0.560

-0.257

-0.711

77
East-West Migration UK Experience

• Life Satisfaction
• 2004 2006
• Bulgaria 2.06 1.99
• Czech Rep 2.82 2.92
• Estonia 2.74 2.74
• Hungary 2.44 2.50
• Latvia 2.52 2.62
• Lithuania 2.55 2.62
• Poland 2.81 2.80
• Romania 2.32 2.33
• Slovakia 2.59 2.70
• Slovenia 3.17 3.09
• UK 3.22 3.18

78
East-West Migration UK Experience
WRS Applications
12 months ending March 2007
Intended length of stay


Per cent







Less than 3 months

126,100
55

3 to 5 months

3,840

2

6 to 11 months

7,605

3

1 to 2 years

10,520

5

More than 2 years

21,225

9

Do not know

58,480

26

Total

227,770

100


79
East-West Migration UK Experience

• 1-2 (at least) of Polish, Slovak, Latvian and
  Lithuanian populations lived and worked in the UK
  at some time between 2004 and 2007 (WRS
  statistics only)
• East-West migration helped lower unemployment in
  A8 countries
• Some caused labor shortages, especially in
  agriculture and construction
• Gilpin et al. (2006, DWP WP 29) relationship
  between change in share of A8 migrants and change
  in regional unemployment

80
East-West Migration UK Experience

• Drinkwater, Eade and Garapich (2006 IZA DP2410)
• A8 migrants highly skilled but have low returns
  to skills and experience
• Wages increase with years since migration
• A8 migrants earn 30 less than migrants from
  other European countries (those from
  English-speaking countries earn 30 more) when
  not controlling for occupation
• No evidence as to whether the extent of
  occupational downgrading is falling over time

81
East-West Migration UK Experience

• If occupational downgrading persists
• Destination countries do not realize the
  migrants full contribution to their GDPs
• Migrants fail to receive wages corresponding to
  their human capital
• Occupational downgrading may become permanent and
  persist even upon return to the home country
  (scarring)
• Source countries suffer brain drain
• Overall, everyone loses
• Time will show if this will be the case.

82
Summary

• Factors underlying patterns of migration flows
• Differentials in (expected) earnings
• Returns to human capital
• Risk sharing at household level
• Economic impact of migration
• Host country little or none aggregate
  labor-market impact but important distributional
  implications
• Home country may be harmful because of brain
  drain and/or Dutch disease

83
Summary

• Political impact
• Host country distributional implications ?
  winners and losers ? political backlash against
  labor mobility and integration
• Home country spread of liberal norms and values
• EU enlargement
• Large and unprecedented migration flows within
  Europe
• Little or no negative labor-market impact on host
  countries (so far)