1 Lecture 10 Migration Econ 340 Lecture 10: Migration 2 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 3 Why People Migrate • Main Reason for Migration: Better Wages • Other Reasons – Better living conditions – Freedom/Persecution – Climate2 Lecture 10: Migration 4 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 5 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 6 Why Wages Differ across Countries • Differences in Technology – Advanced technology makes labor more productive – Causes higher wages, and attracts migration3 Lecture 10: Migration 7 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 8 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 9 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. Experience4 Lecture 10: Migration 10 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 11 Effects of Migration U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 Labor markets in two countries before migration Incentive to migrate from Mexico to US Lecture 10: Migration 12 Effects of Migration U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 −ΔL +ΔL Effect of migration on labor supplies5 Lecture 10: Migration 13 Effects of Migration U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL Effect of migration on wages Migration pulls wages closer together Migration pulls wages closer together Lecture 10: Migration 14 Effects of Migration U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL a b c d e Effect of migration on welfare Lecture 10: Migration 15 Effects of Migration: Labor U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL a b c d e Gain to migrants6 Lecture 10: Migration 16 Effects of Migration: Labor U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL a b c d e Gain to workers left behind Lecture 10: Migration 17 Effects of Migration: Labor U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL a b c d e Loss to competing workers already in US Lecture 10: Migration 18 Effects of Migration: Other U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL a b c d e Loss to factors other than labor in Mexico7 Lecture 10: Migration 19 Effects of Migration: Other U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL a b c d e Gain to factors other than labor in US Lecture 10: Migration 20 Effects of Migration: All 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) U.S. Mexico DM DU ab c d e Lecture 10: Migration 21 Effects of Migration: Mexico U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL a b c d e Gain to Mexico as a whole, including migrants8 Lecture 10: Migration 22 Effects of Migration: US U.S. wU L Mexico wM L DM DU SU0 SM0 wM0 wU0 SM1 SU1 wM1 wU1 −ΔL +ΔL a b c d e Gain to US as a whole, excluding migrants Lecture 10: Migration 23 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 24 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. Experience9 Lecture 10: Migration 25 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 26 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
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