Transcript INTERNATIONAL MIGRATION IN A GLOBALIZING WORLD David Greenaway and Douglas Nelson What is Globalization? This morning I went out and bought a shirt…..the shirt I bought.

INTERNATIONAL MIGRATION
IN A GLOBALIZING WORLD
David Greenaway
and
Douglas Nelson
What is Globalization?
This morning I went out and bought a shirt…..the shirt I
bought represents a triumph of international cooperation.
The cotton was grown in India from seeds developed in
the United States; the artificial fibre in the thread comes
from Portugal and the material in the dyes from at least
six other countries; the collar linings come from Brazil,
and the machinery for the weaving, cutting and sewing
from Germany; the shirt itself was made up in
Malaysia……..(and was bought in the UK).
From Paul Seabright The Company of Strangers: A Natural History of
Economic Life. Princeton University Press (2004)
Migration and Globalisation
Drivers of Globalisation
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Economic globalisation
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International trade
Cross border investment and international outsourcing
Cross border migration
Financial market integration
Non-economic aspects of globalisation
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Cultural integration (e.g. globalised media)
Environmental integration
Total Trade to GDP 1870-1995
c.1870
c.1910
c.1950
1995
UK
41
44
30
57
France
33
35
23
43
Germany
37
38
27
46
Italy
21
28
21
49
Denmark
52
69
53
64
Norway
56
69
77
71
Sweden
28
40
30
77
USA
14
11
9
24
Canada
30
30
37
71
Australia
40
39
37
40
Japan
10
30
19
17
Notes: Exact dates vary by nation, see Kuznets (1967).
Sources: Kuznets (1967) Appendix Table I.
For 1995 World Bank Development Report (1997), Table 3
Capital Flows 1870-1996
Average absolute value of current account as percent of GDP)
UK
USA
Argen.
Australia
Canada
France
Germany
Italy
Japan
1870-1889
4.6
0.7
18.7
8.2
7
2.4
1.7
1.2
0.6
1890-1913
4.6
1
6.2
4.1
7
1.3
1.5
1.8
2.4
1919-1926
2.7
1.7
4.9
4.2
2.5
2.8
2.4
4.2
2.1
1927-1931
1.9
0.7
3.7
5.9
2.7
1.4
2
1.5
0.6
1932-1939
1.1
0.4
1.6
1.7
2.6
1
0.6
0.7
1
1947-1959
1.2
0.6
2.3
3.4
2.3
1.5
2
1.4
1.3
1960-1973
0.8
0.5
1
2.3
1.2
0.6
1
2.1
1
1974-1989
1.5
1.4
1.9
3.6
1.7
0.8
2.1
1.3
1.8
1989-1996
2.6
1.2
2
4.5
4
0.7
2.7
1.6
2.1
Why Do We Care ( Now) About
Globalization?
Density of economic globalisation greatest since First
World War; density of other forms of globalisation
greatest in world history
Pace of change is more rapid
Globalizations critics are globalized
Globalization is perceived to impact on more people
Perceived links between globalization and:
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Rise in the skill premium
Increased unemployment of unskilled
Breakdown of ‘golden age’ regimes
Migration and Globalisation: What’s the
Connection?

Late-19th Century migration was massive
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Hatton and Williamson argue that immigration was the
primary cause of economic globalization in this period.
As a flow, and unlike all other sources of
economic globalisation, migration is considerably
lower today than in the 19th Century.
U.S. Immigration Rate
Immigration Rate per 1000
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
19
00
19
08
19
16
19
24
19
32
19
40
19
48
19
56
19
64
19
72
19
80
19
88
19
96
0.0
Migration and Globalisation: What’s the
Connection?

The European Experience Is Different

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Most European countries were countries of emigration
in the 19th Century.
In the late 20th Century European countries are
countries of immigration
Economic Consequences of
Globalisation: Host Countries

Basic Economics of Trade and Migration
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A great insight of modern trade theory is that trade in goods can
be seen as embodied flows of factors.
Nobel Prize winner Robert Mundell showed that movement of
goods and factors generate gains for all countries from globally
more efficient use of world resources.
However trade and migration involve adjustment.
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Resources must move between industries and countries to realise
the full gains from globalisation.
We can think of two broad classes of adjustment:
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In the short run, factors (and their owners) need to move between
sectors and countries, with attendant costs;
In the long run patterns of production and factor allocation imply
new patterns of returns to different factors.
Economic Consequences of
Globalisation: Host Countries

The economics of long-run adjustment suggests
fundamental differences between trade and
immigration.
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Changes in trading conditions show up as changing
prices which induce long-run differential effects on
factor income (Stolper-Samuelson theorem); while
Changes in migration (that don’t fundamentally change
production conditions within countries) are predicted to
have no long run effects on income (factor-price
insensitivity).
Economic Consequences of
Globalisation: Host Countries

The ‘social economics’ may be rather different:
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With well-functioning welfare states, trade adjustment
is mostly absorbed in macroeconomic adjustment.
Even (or especially) in the presence of welfare states
immigration is different:
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Immigrants impose costs via the welfare state (and may even
be perceived as threatening their long-run functioning);
Immigrants may have effects in local communities beyond the
economic.
Economic Consequences of
Globalisation: Host Countries

Overall:
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Adjustment to trade may be painful, but is essentially
economic and handled by standard welfare state
mechanisms; while
Adjustment to immigration may be economically
painless (except for narrowly defined groups in the
very short run), but socially painful in ways that are not
handled well by standard welfare state mechanisms.
This shows up in the very different politics of these
issues.
Economic Consequences of
Globalisation: Home Countries
Labour Market Effects
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As with industrial countries, as long as there is
adjustment on the output margin, the direct economic
effects of migration should be rather small.
Since welfare states are modest in LDCs, the fiscal
effects of migration are likely to be small as well.
Economic Consequences of
Globalisation: Home Countries
Brain Drain and Remittances
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‘Brain Drain’ has a distinct flavour of the 1960s
Developing countries are now more worried about
maximizing mobility under Mode IV
But if LDCs are successful in opening Mode IV, we
may see a resurgence of interest in the Brain Drain.
The Brain Drain parallels concerns in industrial
countries about outsourcing skilled jobs.
Remittances may be important for some small, poor
countries; but in general are unlikely to have major
macroeconomic / growth effects.
The Politics of Trade and Immigration: A
Puzzle About Politics
In both the US and most European countries,
majorities appear to oppose greater trade
liberalization and more immigration.
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If the median voter model explained policy outcomes,
we would expect to observe restrictive regimes for
both trade and immigration.
But, we observe a restrictive regime for immigration,
and a liberal regime for trade.
The Politics of Trade and Immigration:
Trade
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In politics of any complexity, it is useful to
distinguish mean and variance.
In the case of trade, standard political-economy
models (based on rational pursuit of material selfinterest) do:
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a very good job of explaining the variance, but
a terrible job of explaining the mean.
the massive drop in protection has been possible only
because trade politics have been shielded from
domestic politics.
The Politics of Trade and Immigration:
Immigration
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We would argue that:
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While the average restrictiveness can be rationalised by
standard political economy models;
a closer look at the politics of immigration suggests
that these models simply don’t work very well.
We develop this in Greenaway and Nelson (2004),
“The Distinct Political Economies of Trade and
Migration Policies”.
The Politics of Trade and Immigration:
Immigration, A Starting Point
One of the central facts of contemporary immigration in
most industrial countries is family unification.
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Though widely criticized by economists ( Borjas (1999),
Brücker, et al. (2002)) as economically irrational, widely
adopted as policy.
Furthermore, unlike the ‘irrationality’ of tariffs produced by a
rational political process, it is hard to see family unification as
consistent with politics of material self interest.
Instead, it is a natural outcome of politics organized in terms of
some relatively broad norms of fairness.
The Politics of Trade and Immigration:
Immigration, A Starting Point
Problems with preferences, the US:
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Recent research on attitudes toward immigration suggest that,
while virtually all groups would restrict immigration, Hispanics
and African-Americans hold this attitude more weakly.
However, economic research suggests that these are precisely
the groups for which there is at least some evidence of negative
labour market effects.
This may reflect solidarity or a response to the obviously racist
component of recent anti-immigrant advertising, but it should
be clear that it is not consistent with a strong material basis for
immigration attitudes.
The Politics of Trade and Immigration:
Immigration, A Starting Point

Problems with preferences, Europe:
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In Europe, anti-immigrant politics seems to have
become the language of working class protest (in much
the same way as environmentalism has become the
language of middle class protest).
As such, the intensity of anti-immigrant politics
appears to be more tied to macroeconomic conditions
than to specific labour market pressures.
The Politics of Trade and Immigration:
Practice

Group politics of trade policy
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Since the emergence of the classic tariff system in the 1880s,
trade policy is essentially about the distribution/redistribution of
welfare.
Group politics have been well-organized in terms of material selfinterest for well over a century.
Group politics of immigration policy
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The group politics of immigration have not constituted a stable
system, in terms of well-defined, well-organized interests with a
broad economic base.
Non-economic groups play a larger role and economic groups
cover a much narrower range of interests.
Because protest politics are opportunistic, the politics of
immigration are difficult to predict.
The Politics of Trade and Immigration:
Summary
Overall, for the last 150 years, trade policy can be seen
as constant, national and economic; while immigration
policy can be seen as episodic, local and social.
Unlike trade, the macroeconomics or macropolitics of
immigration are not well understood.
To the extent that we understand it, the political
economy of immigration is
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Social more than economic;
Episodic (so unpredictable);
Potentially inflammatory.
Conclusions: National policy
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These conclusions suggest:
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The social content of immigration policy is likely to
trump the economic policy content.
While economists are fond of, and there is much to be
said for, policies of “contracted temporary migration”,
Such policies seem hard to sustain politically.

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Guest worker programs were precisely this sort of policy, and
They proved socially unsustainable.
Conclusions, International Policy

Given the politics of immigration, and because
the makeup of the population is seen by
governments as central to the definition of
national community, governments are wary about
surrender of sovereignty over this issue.

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Even the EU has a difficult time in developing a
common policy with respect to non-EU Migrants.
The interests of developing and developed countries are
so different with respect to migration that it is hard to
imagine an agreed policy in this area.