INTERNATIONAL MIGRATION IN A

GLOBALIZING WORLDDavid 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 Economic globalisation

International trade Cross border investment and international outsourcing Cross border migration Financial market integration

Non-economic aspects of globalisation Cultural integration (e.g. globalised media) Environmental integration

Total Trade to GDP 1870-1995

c.1870 c.1910 c.1950 1995UK 41 44 30 57France 33 35 23 43Germany 37 38 27 46Italy 21 28 21 49Denmark 52 69 53 64Norway 56 69 77 71Sweden 28 40 30 77USA 14 11 9 24Canada 30 30 37 71Australia 40 39 37 40Japan 10 30 19 17Notes: 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:

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

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.

Immigration Rate per 1000

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

1900

1908

1916

1924

1932

1940

1948

1956

1964

1972

1980

1988

1996

U.S. Immigration Rate

Migration and Globalisation: What’s the Connection? The European Experience Is Different

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

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. Resources must move between industries and countries to realise

the full gains from globalisation. We can think of two broad classes of adjustment:

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. 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:

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: 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:

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

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

‘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.

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 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 self-interest) do: 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 We would argue that:

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. 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:

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:

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

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 self-interest for well over a century.

Group politics of immigration policy 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

Social more than economic; Episodic (so unpredictable); Potentially inflammatory.

Conclusions: National policy

These conclusions suggest: 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.

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. 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.