Relevance of Literature on Voluntary Migration for Forced Migration

Uri DadushCarnegie Endowment for International Peace and OCP Policy

Center

Main Points

• The Voluntary Migration (VM) literature has important bearing on the policy analysis of Forced Migration (FM)• …But it also fails to address some important policy questions which are

related specifically to FM• Techniques used in VM are of broad applicability in FM, but more

systematic effort is needed to gather data and develop dedicated approaches to the problems raised by FM.• VM is politically charged, and FM is even more politically charged; while

economics can provide a guide to the aggregate welfare and distributional impact of FM, policy formulation must – as is always the case - account for priors, perceptions and power relations.

The VM literature has important bearing on policies relating to forced migration

• The line between FM and VM migration is often blurred (there are degrees of compulsion)• Most forced migrants sooner or later settle and find a job (others stay in camps

or return) and when they do the economic impact on the host is similar to that of voluntary migrants.• Much of the literature on the impact of VM on the host community is concerned

with the identification problem – how do you isolate the impact of voluntary migrants from their tendency to go to where there is demand for them? Paradoxically, that has led scholars of VM to study the impact of FM on host communities precisely because the migration is forced and is therefore presumed to be “exogenous”.

Definition

• Voluntary Migrants (VM) those who leave to seek employment opportunities or to reunite families, at a time of their choosing and to a destination of choice.

• Forced Migrants (FM) those who leave because they perceive a high probability that they will be subject to bodily harm, imprisonment, or – due to a natural or man-made disaster - that they will soon be unable to house or feed themselves and their dependents.

FM is Rarely Absolute (At the Point of a Gun): There Are Degrees of Compulsion

• The decision of a forced migrant will depend on the degree of perceived risk, which it turn depends on the availability of information about threats, and people’s ability to assess risks.

• It will depend also on how much the migrant loses by leaving, his or her tolerance for the risk of undertaking the journey, assessment of prospects at destination, and the ability to cover the cost of migration – calculus is similar to VM

• People who are threatened do not all respond in the same way: some leave early on, some leave later, some don’t move.

• VMs can also be “forced” to a greater or lesser degree, for example to escape malnutrition and disease.

• So, while the distinction between VM and FM has important legal bearing (UN conventions), it is somewhat less useful in the conduct of economic analysis.

In analyzing the economic impact of FMs, the Time Dimension is Critical • During, say, the first 6 months, the forced migrant is disoriented, has

suffered a grievous loss and is impaired as an economic actor. • Beyond the initial shock period, some forced migrants will have found jobs

near the locality of arrival, even if they are not allowed to work formally, while others will be looking for opportunities more widely in the country of first arrival or beyond.• With the passage of time, many FMs reach an “end point” where they are

either settled in the country of first arrival or in another country, or resigned to be in camps supported by aid agencies or have returned. The economic impact of those that settle becomes similar to that of voluntary migrants.

Voluntary Migration Literature 1. General Equilibrium Effects• These exercises (e.g. GEP 2006) apply CGE models and assume that the change in the

migrant stock is exogenous – so they are actually directly relevant to analysis of FM• In fact, insofar as VM flows are endogenous and FM flows are exogenous, these

exercises will tend to underestimate the welfare gains from VM, but appropriately depict the welfare gains from FM

• When migration is South-North, the exercises conclude that: the global gains are very large, the biggest gainers are the migrants (who can treble their real income), the source country gains mainly through remittances, capital-owners and native workers who are complementary with migrants gain significantly, while those competing with migrants directly (usually a small group) lose.

• The gains from South-South migration (e.g. Ratha and Shaw) are much less commonly analyzed, but are very likely smaller all around (see below)

Literature 2. Econometric Analysis of the effect of migration on native workers, prices, and economic growth• These studies have been mainly concerned with the effect of unskilled migrants on

the wages of unskilled natives in the United States and Europe.• After much controversy (see for example Borjas (1985) and Otaviano and Peri

(2008)) and repeated efforts to deal with the endogeneity problem (do migrants cause higher wages or do they come because wages are high?), the consensus of the literature today is that the depressing effect on average wages of native unskilled workers is very small and is positive for some unskilled and for the native skilled.• Increased migration is associated with higher investment, faster GDP growth and

with lower prices of many essential services, higher housing prices, and higher rents.• Like trade, migration clearly has significant redistributive as well as aggregate welfare

enhancing effects.

Literature 3. Card Studies

• Card studies examine instances of mass migration triggered by exogenous (usually political) events. They are named after David Card (see 1990), who conducted the first such study, concerning the Mariel boatlift, from Cuba to Miami. Many such studies followed covering other instances of mass migration.

• These studies were motivated by the need to get around the endogeneity problem of econometric studies of the effect of migration on native wages. They typically use differences in differences techniques comparing similar localities, or try to find the appropriate Instrumental Variable to regress native wages against migration inflow. Most often, the IV is the stock of previous migrants from the same country of origin, or geographic distance form the border exploiting the tendency of migrants to cluster and to move nearby.

• These studies generally conclude that the negative effects on native workers is a small negative and can be positive in some instances. For example, in the case of migration of Soviet Jews to Israel, investment rose, growth accelerates and the current account went into deficit temporarily. (Friedberg (2001), Cohen and Hsieh (2000)) but skilled Israelis gained despite the fact that the migrants were disproportionately skilled, because they upgraded as skilled migrants took on the simpler tasks and those that did not require certification or language skills.

However, the literature on Voluntary Migration fails to address important policy issues specific to Forced Migration

• Forced migration is often “en masse” causing disruption in the location of first arrival• There is often a serious job market mismatch – the forced migrants

often find themselves in a location with few job opportunities• Forced migration is predominantly South-South, not South-North• Forced migrants create large international externalities, calling for

international coordination ………….in all these dimensions both data and the economic literature is sparse.

FMs Create Major Challenges for the Host Country on Their Arrival• Housing, Food, Medical Attention, Electricity, Water, Waste Disposal.• Government Budget• Job Market (job opportunities of natives) • Rents and housing prices• Strain on Social and Political Fabric, especially in countries that are fragile Size matters: in poor countries confronted with large inflows relative to their population, the economic burden and political challenge can be overwhelming. In rich countries confronted with a small inflow relative to their population, the economic burden is eminently manageable, even if the political challenge can be severe.

The FM Job Market Mismatch

• FMs do not come with work permits• …but beyond that, even when they are allowed to work, FMs may be

too old or top young , too skilled, or not sufficiently skilled, and not speak the language. • Compared to VMs, their reservation wage may be too high or lower

than it needs to be, and their network nonexistent.• The Job Market Mismatch may be more or less severe depending on

circumstances and individuals; for a subset of FMs the problem may be insurmountable.

South-South Migration is Different from South-North whether it is Forced or Voluntary• 86% of FM stay in the same region• Moving workers from a low-productivity environment to another low-

productivity environment fundamentally reduces the potential global welfare gains from migration, whether it is VM or FM.• Even in the best of circumstances, the migrant gains less, remits less, and

makes a smaller contribution to the country of destination; there will be more direct competition with unskilled natives, especially if migrant comes with language skills (Syria to Jordan)• FM which occurs en masse can upset the political balance, especially in fragile

environments. The effect can be an increase of uncertainty and deterioration of the investment climate, reducing the likelihood that the FMs will be absorbed in reasonable time.

The international Coordination Problem • There are negative global externalities associated with large

concentrations of unsettled refugees: political instability, extremism, economic imbalances in host country (ability to import and to repay debt), infectious disease, illegal migration pressures: How should the cost of housing them temporarily or permanently be shared?• Refugees are often in the wrong place and should be allowed move to

where job opportunities exist: how should their redistribution occur?• How does one make sure that countries avoid free riding and share the

burden equally?• What kind of incentives and transfer schemes should be established to

correct this “market failure”?

Techniques as they apply to FM

+ Commonly applied to VM and easily applicable to FM * CGE, IV estimation, difference in differences, Card case studies+ Data gaps in FM * size of FM populations, origin, destination, and status (Asylum seekers, refugees, IDPs); Duration and return; Profiles in different locations (especially skill level, language skills)+ Technique gaps in FM * design of impact studies * methods to assess the job mismatch problem * systematic examination of S-S migration; requires different approach? * models that measure externalities of FM and identify Pareto- optimal solutions

Political Challenges

• The population can usefully be divided in three groups, those who adamantly oppose the acceptance of any refugees (a big group); those who are absolutely in favor of the acceptance of large numbers of refugees (a small group); and those with mixed feelings and who are prepared to be convinced to accept refugees (how many refugees and size of group varies). • Economic analysis can – in the best of circumstances – only help sway

the last group.• Understanding these priors, and related perceptions and power

relations is absolutely central to formulating a realistic refugee policy. Economic analysis is important, but it does not determine.