The New Economics of The New Economics of MigrationMigration

This is a theory that is more applicable to LDCs than to This is a theory that is more applicable to LDCs than to advanced economies. advanced economies.

Basic proposition: Migration decisions are not made by Basic proposition: Migration decisions are not made by isolated individuals, but rather are made by larger groups of isolated individuals, but rather are made by larger groups of related people, most often families and households. The related people, most often families and households. The individuals in the groups act collectively toindividuals in the groups act collectively to

1. maximize income,1. maximize income,

2. minimize risks, and2. minimize risks, and

3. loosen constraints associated with market failure.3. loosen constraints associated with market failure.

Maximize incomeMaximize income

Wage differentials may not be enough to encourage Wage differentials may not be enough to encourage migration.migration.

Relative income as opposed to absolute income may be Relative income as opposed to absolute income may be important in encouraging migration.important in encouraging migration.

Falling wage/income differentials may not discourage Falling wage/income differentials may not discourage migration.migration.

Minimize risksMinimize risks

Placing family or community members in foreign labor Placing family or community members in foreign labor markets may reduce the risks associated with local production markets may reduce the risks associated with local production if economic conditions in the foreign markets are not if economic conditions in the foreign markets are not correlated with those in local markets.correlated with those in local markets.

Remittances are critical here because they provide a buffer Remittances are critical here because they provide a buffer between poor local outcomes and family/community well-between poor local outcomes and family/community well-being.being.

In years when local conditions are good, the remittances may In years when local conditions are good, the remittances may be used for many purposes, such as purchasing more land, be used for many purposes, such as purchasing more land, machinery, fertilizers, herbicides, insecticides, and better machinery, fertilizers, herbicides, insecticides, and better seeds.seeds.

(In developed countries, private insurance markets and (In developed countries, private insurance markets and government programs mitigate risks, but these frequently are government programs mitigate risks, but these frequently are unavailable in less developed countries.)unavailable in less developed countries.)

Loosen constraints associated with market failureLoosen constraints associated with market failure

Related to the points noted above, in LDCs well-functioning Related to the points noted above, in LDCs well-functioning insurance, credit, and labor markets are often nonexistent, so insurance, credit, and labor markets are often nonexistent, so remittances play a major role loosening production remittances play a major role loosening production constraints. constraints.

SummarySummary

The new economics of migration places migration within a The new economics of migration places migration within a broader community context.broader community context.

It focuses on the household/family as the relevant decision-It focuses on the household/family as the relevant decision-making unit rather than the individual.making unit rather than the individual.

It ties migrant remittance behavior and remittance use with It ties migrant remittance behavior and remittance use with the migration decision itself. the migration decision itself.

Some hypotheses that result from the new economics Some hypotheses that result from the new economics of migration:of migration:

1. Someone who has migrated internationally once is more 1. Someone who has migrated internationally once is more likely to do so likely to do so again.again.2. International migration should be more likely for someone 2. International migration should be more likely for someone who is related who is related to an earlier international migrant. to an earlier international migrant. Persons in households with an Persons in households with an international migrant are international migrant are more likely to migrate internationally. Sons more likely to migrate internationally. Sons are more are more likely to migrate if their fathers migrated earlier.likely to migrate if their fathers migrated earlier.3. International migration requires that more barriers be 3. International migration requires that more barriers be overcome (e.g., overcome (e.g., language, religion, customs, language, religion, customs, papers/documents/visas), so networks papers/documents/visas), so networks are more important are more important in international migration. in international migration. 4. International migration is more likely from communities that 4. International migration is more likely from communities that have had have had many international migrants in the past. many international migrants in the past. 5. Migrants from any given origin community are likely to 5. Migrants from any given origin community are likely to initially locate in initially locate in destination communities where their destination communities where their relatives and friends have relatives and friends have located in the past.located in the past.6. Cumulative migration is more likely when the motivation to 6. Cumulative migration is more likely when the motivation to migrate comes migrate comes from families/communities.from families/communities.

Cumulative migrationCumulative migration

What factors underlie cumulative migration?What factors underlie cumulative migration?

1. 1. Distribution of incomeDistribution of income. As a household’s sense of relative . As a household’s sense of relative deprivation deprivation increases, the motive to migrate also may increases, the motive to migrate also may increase. The first increase. The first migrants from a community may be in migrants from a community may be in the middle to upper income the middle to upper income ranges. When those with lower ranges. When those with lower incomes see how well the migrant incomes see how well the migrant families do, they wish to families do, they wish to migrate themselves. Note here that the key migrate themselves. Note here that the key is the is the household’s relative position in the communities income household’s relative position in the communities income distribution and not its absolute position. distribution and not its absolute position.

2. 2. Distribution of landDistribution of land. A spending target for migrants may be . A spending target for migrants may be land. Land is land. Land is frequently purchased for prestige value or as a frequently purchased for prestige value or as a source of retirement source of retirement income. Since the migrants are abroad, income. Since the migrants are abroad, they often leave their newly they often leave their newly acquired land fallow. When acquired land fallow. When they do this, the demand for farm labor they do this, the demand for farm labor declines. As a declines. As a consequence, the farm laborers migrate out.consequence, the farm laborers migrate out.

3. 3. Organization of agrarian productionOrganization of agrarian production. When migrant . When migrant households own the households own the land they farm, they are more likely to land they farm, they are more likely to use capital-intensive farming use capital-intensive farming techniques, such as techniques, such as machinery, irrigation, fertilizers, herbicides, and machinery, irrigation, fertilizers, herbicides, and better better seeds. Such practices also could displace farm laborers, and seeds. Such practices also could displace farm laborers, and

make them more likely to migrate out. make them more likely to migrate out.

4. 4. Culture of migrationCulture of migration. Those who migrate once are more . Those who migrate once are more likely to migrate likely to migrate again. Migrant values may become part again. Migrant values may become part of the community’s values. of the community’s values. Migration may become part of a Migration may become part of a “right of passage,” especially for “right of passage,” especially for young men and especially young men and especially if their fathers and other relatives have if their fathers and other relatives have migrated in the migrated in the past. past.

● ● The cost of migration falls as more and more people The cost of migration falls as more and more people who share a who share a common language, culture, and religion common language, culture, and religion concentrate at a given concentrate at a given destination. destination.

● ● “Migration capital” builds as more and more people “Migration capital” builds as more and more people concentrate in concentrate in the destination. “Migrant capital” refers the destination. “Migrant capital” refers to contacts in the to contacts in the destination, as well as just knowing how destination, as well as just knowing how to get things done. to get things done.

● ● Past migrants provide miniature social benefits to Past migrants provide miniature social benefits to new migrants.Past new migrants.Past migrants may provide food and shelter migrants may provide food and shelter to the newcomers until they to the newcomers until they can find a job. Past can find a job. Past migrants also may inform the newcomers about migrants also may inform the newcomers about various various social programs that may be available to them.social programs that may be available to them.

5. 5. Distribution of human capitalDistribution of human capital. If the most talented and best . If the most talented and best educated educated depart, those left behind may be worse off as depart, those left behind may be worse off as labor demand and labor demand and labor income fall. As able-bodied men labor income fall. As able-bodied men leave the community, women leave the community, women and children are left in and children are left in many cases to fend for themselves. More out-many cases to fend for themselves. More out- migration migration may then occur as even younger men and women depart.may then occur as even younger men and women depart.

6. 6. Social labelingSocial labeling. Certain jobs in the destination may become . Certain jobs in the destination may become labeled as labeled as “migrant jobs.” Natives may be reluctant to fill “migrant jobs.” Natives may be reluctant to fill such jobs, which shifts such jobs, which shifts the demand for such jobs to the demand for such jobs to immigrants.immigrants.