Some recent research papers by Gabriel J. Felbermayr and his team at Universitat Hohenheim (https://auwi.uni-hohenheim.de/), in Stuttgart, Germany are shedding light on international migration, perhaps the most hotly debated dimension of globalization.

It is widely acknowledged that migration brings many benefits.  After all, we are all migrants, “out of Africa”.

Usually migrants gain as individuals by shifting country, as they can work in higher income activities than at home.  They can send money back to their families in their home countries (remittances).  They can service great needs in destination countries, by filling labour market shortages or doing jobs that locals do not want to do.  Even though brain drain can be a problem, migrants often return home with improved skills and networks (“brain circulation”).  And the opportunity to migrate may increase the incentives to undertake higher education, even for those who do not migrate.

But migration still remains a hot issue.  Workers (particularly lower skilled workers) in destination countries complain that their jobs are stolen.  Problems of economic and social integration can lead to tensions between native and migrant populations.  And there are many claims that migrants place a burden on national social welfare systems.

I guess that we will never fully understand all the many impacts and implications of international migration.  But the Universitat Hohenheim give us a few more insights.

First, does international migration promote trade?  Yes, indeed, is the answer.  This means that thanks to increased trade, migration has added benefits.

Bilateral migration flows of both low- and high-skilled migrants between a rich and a poorer country does boost trade, though this effect does not apply in the case of medium-skilled migrants.  A one percent increase in the stock of migrants raises bilateral trade by 0.11 per cent.  This may not seem much, but it means that one additional migrant creates about $2,700 in trade.

One can speculate on the many ways that migration boosts trade.  International migration creates international networks between the source and destination countries, which may help identify market opportunities.  Migration may also enable countries to better exploit their comparative advantages.  The migration of skilled technology workers to the US has undoubtedly helped the world’s most innovative country make even further advances in information technology and biotechnology.

But more fundamentally, as can be seen in East Asia’s complex supply chain networks, global manufacturing production systems are characterized by simultaneous investment, trade and migration.  Companies outsource production facilities by international investment.  This boosts trade in plant and equipment and parts and components.  And this necessitates migration of key personnel to manage and oversee operations.

So, in short, much international migration is increasingly part of the internationalization of business, and is much less a separate phenomenon.

Second, what is the effect of immigration on overall per capita income in destination countries?  Surprisingly, for the cross-section of countries examined, the result is positive.  That is, immigration actually boosts overall per capita income in destination countries.  It is estimated that a 10% increase in the migrant stock leads to a per capita income gain of 2.2%.  This gain could be used to compensate any particular groups in society who lost out from migration.

How can this be?  Most people would imagine that immigrants are generally poorer and less well qualified than native populations.  And thus, immigration should reduce overall per capita income.

What would theory suggest as an explanation?  One possibility is that the skills of migrants are quite different from the pre-existing stock of natives.  And moreover, there must be a complementarity between these skills and production structure of the economy.  This may not be as surprising as it seems.  Many low-skilled migrants do difficult, dirty and dangerous jobs that native populations won’t touch.  Perhaps this enables economic activities to occur that would not otherwise occur, like dangerous construction or natural resource extraction activities.  And many high-skilled migrants are again key players in the technology and innovation processes.

These arguments may not be sufficient to convince the anti-migration voices, but they do add a new richness to the debate

References:

Felbermayr, Gabriel J. and Benjamin Jung, “The Pro-Trade Effect of the Brain Drain: Sorting Out Confounding Factors”.  Working Paper Nr. 302/2008.  November 2008.  Institut fur Volkswirtschaftslehre, Universitat Hohenheim, Stuttgart, Germany.  http://www.uni-hohenheim.de/RePEc/hoh/papers/302.pdf

Felbermayr, Gabriel J., Sanne Hiller and Davide Sala, “Does Immigration Boost Per Capita Income?”.  Working Paper Nr.300/2008.  October 2008.  Institut fur Volkswirtschaftslehre, Universitat Hohenheim, Stuttgart, Germany.

http://www.uni-hohenheim.de/RePEc/hoh/papers/300.pdf