Saturday, July 19, 2008

The economics approach of new European immigration policy (II)

Why do people emigrate ?. There are some key non economics factors which explain migration flows. Let take a look at them:
v Social factors. It refers to the desire of migrants to break away from domestic constraint whatever they might be.
v Cultural factors, It includes the safety net provide in most advanced countries, which give a better sense of protection and better living standard than the one they have at home countries.
v Physical factors .Recent migration from south China because of flooding, is an example of migrations flows due to natural disasters .
v Transportation facilities. It is easier to travel now than what it was before.
Following the Todaro ´s model (Economic Development in the third world .Second edition 1981),there is also an economic explanation for migration flows. People do migrate because of expected earnings, between sectors in domestic economy. This expected earnings, are measured by the difference in real incomes among different sectors, and the probability of a new migrant of obtaining an urban job at his destination point .Thus ,the model explains rural urban- migration, regional migration ,and it can also be applied to international migration.
International migration above a certain level of natural flows due to transitory causes(relatives who goes back to their own countries ,and the like),could be hypothesized as the outcome of wrong designed domestic policies , as long as the income gap is wide enough against domestic work places. In such a case People will look foreign work places, even with imperfect information or without information at all, about the probability of finding a job. The perception of that income gap to be permanent, will induce people to take riskier actions, because the expected benefit, is perceived to be higher than the current permanent cost .
In short ,migration can be explained by rational considerations related to benefits and cost, mostly financial, but also psychological. It follows that better domestic policies, would decreases the benesfit of migration .But what are the incentives for such a better policies?.Moral hazard and free ride for policy makers, applied fully when the destination countries do not take actions aimed to decreased such a benefit of migration which includes the legal framework and immigration policies.
To make the argument clear, in a global economy migration flows are a necessary condition to complement capital flow specially the services arising from those high skilled worker, which is the kind of migration with positive externalities for the host countries , and the one they prefer most. The problem is with the migration flows of both low skilled and illegal migrants, which becomes a competitors with domestic citizens for social benefits.In this case ,low skilled immigration flows are linked to negative externalities,which market forces can not solve because it fails to define the property right of domestic jobs.Therefore ,it is necessary for governments to step in,like in any other case of such externalities.It follows that the real issue should not be the new European immigration policy,but the new seeting which it imply ,for those countries which depended on former facilites to migrants, such that they should start to improve the design of domestic policy, heavely focused on redistribution and less on economic growth.