Perhaps one of the most conflicting issues of the global economy these days, based upon free flow of capital ,goods, services and labor, is the one related to migration. This is so, because as capital moves quickly to different places following the expectation of increasing profits, it requires both complementary services and labor skills to keep the economic return curve , as much as it is possible, on the rising side, otherwise capital will move to a new gains opportunity , leaving behind the adjustment cost of resources reallocation within sectors which loose capital , with those ones which gain capital flows. This mean that in terms of capital financial return in the destiny country, labor skills which matter the most, are the one above average. In other words , capital expected financial return, define the profile of labor migration needs,as much as those skills mean higher productivity. Of course, a different story is related to cost gains, but in this case it is capital which follow such a places.-
So, any economy lacking sufficient domestic labor force skills, may import it from other countries.It is like importing either education or qualified human capital. This was the story of Brain migration in the sixties from underdevelopment countries to development ones.-
However, Migration can be analyzed both from the demand(above), or the supply side.
The supply side of migration depends upon expected wages gains, coupled with the expected probability of employment(Todaro ,1981). Both, the higher the expected wage, and the employment probability , the higher will be the qualified migrants flows from one place to another.In this case, Migration is also an Human capital investment, which increases the returns of education.In such scenario, the migrant market fit the requirement of capital increasing returns.However,there are in place two implicit assumtions :
a.- From the productivity level that any competitive economy requires, the relevant migration flows are those endowed with high human capital levels, because even whether the probability of employment is low, such an important human capital endowment , allows their owners for higher flexibility, mobility and adaptation to different requirement arising in the labor search process.-
b.- The only way human capital arising from migration, may be useful for productive purposes (both increasing return of capital and employment), is based on the clear definitions of its property right. This has two tier:
b.1 Those propety rights, come from formal education and its certification granted to those who successfully get the finish line at whatever level.-
b.2 Those property rights, are recognized by the legal system of both countries( the one from the origin, and the one of the destiny of any migrant), which means that any migrant, must follow the rules of the legal system.
Thus, there is a formal markets of migrants, which like any markets may work well,adjusting its wage levels according to migrants flows. Given symmetric information, if expected wages are high because both , there is in the destiny country, strong economic growth and low unemployment level, it will increase the flow of legal migrants, which sooner than later will decrease the expectation wages and migrant flow wuill decline.To avoid such disturbing fluctuations, and its displacement consequences, Europe implemented a few years ago ,the "Guest worker program" which allowed Migrants to stay in the dstiny country for the period of time their labor contract allowed them to do so.-
But, the problem starts with the fact that the demand and supply flows of migrant do not always match an equilibrium in which social(private) benefits and cost are equal, becasue there is simultaneously an informal markets.
So, Migrant markets is a segmented one. with two categories:.
a.- The first level has the best of high qualified migrant
b.- The secondary level, has the lower qualified migrant which lacks of property rights,(not education certification), and do not have the incentive to get into the legal system, because it would valued it at zero .-
This secondary market, is the one which deal with illegal migration, equivalent to importing (country of destiny)or, exporting poverty(country of origin ). At this point, arises negative externalities dealing with poor migrants and poverty exporting, such as human traficking, border services requirement(patrolling, cheking point and the likes), aditional shelter for those in the waiting list, judiciary courts to solve those issues concerning the rights of the migrants, better unfrastructure to cope with health, sanitary and foods demands.
In this secondary market, social cost are higher than social benefits, while private cost(nothing left behind), are lower than expected private benefits(illegal jobs).So the outcome is that migrant flows are higher than what is socially needed.-
What is the proper solution?.The economic analysis suggest that any informal markets do not add up to social welfare. Instead, it decreases social welfare of the country of destiny, and no welfare gains whatsoever, in the country of origin unless, there are laws which may deal this disequilibrium. The law solves what market forces, do not, just the same way as it happens with environment contamination , collusive behavior in oligopoly markets,public goods, and the likes.The aplication of the resources provided by the legal system, is a guarantee for the property right protection and the welfare levels, of the majority of migrants.-
Economic analysis (Coase Theorme),also suggest that in some cases, there is a chance of political solutions based upon negotiations .But the Coase Theorem also make clear that such a solution, requires low transaction cost, and clear definitions of property right.However, none of theses condtions, apply to illegal migrants.-
So there are currently hard times for the global economy, because its global markets (goods, services, capital and labor) no always work the way it should. It seems that it is needed an up dated in the global economy institutional framework, dealing with the way markets provide even better outcomes than the ones which are already known.-
