Sunday, June 30, 2013

Julian di Giovanni and Andrei Levchenko — A global view of cross-border migration

There is growing interest in understanding and quantifying the costs and benefits of migration. This column presents new research suggesting that migration benefits practically all origin and destination countries. OECD countries benefit because of greater domestic product variety and, in turn, most countries that are the source of migration countries benefit because the remittances sent by migrants more than offset the costs associated with smaller market size.
A global view of cross-border migration
Julian di Giovanni, Economist in the Research Department at the International Monetary Fund, and Andrei Levchenko, Assistant Professor of Economics at the University of Michigan

Nothing about wage suppression in the host country and the global wage leveling that benefits the developing world at the expense of the workers of the developed world. How would this play politically in developed nations where workers dominate the electorate. I'm all for free flow of people and open borders, but there are political realities to face, too, as well as power relationship that will influence the way this would carried out to the benefit of capital. Initially, high skilled workers will flow toward the highest paying areas, reducing incomes of similar workers there, resulting in a "brain drain" in less developed areas and lower wages due to increased competition in more highly developed ones.

All models are assumption-dependent and this one is arguably unrealistic in what it assumes. Moreover, it works "in the long run." Short-run? Not so much.

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