Economia Internazionale Alireza Naghavi Capitolo 10(b) La ...alirezanaghavi.altervista.org/2013FTMigration.pdf · Economia Internazionale Alireza Naghavi Capitolo 10(b) La mobilità
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• Determining the Wage� Labor in manufacturing is measured from the left.� Labor in agriculture is measured from the right.� PMMPLM is downward sloping because as more labor is
used in manufacturing, the MPL and therefore the wages fall in that industry.
� PAMPLA is upward sloping because we are measuring LA from right to left: as LA increases, MPL and wages in agriculture fall.
� Equilibrium wage is at A where the two curves cross.� When wages are equal across industries, there is no
• Determining the Wage� We assume that the Foreign equilibrium wage, W*, is
lower than Home equilibrium wage, W.� Foreign workers will want to immigrate to Home and the
Home workforce will increase by an amount ∆L, reflecting the number of immigrants.
• Effect of Immigration on the Wage in Home� We add the ∆L to figure 5.1,� The PAMPLA shifts right by ∆L.� The origin for manufacturing has not changed so
• We no longer see large scale migration from Europe to the “New World.”
• Instead, we see migration from developing countries to wealthier ones.� In many cases, the immigration includes a mix of low-skilled
workers and high-skilled workers.
• In the U.S. much of the recent debate focused on the issue of illegal immigration.� There are about 12 million illegal immigrants in the U.S.� This often obscures the fact that the majority of immigrants are
legal.
• The combination of legal and illegal immigrants in the U.S. creates a U-shaped pattern between the number of immigrants and their educational level.
• Illegal immigrants into the U.S. compete primarily with the lowest-educated workers.
• Legal immigrants compete with workers at the highest educational levels.
• Under the specific factors model, the greatest impact on labor will be for the lowest and highest educated U.S. workers.� This is supported by the data.
• The negative impact of immigration on wages is fairly modest for most workers and is offset with capital moves between industries as discussed later.
• Due to a shrinking workforce, Europe’s leaders are looking for ways to attract talented foreigners, even as some countries on the Continent close their borders.
• A new EU-wide “green card” would allow skilled workers already in the 25-nation bloc to change countries without extra paperwork.
• Europe's work force is expected to shrink by 20 million between now and 2040, according to the European Commission.
• Businesses complain regularly about a shortage of highly skilled personnel.
• Commissioner Franco Frattini, the man charged with developing common immigration policies for the EU, has a vision:� A North African engineer could go to work in Europe,
earn good money, and return regularly to his hometown to start and maintain a business.
• Immigration policy is still up to individual countries.
• Mr. Frattini uses the term “brain circulation” instead of the accusatory term “brain drain.”
• Other Effects of Immigration in the Short Run� U.S. and Europe have both welcomed foreign workers
in specific industries: agriculture and high-tech.� They do this even though those foreign workers
compete with domestic workers in those industries.� Therefore there must be benefits to the industries.� We can measure these potential benefits by the
• Determination of the Real Wage and Real Rental� The wages and rentals are determined by the marginal
products of labor and capital.� The marginal products are determined by the capital-
labor ratio in each industry.� If there is a higher capital-labor ratio, then by the law of
diminishing returns, the marginal product of capital and real rental must be lower and the marginal product of labor and real wage must be higher; the opposite holds for a higher L/K ratio.
� Because each line in the box diagram is a particular capital-labor ratio, it is also a particular wage and rental.
• Increase in the Amount of Home Labor� What has happened to wage and rentals?� Since the capital-labor ratios are unchanged, so are the
marginal products.� Therefore the wages and rentals are unchanged.� This is a very different result from the short-run model.� When capital can move freely between industries,
immigration in the long run has no impact on the wage and rental rates.
• The long run result we just showed was named after economist T.N. Rybczynski, who first discovered it.
• Rybczynski Theorem:In the Heckscher-Ohlin model with two goods andtwo factors, an increase in the amount of a factorfound in an economy will increase the output ofthe industry using that factor intensively anddecrease the output of the other industry.
• Effect of Immigration on Factor Prices� Notice that the change in outputs in the Rybczynski
Theorem goes hand-in-hand with the finding that wage and rental will not change due to the increase in labor (or capital).
� That is because the economy can absorb the extra amount of labor by changing output.
• Factor Price Insensitivity:In the Heckscher-Ohlin model with two goods and two factors, an increase in the amount of a factor found in an economy can be absorbed by changing the outputs of the industries, without any change in the factor prices.
• Wages at Home and Abroad� Point B is equilibrium with full migration.� Wages are equalized at W′. � Equilibrium with full migration is reached only in the
very long run.� Has this migration benefited the workers (not including
the immigrants) in the Home country? � Has migration benefited the Foreign country, including
• Gains for the Foreign Country� We need to include the wages received by the migrants
who left when calculating Foreign income.� These wages are often returned to their families.
� Even if the wages are not sent back, we still incorporate them in the measure of Foreign income since that is where the migrants originally came from.
� Foreign Wage W* = MPL*P.� As foreign workers emigrate, MPL in Foreign rises,
• The fact that immigrants return some of their income back home may not be enough to compensate their home countries for the loss of their labor.
• To calculate the gains, we need to include all the earnings of the immigrants in their home countries’ income.� In the case of highly-educated migrants, unless these migrants
return most of their earnings back home those countries lose from the outflow of these workers.
• Jagdish Bhagwati, an economist, has proposed that countries impose a “brain drain” tax on the outflow of educated workers.
• World Gains from Migration� Combining the gains to the Home and Foreign
countries we obtain the triangular region ABA*, the world gains due to immigration.
� We can measure the area of this triangle but we need to know the difference in wages before any migration and the number of people who would emigrate.
� One way to think about world gains from migration is that it equals the increase in world GDP due to immigration.
� We can then say the difference between the Home and Foreign wages therefore equals the net increase in world GDP due to migration.
• World Gains from Migration� Adding this up across all migrants, we get the triangle
ABA*, the increase in world GDP and the world gains due to migration.
� In practice, however, there are other costs that immigrants bear which would make the gains from immigration less than the increase in world GDP.� Moving costs, payments to traffickers of illegal immigrants.
� These costs must be subtracted from the increase in GDP in order to obtain the net gains.
• Immigration potentially affects the wages in the host country where the workers arrive.
• In the short-run specific-factors model, a larger supply of workers due to immigration will lower wages.
• The arrival of immigrants is beneficial to owners of capital and land in the specific factors model.� As wages are reduced in the short run the rental on
• In the long run, when capital can move between industries, the fall in wage will not occur.
• Industries that use labor intensively can expand, and other industries contract, so that the immigrants become employed without any fall in wages.� Rybczynski
• Immigration creates world gains as labor moves from countries with low marginal products to countries with high marginal products.