Trading Goods or Human Capital: The Gains and Losses from Economic Integration

In this paper, I quantify the economic consequences of liberalizing migration in the OECD and compare them with those of a hypothetical liberalization of trade across the OECD. First, I investigate the bilateral migration and trade agreements between the EU and Australia, Canada, Japan, Turkey, and the US. Second, I show that the overall impact of reducing all legal restrictions on migration in the OECD is moderate (1.6 percent in real GDP), while the gains from removing tariff and non‐tariff barriers to trade among all of the OECD economies are slightly lower (1.1 percent in real GDP). Finally, both the theoretical and numerical findings suggest that the direction of relationships between trade and migration (either substitutability or complementarity) depends on the type of shock imposed in the system.     

Globalizing labor and the world economy: the role of human capital

We develop a dynamic model of the world economy that jointly endogenizes individual decisions about fertility, education and migration. We then use it to compare the short- and long-term effects of immigration restrictions on the world distribution of income. Our calibration strategy replicates the economic and demographic characteristics of the world, and allows us to proxy bilateral migration costs and visa costs for two classes of workers and for each pair of countries. In our benchmark simulations, the world average level of income per worker increases by 12% in the short term and by approximately 52% after one century. These results are highly robust to our identifying strategy and technological assumptions. Sizable differences are obtained when our baseline (pre-liberalization) trajectory involves a rapid income convergence between countries or when we adjust visa costs for a possible upward bias. Our quantitative analysis reveals that the effects of liberalizing migration on human capital accumulation and income are gradual and cumulative. Whatever is the size of the short-term gain, the long-run impact is 4 to 5 times greater (except under a rapid convergence in income).     

The brain drain and the world distribution of income

Skilled emigration (or brain drain) from developing to developed countries is becoming the dominant pattern of international migration today. Such migration is likely to affect the world distribution of income both directly, through the mobility of people, and indirectly, as the prospect of migration affects the rate of return to education in both the sending and receiving economies. This migration pattern will therefore affect human capital accumulation and fertility decisions in both the sending and receiving economies. This paper analyzes these effects in a dynamic two country model of the world economy where agents in both countries make optimal fertility and human capital decisions. The implications of the analysis for the world distribution of income are derived in the light of recent empirical findings of the brain drain literature. The analysis shows that the current trend towards predominantly skilled emigration from poor to rich countries may in the long run increase inequality in the world distribution of income as relatively poor countries grow large in terms of population. In the short run however, it is possible for world inequality to fall due to rises in GDP per capita in large developing economies with sufficiently low skilled emigration rates.     

The welfare impact of migration with endogenous cross-border movement: An application to the European Union

In this paper, I examine the welfare impact of migration in a general equilibrium model with endogenous worker location choice. My framework incorporates labor productivity differences across countries, worker heterogeneity in productivity across skill and nativity types, as well as country-pair specific costs of migration. In a series of experiments, I predict the migration response of workers to an expansion or contraction in the number of European Union (EU) member countries. For the case of the United Kingdom (U.K.) leaving the EU, commonly referred to as Brexit, low skilled native-born U.K. workers suffer a drop-in income, whereas high skilled workers experience an increase. This result is driven, in part, by an increase in high skilled immigration to the U.K. from outside the EU, which helps to dampen the loss in income of low skilled workers.     

Temporal causality and the dynamics of democracy,emigration and real income in Fiji

This study is the first to explore temporal causality between democracy, emigration and real income in Fiji within a multivariate cointegration model. We find three long run relationships between democracy, emigration and real income. In the long run there is evidence that migration and democracy Granger cause real GDP in Fiji; real GDP and democracy Granger cause migration from Fiji and that real GDP and migration Granger cause democracy in Fiji. In the short run we find unidirectional Granger causality running from migration to real GDP and from democracy to real GDP, but neutrality between democracy and migration in the short run. We also extend the analysis to examine the degree of exogeneity of the variables beyond the sample period through considering the decomposition of variance and impulse response functions.     

Benefits and Dangers of EU Enlargement

A new macroeconomic evaluation of EU enlargement is undertaken with a world macroeconomic model taking into account all possible integration effects: trade effects, Single Market effects, factor movements (FDI, migration) and the costs of enlargement. Due to the differences in size of the regions involved, on average the CEEC – measured in terms of real GDP – will gain around 10 times more from enlargement than the EU. Hungary and Poland can increase their real GDP by around 8 to 9 percent over a 10-year period, the Czech Republic gains a little bit less (5 to 6 percent). The EU on average would gain around 0.5 percent of real GDP over a 6-year period. Although, on average enlargement is a win-win game, the impact is quite different in the separate EU member states, with Austria, Germany and Italy gaining the most and losses for Spain, Portugal and Denmark. Hence, EU enlargement may not only be beneficial but might be a risky undertaking. Due to the regional different impact, enlargement acts like an exogenous shock leading to asymmetric disturbances in the EU. This could pause the process of business cycle synchronisation and might impair monetary policy in Euroland at the beginning of the enlargement process. A two-step integration of the CEEC into the EU – first the participation in the Single Market and only later into the EMU – is therefore preferable under the aspect of macroeconomic stability in Euroland.     

The impact of the credit crisis on poor developing countries: Growth,worker remittances,accumulation and migration

We show that the credit crisis of OECD countries has a negative impact on the growth of the world economy according to an error-correction model including China and Australia. This causes negative growth effects in poor developing countries. The reduced growth has a direct or indirect impact on the convergence issue, aid, remittances, labour force growth, investment and savings, net foreign debt, migration, tax revenues, public expenditure on education and literacy. We estimate dynamic equations of all these variables using dynamic panel data methods for a panel of countries with per capita income below $1200 (2000). The estimated equations are then integrated to a dynamic system of thirteen equations for thirteen variables that allows for highly non-linear baseline simulations for these open economies. Then we analyze the effects of transitional shocks as predicted by the international organizations for the OECD and world growth for 2008 and 2009. Whereas growth rates return to the baseline scenario until 2013 with overshooting for China and Australia, the level of the GDP per capita shows permanent effects, which are positive only for China. In the poor countries, investment, remittances, savings, tax revenues, public expenditure on education, all as a share of GDP as well as literacy and the GDP per capita, are reduced compared to the baseline until 2087 where our analysis ends. Investment, emigration and labour force growth start returning to baseline values between 2013 and 2017. GDP per capita and tax revenues start returning to baseline around 2040. Education variables do not return to baseline without additional effort.     

Investing back homeReturn migration and business ownership in Albania1

This study uses data from the 2005 Albania Living Standards Measurement Study survey to assess the impact of past migration experience of Albanian households on non‐farm business ownership through instrumental variables regression techniques. Considering the differences in earning potentials and opportunities for skill acquisition in different destination countries, we differentiate the impact of past household migration experience by main migrant destinations. The study also explores the heterogeneity of impact based on the timing of migration. The empirical results indicate that past household migration experience exerts a positive impact on the probability of owning a non‐farm business. While one additional year in Greece increases the probability of household business ownership by roughly 6 percent, a similar experience in Italy or farther destinations raises the probability by over 25 percent. Although past household migration experience for the period of 1990–2000 is positively associated with the likelihood of owning a household enterprise, a similar association does not exist for the period of 2001–2004.     

Worker remittances,migration, accumulation and growth in poor developing countries: Survey and analysis of direct and indirect effects

A broad but brief survey of the literature on remittances and growth shows that indirect effects are only included via interaction terms. Then, we regress data for migration, worker remittances, savings, investment, tax revenues, public expenditure on education, interest rates, literacy, labor force growth, development aid and GDP per capita growth on migration, remittances and other variables for a panel of countries with income below $1200. The estimated dynamic equations are integrated to a system used for baseline simulations. Comparison with the counterfactual policy simulations ‘only 50% remittances’ or ‘no net migration anymore’ shows that the total effect of remittances on levels and growth rates of GDP per capita, investment and literacy are positive, and that of net migration is negative for literacy and investment but positive for growth.     

当今国际劳工迁移现状、特点和政策趋向

国际劳工迁移是国际政治经济和人口发展不平衡的结果，由于劳动力的相对短缺，许多发达国家和发展中国家都积极从国外引进本国所需要的劳动力。本文在对主要地区和国家的国际劳工迁移的现状分析后，发现当今国际劳工迁移呈现出众多特点。为避免国际劳工迁移给本国社会经济带来负面影响，一些国家对国际移民政策进行了调整，并采取了一些行之有效的对策和措施：大力开发国内劳动力市场，积极采用新技术，将劳动密集性产业和低附加值的产品布置在劳动力资源丰富的邻国，大力引进高技术人才等。     

Can good governance lower bank intermediation costs?

ABSTRACT

This paper argues that better governance practices can reduce the costs, risks and uncertainty of financial intermediation. Our sample covers 100 high-, middle- and low-income countries during 1996 to 2015. Using panel regressions accounting for endogeneity and cross-sectional dependance, we find that net interest margins of banks are lower if various governance indicators are better. Governance indicators range from comprehensive indices on the rule of law to more narrow indicators like ethics of private firms. The global financial crisis seems not to have had a strong impact except via credit risk. Finally, we estimate that potential annual savings from lower net interest margins could average almost 0,3 percent of GDP, had the governance indicators been at the top decile. These simulations lend credence to the intuition that better governance practices should reduce costs, risks and uncertainty.     

Natural resources,economic growth and geography

Worldwide materials extraction increased by a factor of 8.4 over the course of the 20th century. In the meantime, global GDP and population increased by factors of about 22 and 4, respectively. This reveals that one of the key factors driving the increase in the exploitation of the resources was the growth in world population, although mitigated by the reduction in the intensity in the use of the resources in production. In this paper, we present a model that combines the theory of endogenous growth and the economy of natural resources, but taking into account the geographical distribution of economic activity. Indeed, the New Economic Geography provides insights about two elements that, although speeding up GDP growth, can curb the pressure on natural resources, namely the reduction in transports costs and a boost to pace of innovation.     

The selection of migrants and returnees in Romania

This paper uses census and survey data to identify the wage earning ability and the selection of recent Romanian migrants and returnees on observable characteristics. We construct measures of selection across skill groups and estimate the average and the skill‐specific premium for migration and return for three typical destinations of Romanian migrants after 1990. Once we account for migration costs, we find evidence that the selection and sorting of migrants are driven by different returns to skills in countries of destination. Our identification strategy for the effects of work experience abroad permits a cautious causal interpretation of the premium to return migration. This premium increases with migrants' skills and drives the positive selection of returnees relative to non‐migrants. Based on the compatibility of the results with rationality in the migration decisions, we simulate a rational‐agent model of education, migration and return. Our results suggest that for a source country like Romania relatively high rates of temporary migration might have positive long‐run effects on average skills and wages.     

The macroeconomic costs of conflict

Macroeconomic costs of conflict are generally very large, with GDP per capita about 28 percent lower ten years after conflict onset. This is overwhelmingly driven by private consumption, which falls by almost 25 percent ten years after conflict onset. Conflict is also associated with dramatic declines in official trade, with exports (imports) estimated to be 58 (34) percent lower ten years after conflict onset. The onset of conflict often also induces significant refugee outflows to neighboring non-advanced countries in the short run, and relatively small but very persistent refugee outflows to advanced countries over the long run. To alleviate reverse causality concerns between GDP and conflict onset, we control for pre-conflict GDP forecasts from the IMF World Economic Outlook and show that similar results are obtained with and without pre-conflict GDP forecasts.     

Demographic and Economic Pressure on Emigration out of Africa*

Two of the main forces driving European emigration in the late nineteenth century were real wage gaps between sending and receiving regions and demographic booms in the low‐wage sending regions. Our new estimates of net migration for the countries of sub‐Saharan Africa show that exactly the same forces driving African across‐border migration are at work today. The results suggest that rapid growth in the cohort of potential young emigrants, population pressure on the resource base, and slow economic growth are likely to intensify the pressure for migration out of Africa and into high‐wage OECD countries over the next two decades.     

Does trade creation by social and business networks hold in services?

Recent literature on the border effect has shown that the intensity of trade in goods is positively correlated with the migration stocks between any pair of countries/regions. The number of references for business networks is more limited, but they are also related with a reduction on information costs. In this article we investigate whether such a relation holds also for Spanish domestic trade flows in consumer services. To this end, we use a gravity model rooted in the Dixit–Stiglitz–Krugman theoretical framework and a unique data set on interregional trade flows for some of the main tourism service sectors, namely, accommodations and restaurants. Our industry-specific analysis finds a large positive effect for restaurants but a more limited effect for accommodations. Forces driving the demand in each sector explain this result and suggest the idea that although social networks can act as a substitute of firms in some sectors at the same time they can enhance trade flows in other sectors. We perform the same kind of analysis with a data set (obtained by a similar method) for domestic trade in goods and discover a different response to social and business networks. Finally, we treat the potential endogeneity by taking the instrumental-variable approach of the Poisson pseudo-maximum likelihood estimator and thus obtain consistent results.     

Migration decisions, expected remittances, and altruism

We investigate the effects of altruism on migration decisions by the potential migrant as well as the effects of altruism on remittances by the migrant to clarify how altruism affects remittances that the household in the home country will receive, i.e., expected remittances. Previous studies did not pay adequate attention to the effects of altruism on migration decisions of the potential migrant when examining the effects of altruism on remittances that will be sent from aboard. We find that if migration does not incur any costs, the potential migrant always migrates, and altruism increases expected remittances monotonically. On the other hand, if migration incurs costs, the potential migrant does not necessarily migrate, and the potential migrant with a higher degree of altruism is less likely to migrate. As a result, with migration costs, altruism may decrease expected remittances. Therefore, altruism does not increase expected remittances monotonically. Our results falsify the usual assumption of monotonicity regarding the effects of altruism on remittances.     

How Much Did Oil Market Developments Contribute to the 2009 Recession in Germany?

In this paper, we use a structural vector autoregressive model to study the effects of oil market developments on the German economy. We find that higher oil prices are always associated with a decline in private consumption expenditures, but the response of gross domestic product (GDP) crucially depends on the underlying shock. While a disruption in oil supply provokes a recession, positive world demand shocks prompt a temporary increase in exports and investment, which initially outweigh the cutback on consumption. In a counterfactual analysis, we show that the world demand shocks that led to the 2007/2008 oil price rise triggered a delayed 0.8 percent decrease in German GDP in 2009, and therefore notably contributed to the recession of that year.     

Convergence of labor productivity across the US states

Most studies of labor productivity convergence among US states base their analyses on state-level GDP per worker. Such aggregated analysis may hide important information about the role of sectors, and changes in the sectoral composition of these economies, in explaining economy-wide convergence results. Using highly disaggregated data for the period 1987–2015 from the US Bureau of Economic Analysis, we examine sectoral unconditional convergence in labor productivity in the US states. Our results demonstrate a general slowing down in the rate of convergence of labor productivity in the latter years of this period. The sectoral analysis also indicates that manufacturing was the primary driver of convergence during the 1987–1997 period, which had the highest rate of convergence; the role of this sector, however, has diminished in recent years. Several factors—such as the decline in interstate migration, rising housing costs in major cities, agglomeration, and structural changes in the US economy that have reduced the role of manufacturing—may have contributed to the rise in the labor productivity differential among US states.