Extending the case for a beneficial brain drain

The recent literature about the so-called beneficial brain drain assumes that destination countries are characterized not only by higher wages than the source country, but also by a higher or at least not lower relative return to education. However, it is a well known stylized fact that the returns to education are higher in rich than in poor countries. Against this background, we assess whether the main prediction of this literature, namely the possibility of a beneficial brain gain, still holds under the reverse assumption. We show that there is a still a strong case for a beneficial brain drain, even if the returns to education in the source country exceed those in the destination country. Immigration policies that are biased against unskilled workers are not necessary for a beneficial brain drain to occur once one considers that agents face heterogeneous migration costs.migration; brain drain; skill premium; heterogeneous agents; selective immigration policies

Macroeconomic consequences of migration diversion : a CGE simulation for Germany and the UK

"This paper examines the macroeconomic consequences of the diversion of migration flows away from Germany towards the UK in the course of the EU Eastern Enlargement. The EU has agreed with the new member states from Central and Eastern Europe transitional periods for the free movement of workers. The selective application of migration restrictions during the transitional periods has resulted in a reversal of the pre-enlargement allocation of migration flows from the new member states across the EU: Germany as the main destination before enlargement attracts only modest immigration flows since 2004, while the UK and Ireland which have been only marginally affected by immigration prior to enlargement absorb about 60% of the inflows in the post-enlargement period. The macroeconomic effects of this diversion process is analysed in this paper on the basis of a CGE model which considers wage rigidities. We find that higher migration is associated with larger GDP and employment gains, but also with a smaller wage increase and a smaller decline of the unemployment rate. The diversion of migration flows away from Germany towards the UK yields thus a higher GDP and employment growth in the UK. The joint GDP of Germany and the UK declines by 0.1 per cent as a consequence of the migration restrictions." (Author's abstract, IAB-Doku) ((en))EU-Osterweiterung - Auswirkungen, internationale Wanderung, Ost-West-Wanderung, Arbeitskräftemobilität, Mobilitätsbarriere, Wirtschaftsentwicklung - internationaler Vergleich, Bruttoinlandsprodukt, Beschäftigungseffekte, Arbeitsmarktentwicklung, Arbeitslosigkeit, Lohnentwicklung, Beschäftigungsentwicklung, Einwanderung, Bundesrepublik Deutschland, Großbritannien, Irland, Europäische Union, Osteuropa

The macroeconomic consequences of migration diversion: evidence for Germany and the UK

This paper examines the macroeconomic consequences of the diversion of migration flows away from Germany towards the UK in the course of the EUâs Eastern Enlargement. The EU has agreed transitional periods for the free movement of workers with the new member states from Central and Eastern Europe. The selective application of migration restrictions during the transitional periods has resulted in a reversal of the pre-enlargement allocation of migration flows from the new member states across the EU. Based on a forecast of the migration potential under the conditions of free movement and of the transitional arrangements, we employ a CGE model with imperfect labour markets to analyse the macroeconomic effects of this diversion process. We find that EU Eastern enlargement has increased in the GDP per capita in the UK substantially, but that the diversion of migration flows towards the UK has reduced wage gains and the decline in unemployment there. The effects of the EU Eastern enlargement are less favourable for Germany, but the diversion of migration flows has protected workers there against a detrimental impact on wages and unemployment.EU Eastern enlargement, international migration, computable equilibrium model, wage-setting.

Inequality and the (self-)selection of international migrants : theory and novel evidence

"This paper analyses the (self-)selection of migrants between countries which have substantial differences in the inequality of earnings and income levels. In an extended version of the Roy-model we consider migration costs, which tend to grow less than proportional with the income level. As a consequence, migrants can be favourably self-selected although the inequality of earnings is larger in the destination relative to the sending country. Based on a novel panel data set, covering migration from 143 sending countries all over the world into the 6 main receiving countries in the OECD from 1975 to 2000, we examine the factors which drive the selection bias of the migrant population empirically. The descriptive statistics indicate that migrants tend to be positively (self-)selected although the inequality in earnings is larger in the destination relative to the sending countries. Our estimation results suggest that both, a higher inequality in the distribution of earnings in the receiving and the sending country increases the skill level of the migrant population relative to that of the population in the sending countries. Moreover, the positive selection bias decreases with the income level of the sending country at a given income differential. Finally, migration barriers and distance affect the selection bias positively." (Author's abstract, IAB-Doku) ((en))internationale Wanderung, Wanderungsmotivation, regionale Mobilität, Mobilitätsbereitschaft - Determinanten, ökonomische Faktoren, Einkommensverteilung, Ungleichheit, Migranten, Arbeitsmigration, Qualifikationsniveau, Qualifikationsstruktur, Herkunftsland, Einwanderungsland, Humankapital, Migrationstheorie, Mobilitätsbarriere, Welt, OECD, Australien, Kanada, Frankreich, Bundesrepublik Deutschland, USA, Großbritannien

Estimating and forecasting European migration : methods, problems and results

"The specification of macro migration models and, hence, forecasts of migration potentials differ largely in the literature. Two main differences characterise macro migration models: first, whether migration flows or stocks are used as the dependent variable, and, second, whether the heterogeneity in the migration behaviour across countries is considered. This paper addresses both issues empirically using German migration data from 18 European source countries in the period 1967-2001. It finds first that panel unit-root and cointegration tests reject the hypothesis that the variables of the flow model form a cointegrated set, while the hypothesis of cointegration is not rejected for the stock model. The second finding is that standard fixed effects estimators dominate the forecasting performance of both pooled OLS and heterogeneous estimators. Applying the preferred fixed effects estimator, the migration potential from the Central and Eastern European accession countries is estimated at 2.3-2.5 million persons for Germany, which implies a migration potential of 3.8-3.9 million persons for the EU-15. Finally, our estimates indicate that the migration potential in the EU-15 is already exhausted and that the migration potential from Turkey is relatively small." (Author's abstract, IAB-Doku) ((en))Einwanderung, internationale Wanderung - Prognose, Prognoseverfahren, Prognosemodell, Prognosegenauigkeit, Migrationsforschung, Wanderungspotenzial, Schätzung - Methode, Arbeitskräftemobilität, regionale Mobilität, Europäische Union, Bundesrepublik Deutschland

Migration, Co-ordination Failures and EU Enlargement: Paper Presented at the 41st Economic Policy Panel in Luxembourg, 15/16 April 2005

European migration policies are characterised by a fundamental paradox: While the barriers for the free mobility of labour have been largely removed within the EU, the regulation of immigration from third countries remains in the domain of national policies of the individual Member States. During the last ten years, these policies have become more and more restrictive, although the public opinion has not become more hostile on migrants. In this paper we analyse whether increasing migration restrictions can be traced back to co-ordination failures. Simulations on basis of a general equilibrium model suggest that the economic benefits from international migration are, at a GDP gain of 0.2-0.3% at a migration of 1% of the labour force, high. However, assuming (partially) rigid wages and persisting unemployment in both the sending the receiving countries, natives in the receiving countries can lose from migration. Moreover, our results show that even under pessimistic assumptions on the unemployment rates of migrants the joint GDP of the sending and receiving countries tends to increase with unemployment benefits. However, the losses of the receiving country increase with the replacement rate. While the principles of the free movement and equal treatment enable the Community to realise the economic gains from intra-EU migration, co-ordination failures both between the receiving and the sending countries and among the receiving countries hinder international migration between the EU and its neighbouring regions. The latter is proved at the example of the Eastern Enlargement episode, where national decision-making has led to a 'race-to-the-top' with regard to transitional restrictions. While a co-ordination of migration policies between receiving and sending countries is hampered by conflicting interests, a co-ordination among receiving countries at the EU-level can reduce migration restrictions and improve welfare in Europe.

Extending the case for a beneficial brain drain

The recent literature about the so called brain drain assumes that destination countries are characterized not only by higher wages than the source country, but also by a higher or at least not lower relative return to skill. As this assumption has a doubtful empirical validity, we assess whether the main prediction of this literature, namely the possibility of a beneficial brain gain, still holds under the reverse assumption. We show that there is still a case for a beneficial brain drain. Immigration policies that are biased against unskilled workers are not necessary for a beneficial brain drain to occur once one considers that agents face heterogeneous migration costs.migration; brain drain; skill premium; heterogeneous agents; selective immigration policies

Selective Immigration Policies, Migrants' Education and Welfare at Origin

Destination countries are progressively shifting towards selective immigration policies. These can effectively increase migrants' average education even if one allows for endogenous schooling decisions and education policies at origin. Still, more selective immigration policies reduce social welfare at origin.international migration, selective immigration policies, education policies, social welfare

Short-Time Work Benefits Revisited: Some Lessons from the Great Recession

The Great Recession triggered a resurgence of short-time work (STW) throughout the OECD. Several countries introduced from scratch STW or significantly expanded the scope of the programmes already in place. In some countries like Italy, Japan and Germany between 2.5 and 5 per cent of the workforce participated in short-time work schemes at the trough of the recession. In this paper we analyse the rationale for short time work benefits and their effects on labour adjustment from both a cross-country and a time-series perspective. We find that STW actually contributed to reduce job losses during the Great Recession. However, the number of jobs saved, according to our macroeconomic estimates, is smaller than the full-time equivalents jobs involved by these programmes, pointing in some cases to sizeable deadweight costs. Other institutions, like plant-level bargaining over hours, wages and employment levels may be more effective than STW in encouraging adjustment along the intensive margins in presence of temporary shocks. Our results also suggest that STW cannot be readily extended to countries having much different institutional configurations as the demand for STW is very much affected by other institutions such as employment protection legislation and the degree of centralization of collective bargaining. The micro evidence from firm-level data in Germany is more encouraging as to the effectiveness of STW, pointing to rather moderate deadweight losses. We interpret this result as due to specific design features of the German STW that could make it more effective in addressing the moral hazard problems related to reliance on subsidised hour reductions. The German Kurzarbeit scheme is indeed discouraging 100 per cent hours reductions and is experience-rated.intensive margin, short-time