The New Economics of Migration
This is a theory that is more applicable to LDCs than to advanced economies.
Basic proposition: Migration decisions are not made by isolated individuals, but
rather are made by larger groups of related people, most often families and
households. The individuals in the groups act collectively to
1. maximize income,
2. minimize risks, and
3. loosen constraints associated with market failure.
Maximize income
Wage differentials may not be enough to encourage migration.
Relative income as opposed to absolute income may be important in
encouraging migration.
Falling wage/income differentials may not discourage migration.
Minimize risks
Placing family or community members in foreign labor markets may reduce
the risks associated with local production if economic conditions in the
foreign markets are not correlated with those in local markets.
Remittances are critical here because they provide a buffer between poor
local outcomes and family/community well-being.
In years when local conditions are good, the remittances may be used for
many purposes, such as purchasing more land, machinery, fertilizers, herbicides,
insecticides, and better seeds.
(In developed countries, private insurance markets and government programs
mitigate risks, but these frequently are unavailable in less developed
countries.)
Loosen constraints associated with market failure
Related to the points noted above, in LDCs well-functioning insurance, credit,
and labor markets are often nonexistent, so remittances play a major role
loosening production constraints.
Summary
The new economics of migration places migration within a broader
community context.
It focuses on the household/family as the relevant decision-making unit rather
than the individual.
It ties migrant remittance behavior and remittance use with the migration
decision itself.
Some hypotheses that result from the new economics of migration:
1. Someone who has migrated internationally once is more likely to do so
again.
2. International migration should be more likely for someone who is related
to an earlier international migrant. Persons in households with an
international migrant are more likely to migrate internationally. Sons
are more likely to migrate if their fathers migrated earlier.
3. International migration requires that more barriers be overcome (e.g.,
language, religion, customs, papers/documents/visas), so networks
are more important in international migration.
4. International migration is more likely from communities that have had
many international migrants in the past.
5. Migrants from any given origin community are likely to initially locate in
destination communities where their relatives and friends have
located in the past.
6. Cumulative migration is more likely when the motivation to migrate comes
from families/communities.
Cumulative migration
What factors underlie cumulative migration?
1. Distribution of income. As a household’s sense of relative deprivation
increases, the motive to migrate also may increase. The first
migrants from a community may be in the middle to upper income
ranges. When those with lower incomes see how well the migrant
families do, they wish to migrate themselves. Note here that the key
is the household’s relative position in the communities income
distribution and not its absolute position.
2. Distribution of land. A spending target for migrants may be land. Land is
frequently purchased for prestige value or as a source of retirement
income. Since the migrants are abroad, they often leave their newly
acquired land fallow. When they do this, the demand for farm labor
declines. As a consequence, the farm laborers migrate out.
3. Organization of agrarian production. When migrant households own the
land they farm, they are more likely to use capital-intensive farming
techniques, such as machinery, irrigation, fertilizers, herbicides, and
better seeds. Such practices also could displace farm laborers, and
make them more likely to migrate out.
4. Culture of migration. Those who migrate once are more likely to migrate
again. Migrant values may become part of the community’s values.
Migration may become part of a “right of passage,” especially for
young men and especially if their fathers and other relatives have
migrated in the past.
● The cost of migration falls as more and more people who share a
common language, culture, and religion concentrate at a given
destination.
● “Migration capital” builds as more and more people concentrate in
the destination. “Migrant capital” refers to contacts in the
destination, as well as just knowing how to get things done.
● Past migrants provide miniature social benefits to new migrants.Past
migrants may provide food and shelter to the newcomers until they
can find a job. Past migrants also may inform the newcomers about
various social programs that may be available to them.
5. Distribution of human capital. If the most talented and best educated
depart, those left behind may be worse off as labor demand and
labor income fall. As able-bodied men leave the community, women
and children are left in many cases to fend for themselves. More outmigration may then occur as even younger men and women depart.
6. Social labeling. Certain jobs in the destination may become labeled as
“migrant jobs.” Natives may be reluctant to fill such jobs, which shifts
the demand for such jobs to immigrants.