Riassunto in inglese materia "Economics & Migration", Sintesi del corso di Economia

Scarica Riassunto in inglese materia "Economics & Migration" e più Sintesi del corso in PDF di Economia solo su Docsity! Teaching notes "Economics and Migration" Professor Samir Abdelhafidh Summary The main objectives of the course.................................................................................................................4 PART 1: Levels and trends in international migration and its main characteristics (Data sources: UN and statista).............................................................................................................................................................6 Levels and Trends..........................................................................................................................................6 Demographic characteristics of international migration..............................................................................8 The case of Italy..........................................................................................................................................10 PART 2: Why do people move?.......................................................................................................................14 The theory...................................................................................................................................................14 The evidence...............................................................................................................................................16 EMPIRICAL EVIDENCE ON THE DETERMINANTS OF MIGRATION (I): the case of a sample of countries. 18 EMPIRICAL EVIDENCE ON THE DETERMINANTS OF MIGRATION (II): the case of Italy............................20 PART 3: Economic Consequences of immigration in the host countries..........................................................23 Public Perceptions of natives on the economic effects of immigration in the country of destination..........23 Immigration and the labor market: the theory and some empirical evidence............................................24 The theory...................................................................................................................................................24 The size of the immigration surplus for the USA (Borjas, 1995)..............................................................28 A The initial situation (pre-immigration) – Domestic Labor Market in the host country........................29 B How big is the immigration surplus?....................................................................................................31 C What the redistribution effects of immigration are? How does the immigration surplus vary with the elasticity of factor price for Labor? Quali sono gli effetti di redistribuzione dell'immigrazione? Come varia il surplus di immigrazione con l'elasticità del prezzo dei fattori per il Lavoro?...............................34 (I) EXTERNAL EFFECTS AND THE IMMIGRATION SURPLUS – SOME EXTENSIONS OF THE BASIC MODEL....36 (II) What if immigrants bring capital with them? The effects of capital adjustment...................................38 (III) What if we suppose an elastic supply curve?........................................................................................39 (IV) Immigrant Skills and the Immigration Surplus......................................................................................40 The evidence...............................................................................................................................................41 ESTIMATING PRODUCTION FUNCTIONS.....................................................................................................41 The case of the USA................................................................................................................................42 The case of Italy......................................................................................................................................42 THE SPATIAL CORRELATION APPROACH.....................................................................................................43 The case of the USA: Card D (1990)........................................................................................................43 The case of France..................................................................................................................................44 SIMULATION BASED APPROACHES.............................................................................................................45 The case of USA......................................................................................................................................46 THE SKILL CELL CORRELATION APPROACH..................................................................................................46 The case of USA......................................................................................................................................47 The case of Canada.................................................................................................................................47 The case of the United Kingdom.............................................................................................................47 The case of Spain....................................................................................................................................48 Some other issues on the economic impacts of immigration on the host countries....................................48 ECONOMIC GROWTH..............................................................................................................................48 INFLATION...............................................................................................................................................49 HOUSING................................................................................................................................................49 FISCAL EFFECT.........................................................................................................................................50 PART 4: Economic Consequences of immigration in the sending Countries...................................................52 REMITTANCES.............................................................................................................................................52 What are the advantages of remittances?..............................................................................................53 What are the determinants of remittances?..............................................................................................53 ALTRUISTIC MOTIVES..............................................................................................................................53 EXCHANGE MOTIVES..............................................................................................................................53 INSURANCE AND MORAL HAZARD MOTIVES..........................................................................................54 THE INVESTMENT MOTIVE: FAMILY LOAN ARRANGEMENTS(prestiti)....................................................54 INHERITANCE MOTIVE............................................................................................................................54 Empirical evidence on the determinants of Remittances...........................................................................54 Economic Impact of Remittances................................................................................................................55 BRAIN DRAIN..................................................................................................................................................57 Why should economists care about Brain Drain?.......................................................................................59 The determinants of Brain Drain................................................................................................................60 The potential POSITIVE effects of brain drain on the sending countries.....................................................61 REMITTANCES & BRAIN DRAIN...............................................................................................................61 INVESTMENT & BRAIN DRAIN.................................................................................................................61 EXPERTISE AND KNOWLEDGE FLOW.......................................................................................................61 CIRCULAR MIGRATION............................................................................................................................62 The potential NEGATIVE effect of brain drain on the sending countries....................................................62 Some other issues on the economic impact of migration in the sending countries.......................................63 EMIGRATION AND TRADE...........................................................................................................................64 The impact of emigration on political outcomes in sending countries.......................................................64 Revision..........................................................................................................................................................65 2) to explain why people, leave one country and go and live and work in another country; We show in this part that the main reasons for people to move from one country to another are related to wage differentials (differenze salariali) and to the characteristics of the labour markets (mercato del lavoro). 3) to highlight the theoretical economic consequences that immigration should has in the source and destination countries; The analysis of this impact will be based mainly on the effects on the labour market and on those related to public finance. Some other potential impacts (growth for example) will also be discussed. 4) to challenge some public attitudes on the economic impact of immigration; Two issues which received high attention in the literature will be addressed: Remittances and brain-drain. PART 1: Levels and trends in international migration and its main characteristics (Data sources: UN and statista) First, we need to define some concepts before continuing:  INTERNATIONAL MIGRANTS: the number of people living in a country or area other than (diversa) in which they were born. Where the number of foreign-born was not available, the estimate refers to the number of people living in a country other than that of their citizenship.  INTERNATIONAL MIGRANTS AS A SHARE OF TOTAL POPULATION : The number of international migrants divided by the total population. Data are expressed as %.  FEMALES AMONG ALL INTERNATIONAL MIGRANTS: The number of migrant women and girls divided by the total number of international migrants. Data are expressed as %.  INTERNATIONAL MIGRANTS BY AGE GROUP: the number of international migrants in a particular age group divided by the total number of international migrants. The data are shown for three age groups: under or equal to 19, 20-64 and 65 or over. Data are expressed as %.  MEDIAN AGE OF INTERNATIONAL MIGRANTS: The age that divides the migrant population in two parts of equal size, that is, there are as many persons with ages above (al di sopra) the median as there are with ages below (al di sotto) the median. Data are presented in years.  MIGRANTS ORIGINATING FROM THE SAME REGION: The number of international migrants born in a country of the same region where they reside divided by the total number of international migrants residing in the country with known origin. Data are expressed as percentages. Levels and Trends We can now present some trends and levels on international migrants, starting from a general presentation: We can immediately note that there is a huge increase in international migration: in 2019 the number of international migrants worldwide was nearly 273 million, up from 173 million in 2000. The higher increase is observed in the region of Northern Africa and Western Asia. (more than doubled). In 2019, the regional repartition of international migration is as follow:  More than half of all international migrants lived in Europe (82 million) or Northern America (59 million);  Northern Africa and Western Asia hosted the 3° largest number of international migrants (49 million), followed by  Sub- Saharan Africa (24 million), Central and Southern Asia (20 million), Eastern and South-Eastern Asia (18 million), Latin America and the Caribbean (12 million), and Oceania (9 million). In 2019, about 3,5% of the world population were international migrants, compared to 2.8% in 2000 . Except of the Central and Southern Asia, the same trend was observed in all the region of the World. However, the share of international migrants in total population varied considerably across regions:  Oceania 21.2%  Northern America 16%  Europe 11%  Northern Africa and Western Asia (9.4%) recorded the highest proportions of international migration in the total population. By contrast, international migrants represented 2.2% of the total population in sub-Saharan Africa, 1.8%, in Latin America and Caribbean (1%) and Southern Asia, and 0.8% in Eastern and South Eastern Asia. Countries with the largest numbers of international migrants Moreover, in 2019, 2/3 of all international migrants were living in just 20 countries (seven were in Europe, four in Northern Africa and Western Asia, three in Central and Southern Asia, two in Eastern and South- Eastern Asia, two in Northern America, and one in each of sub-Saharan Africa and Oceania).  The largest number of international migrants (51 million) resided in the USA, equal to about 19 % of the world’s total.  Germany and Saudi Arabia hosted the second and third largest numbers of migrants worldwide (around 13 million each),  followed by the Russian Federation (12 million), the United Kingdom and Northern Ireland (10 million), and the United Arab Emirates (9 million). In 2019, the number of international migrants below age 20 reached 38 million, or 13.9 % of the global migrant stock.  Sub-Saharan Africa hosted the highest proportion of young persons among all international migrants (27.3 %), followed by Latin America and the Caribbean, and Northern Africa and Western Asia (21.6 % each).  The share of those under age 20 among all migrants was smaller in Eastern and South-Eastern Asia (13.3 %), Central and Southern Asia (13.2 %), Oceania (11 %), Europe, and Northern America (8 for % each).  In 2019, 202 million international migrants, equivalent to 74.2 % of the global migrant stock, were between the ages of 20 and 64. In 2019, approximately 32 million international migrants, or 11.8 % of the global migrant stock, were aged 65 years or over.  Oceania recorded the highest share of older persons among all international migrants in 2019 (18.8 %), followed by Northern America, Central and Southern Asia, and Europe (16.2 %, 15.9 %, and 14.4 %, respectively) The case of Italy Italy observed a high increase in international migrants, both in level as well as a share of total population: In 2019, the number of immigrants and their share of Italian population are more than 4 times of what was observed in 1990. The faster increase was observed in the period from 2000 to 2010. On average, Females represent about 54% of international immigrants. This share is relatively stable. The median age increased from nearly 31 years in 1990 to slightly more than 40 years in 2019, suggesting immigrants being older in Italy. Since 2005, the share of European migrants dominates that of other geographic origins. The explanation relies on the adhesion of many Eastern European countries to the EU by many East European. What is the Italian region which hosted the highest share of international immigrants? In April 2020, Lombardy was the region in Italy hosting the largest share of immigrants (14 %), followed by Emilia Romagna, Lazio, and Piedmont. These regions are also the Italian regions with the highest number of inhabitants:  for instance, in 2019, Lombardy counted ten million inhabitants (approximately one sixth of the total Italian population) and was housing 17 thousand immigrants.  From where do the highest proportion of international immigrants come from? As of January 2019, Romania was the country from which the majority of the foreign population in Italy came from. Albania and Morocco followed with more than 441 thousand and almost 423 thousand people, respectively. The top ten is composed by 4 European countries, 4 Asian countries, and two North African countries. What is the percentage of foreigners with a degree or diploma? The share of foreigners with a university degree peaked (ha raggiunto) in 2018 at 10.99 percent. The distribution of graduated foreigners reached the lowest level in the whole period in 2011 (9.39 percent of the foreign population living in Italy). The distribution of foreigners with diploma reached its lowest level of the period in 2018 (34.68 percent of the foreign population living in Italy). On the international level, Italy has the lowest percentage of highly educated immigrants (14%) despite the 65% of Canada. What about unemployment? Moreover, in the field of “unemployment”, the unemployment rate (tasso) of foreigners in Italy peaked in 2013 at 28%. As for 2018 (a partire dal 2018), more than 25% of foreign population were unemployed. degli utili futuri], that we note “r”, is the same in the two countries and we suppose that it is a constant. Es. Suppose that we have an initial revenue of Y0 = 2000 euros and that the annual interest rate is 2%. If Y0 is placed for one year, in the term of the placement (nel periodo di collocamento), after one year, we will get: Y1 = 2000 + (2000*0,02) =2000*(1+0,02) = 2040 euros. This amount is the future value, after one year, of 2000 euros. It is equivalent to say that the present value of 2040 is 2000. Instead, if Y0 is placed for two years, in the term of the placement, after two years, we will get: Y2 = 2000*(1+0,02)2 = 2080.8 euros. This amount is the future value, after two years, of 2000 euros. A8 We suppose that the wages and costs are expressed in the same currency unit in the two countries. So, the migration decision is the result of the comparison between the present value of both countries/alternatives. To find the “Net Gain” (utile netto) we have to we subtract from the present value of foreign country wages the present value of home country wages and the cost of migration (if any): NG = F – H – M H=∑ k=N T Whk (1+r ) k−N F=∑ k=N T Wfk (1+r ) k −N Note: worker moves if the Net Gain is positive. Illustration: Suppose for example that an Italian worker (suppose that he is 27 years old) is thinking about emigration to Germany for a period of three years (hence, the values of k will be 27, 28, and 29 and the variable T will be replaced by 29, the age when the Italian worker planned to leave Germany). Available information are as follow:  The discount rate is r = 3%, the same in the countries  The migration costs are evaluated at 5000 Euros. Italy Germany YEAR YEAR 1 YEAR 2 YEAR 3 YEAR 1 YEAR 2 YEAR 3 WAGE 20000 21000 22050 22000 22000 24000 1. Is it in the interest of the worker to move from Italy to Germany? Proof your answer; 2. Is he going to make the same decision as in (1.) if the migration costs decrease to 2000 euros? Proof your answer; 3. Is he going to make the same decision as in (1.) if the annual anticipated growth rate of the wages is of 2% and of 1% respectively in Germany and in Italy? Proof your answer. Italy Germany Year 1 20000.00 22000.00 Year 2 20388.35 21359.22 Year 3 20784.24 22622.30 The Net Gain is negative, so it is not in the interest of the Italian worker to move from Italy to Germany (1). If the migration cost decrease to 20000 euros, the net gain will be: = (F – H – M) = 65981.52 - 61172.59 - 2000 = 2808.93 Euros > 0 greater than zero, so it will be in the interest of the migrant to move from Italy to Germany. The worker migrate decision will be more probable if the migration costs decrease, all other things being equal (2.). Is he going to make the same decision as in (1.) if the annual anticipated growth rate of the wages (tasso di crescita annuo dei salari) is of 2% and of 1% respectively in Germany and in Italy? Italy Germany Year 1 20000.00 22000.00 Year 2 19611.65 21786.41 Year 3 19230.84 21574.89 (3.) The net gain is positive, so it is in the interest of the worker to move from Italy to Germany. The implication of this results is that the worker migrate decision will be more probable if the growth rate of wages is higher in the host country than in the source country. . Why do people move? The evidence Empirical literature focusing on the determinants of International migration employ the so called “ECONOMETRIC MODELS” using, in addiction of wages and costs variables, other potential determinants which are proxies (valore indicative) for example of political, social, or demographic. Indeed, international migration is often empirically explained by a basic push-and-pull model:  “Push factors” are factors which are favourable for the decision to move outside of the home country;  “Pull factors”, are factors which are favourable for the decision to move to the destination country. What is an “econometric model”? (the case of the multiple linear regression model) An econometric model is a tool of an empirical investigation searching for estimates of unknown parameters. Usually, it attempts (si tenta) to measure the validity of a theory against the behaviour of observable data. The multiple linear regression model is used to study the relationship between a dependent variable and one or more independent variables. The generic form of the linear regression model is: Y = f (X1, X2, . . ., XK) + ε = β1 X1+ β2X2 + ··· +βK XK + ε in which:  Y is the dependent or explained variable. It is also called the regressand;  X1, . . ., XK are the independent or explanatory variables. They are also called the regressors or covariates.;  ε is a random disturbance. The disturbance arises for several reasons: • Difficulties to capture every influence on an economic variable in a model. • Errors of measurement: It is easy to theorize about the relationships among precisely defined variables; it is quite another to obtain accurate measures of these variables. • There may be no observable counterpart to the theoretical variable. This model can be used for cross section data, for time series data, or for panel data: 1) Cross section data: it is a type of data collected by observing many subjects (such as individuals, firms, countries, or regions) at the one point or period of time. Yi = f (X1i, X2i, . . . , XKi ) + εi . The subscript i refers to the subject observed at the one point or period of time. Example: i: Italy, France, Germany… 2) Time series data: A time series is a series of data points indexed in time order (serie di dati indicizzati in ordine di tempo). Most commonly, a time series is a sequence taken at successive equally spaced points in time (the year for example) β0 < 0, β1 > 0, β2 < 0, β3 > 0, β4 > 0, β5 > 0, β6 > 0, β7 < 0, and β8 > 0. What are the main results?  β0 < 0 was observed, but it was not statistically significant. The author explains that it is linked on a possible “poverty trap” in the home country. In particular, even if the low home wage increase, it will not significantly affect the decision of the worker to emigrate.  The hypothesis of a β1 > 0 was confirmed. Pull factors (or attractiveness factors) - that is, improvements in the mean income opportunities (opportunità di reddito medio) in the destination country-, significantly increase the size of emigration rates.  The hypothesis of a β2 < 0 was confirmed. Among the variables affecting the costs of migration, distance between destination and origin country appears to be of considerable importance. Its effect is negative, significant and steady across specifications.  The coefficients β3, β4, β5 were not robust and not significant. The author did not find evidence that cultural variables (a common language, a common border, and a colonial relationship) play a significant role.  The hypothesis of a β6 > 0 was confirmed. The sign of Demographics - in particular, the share of the origin country’s population who is young - shapes bilateral flows as predicted by the theory (modella i flussi bilaterali come previsto dalla teoria);  The hypothesis of a β7 < 0 was confirmed. When immigration laws become less restrictive in a host country, the effect of push factors turns more negative.  The hypothesis of a β8 > 0 was confirmed. When immigration laws become less restrictive in a host country, the effect of pull factors turns more positive. N.B: According to the theory, if the migration policy of a destination country becomes less restrictive, the effect of pull (push) factors should turn more positive (negative). [Secondo la teoria, se la politica migratoria di un paese di destinazione diventa meno restrittiva, l'effetto dei fattori di attrazione (spinta) dovrebbe diventare più positivo (negativo).] EMPIRICAL EVIDENCE ON THE DETERMINANTS OF MIGRATION (II): the case of Italy In this section, we rely on the paper of Ricardo Faini and Alessandra Venturini (1994): “Italian emigration in the pre-war period”, in “Migration and the International Labor Market, 1850-1939”, edited by T. J. Hatton, Jeffrey G. Williamson, Chapter 4, PP. 72-90. Routledge, London. From more than a century, and since the country’s unification in 1861, Italians have migrated abroad trying to escape poverty and deprivation at home. From 1901 to 1913, Faini and Venturini noted that more than 8 Million people migrated from Italy. They tried to econometrically explain emigration from Italy to France, Germany, and the USA from 1876 to 1913. For this objective, they estimate 4 equations on the basis of the following model: Log (Mi/Pop)t = d0Dum0 + d1Dum1 + d2Dum2 + a1 log(Yi/Y)t + a2EGit + a3 EGt + a4 log(Y)t + a5 (Trend) + a6Gpopt-15 + et  Log (Mi/Pop) t: is the log of the ratio of migration M from Italy to country i at year t (Mi is the total Italian immigrants in country i such as France or Germany; Pop t is the Italian population at year t). This is the dependent variable. Let us see the explanatory variables:  a1 log(Yi/Y)t is the log of the ratio of the country of destination’s per-capita income (Yi) to the Italian’s per-capita income (Y) in year t. (reddito pro-capite) This variable proxy the wage differential (differenziale salariale) between Italy and each of the three corresponding countries. The bigger this ratio is, the more the incitation for Italians to emigrate will be;  a2EGit is the employment growth in the receiving country i. (crescita dell’occupazione). A higher growth of employment in the receiving country should be attractive for more immigrants.  a3 EGt is the employment growth rate in Italy at period t: a higher employment growth rate in Italy will offer more job opportunities in its domestic labor market. Hence, the effect of this variable on Italian emigration should be negative.  a4 log(Y)t is the per-capita income in Italy. (reddito pro-capite in Italia). The authors suppose that this variable should capture most of the factors which are, through the processes of economic growth, likely to increase emigration (sono suscettibili di aumentare l’emigrazione). Examples of these factors include urbanization, the falling share of agricultural employment, the lessening of financial and educational constraints (vincoli). They expected a positive effect.  a5 (Trend) a temporal trend which is introduced by the authors to proxy the fall of transportation costs. Falling transport costs should lower the monetary costs of moving abroad. Hence the coefficient of this variable should be positive.  a6 Gpopt-15 it is well known that migrants are typically young adults. Indeed, older people are less prone to move abroad. To test this hypothesis, the authors introduced the population growth rate 15 years later: a higher growth rate at time t-15 should imply a bigger share of young adults at time t and, consequently, an aggregate greater propensity to migrate.  d0Dum0 + d1Dum1 + d2Dum2 are dummy (ausiliari) variables for the USA, France, and Germany, respectively.  et is a residual term. Result 1: EQUATION 1: in this equation, the authors included only the basic determinants of immigration, that is the job market variables: Log (Mi/Pop)t = 0,71 Dum0 + 0,12 Dum1 + 0,36 Dum2 + 0,6 log(Yi/Y)t + 5,89 EGit - 0,95 EGt We can also report the respective t-student figures (cifre), which are indicators of statistical significance. Log (Mi/Pop)t = (2.39) + (2.64) + (1.96) + (2.32) + (3.37) – (2.43) All coefficients are statistically different from zero and bear the right signs. (portano i segni giusti): both an increase in the income and faster employment growth rate in the destination countries will boost emigration. (sia un aumento del reddito che una crescita più rapida dell’occupazione nel paese di destinazione stimoleranno l’emigrazione). In addiction, domestic employment growth leads to lower migration. Result 2: EQUATION 2: in this equation, the authors add the level of domestic per capita income (reddito pro-capite): Log (Mi/Pop)t = 2.84 Dum0 + 2.28 Dum1 + 2.49 Dum2 + 0.56 log(Yi/Y)t + 5.7 EGit - 0.91 EGt + 0.35 log(Y)t Log (Mi/Pop)t = (2.44) + (2.00) + (2.19) + (2.24) + (3.28) – (2.42) + (1.91) The coefficients are as expected positive and significantly different from zero, indicating therefore that rising income can account for greater propensity to migrate. (indicando quindi che l’aumento del reddito in Italia può rappresentare una maggiore propensione alla migrazione). Result 3: EQUATION 3: the authors tried to control the effects of better transportation and communication facilities, by adding a time trend: Log (Mi/Pop)t = -3.01Dum0 + 2.48 Dum1 + 2.65 Dum2 + 0.53 log(Yi/Y)t + 5.74 EGit – 0.91 EGt + 0.38 log(Y)t + 0.003 (Trend) Log (Mi/Pop)t = (0.24) + (2.05) + (2.23) + (2.03) + (3.31) – (2.43) + (1.95) + (0.47) The time trend has the right sign, but it is not statistically different from zero. Furthermore, all the other coefficients do not differ much from the results in the previous regression. Result 4: EQUATION 4: the authors investigated whether demographic factors play any role (besides their impact on the level of population) in affecting the pattern (modello) of migrations. They introduce the population growth lagged 15 years. (crescita della popolazione in ritardo di 15 anni). Log (Mi/Pop)t = -2.81 Dum0 + 2.5 Dum1 + 2.67 Dum2 + 0.53 log(Yi/Y)t + 5.72EGit - 0.92 EGt + 0.39 log(Y)t + 0.003 (Trend) + 0.0001 Gpopt-15 Log (Mi/Pop)t = (0.22) + (2.07) + (2.25) + (2.03) + (3.3) – (2.46) + (1.97) + (0.45) + (0.41) Results show that population growth does not seem to add much to the estimates. Its coefficient is not statistically different from zero, while everything else stays basically unchanged. We can conclude that similar conclusions were reached by T. Straubhaar (1968, 1988) in his empirical analysis of the Italian emigration flows to Germany and France in the more recent period 1963-1984. Income differential, labor market variables and lagged dependent variables are significant with the expected signs, while the income growth in the origin country has a “pulling” effect (positive and significant coefficient) in the Italian-German flow and is not significant but with the expected negative sign in the Italian French one. (Il differenziale di reddito, le variabili del mercato del lavoro e le variabili dipendenti ritardate sono significative con i segni attesi, mentre la crescita del reddito nel paese di origine ha un effetto "trainante" (coefficiente positivo e significativo) nel flusso italo-tedesco, e non è significativo ma con l'atteso segno negativo in quello italo-francese). The results comfort the affirmation of Also Daniela Del Boca & Alessandra Venturini (2003) that: In generale, possiamo dire che quando il prezzo di un bene aumenta, la quantità domandata diminuisce. In molti casi, vorremmo saperne di più: di quanto diminuirà la domanda? E quindi, conoscere la sensibilità della domanda ad un aumento del prezzo. La curva D’ è più elastica della curva D. Quindi, la variazione percentuale della quantità domanda in seguito ad una variazione percentuale del prezzo sarà maggiore sulla curva D’ che sulla curva. D. 1) Consideriamo che inizialmente la curva di offerta di S1, e che intersechi la curva di domanda in A, a un prezzo p1e una quantità pari a Q1. 2) Ora la curva di offerta si sposta in S2. Cosa succede al prezzo e alla quantità di equilibrio? a) Nel caso della curva meno elastica, D, si verificano un aumento relativamente elevato del prezzo (p 2) e un calo modesto della quantità domandata ( Q2 ): il nuovo equilibrio è B. (benzina) b) Nel caso della curva più elastica D’, si verifica solo un moderato incremento del prezzo ( p3 ) ma un calo drastico della domanda ( Q3 ): l’equilibrio si sposta in C. (cavolfiori) Da quanto visto quindi, se disegniamo due curve di domanda sullo stesso grafico, la curva più piatta risulta più elastica rispetto a quella più ripida. Per avere una misura “precisa”, è necessario confrontare le due ampiezze. Poiché prezzo e quantità sono misurati in unità diverse, l’unico modo sensato per effettuare tale confronto è usare variazioni percentuali %, così da ottenere l’elasticità della domanda al suo prezzo ( ε ) Le curve di domanda di solito sono inclinate negativamente. Questo significa che le variazioni del prezzo e della quantità vanno in direzioni opposte. Un aumento del prezzo (segno positivo), causerà un calo della quantità domandata (segno negativo). Quindi, nel calcolo di ε, dividiamo sempre un valore positivo per uno negativo e viceversa, ottenendo sempre un valore negativo. Se consideriamo il valore assoluto dell’elasticità, ovvero ignorando il segno negativo, questo valore ci dirà se la domanda è elastica o anelastica:  Elastica: | ε | > 1 : una variazione % del prezzo causa una variazione % più che proporzionale della quantità domandata.  Anelastica : 0 ≤ | ε | < 1 : una variazione % del prezzo causa una variazione % meno che proporzionale della quantità domandata.  Elasticità unitaria: | ε | = 1 : prezzo e quantità domandata variano nella stessa proporzione Elasticità incrociata della domanda: è una misura della sensibilità della domanda di un bene al prezzo di un altro bene ( sostituto o complemento). Essa ci permette di prevedere la variazione nella domanda del primo bene all’aumentare del prezzo del secondo bene. (ad esempio, se Coca-Cola fosse a conoscenza dell’elasticità incrociata della domanda della Coca-cola al prezzo della Pepsi, potrebbe prevedere l’effetto sulle sue vendite di variazioni del prezzo di quest’ultima). Essa è data dal rapporto tra la variazione % della domanda del bene 1 e la variazione % del prezzo del bene 2. La determinante principale è il grado di sostituibilità o di complementarità tra i due beni. Quanto maggiore è tale grado, tanto maggiore sarà l’effetto sulla domanda del primo bene di una variazione del prezzo del bene sostituto o complemento, quindi tanto maggiore sarà l’elasticità incrociata, sia essa positiva o negativa. Reminder!!! The Price elasticity of demand (supply) measures how responsive the quantity demanded ∆Q (supplied) is to a price variation. It is measured as the percentage change of demand ∆Q (supply) following a percentage change of the price ∆P. e = % ∆Q / % ∆P = [∆Q / Q]/ ∆P / P] = [ (Q2 - Q1 / Q1 )*100] / [(P2 - P1 ) / P1 )*100 ] = [(Q2 - Q1 ) / (P2 - P1 )]* (P/Q) = [∆Q / ∆P] (P/Q) Where “Q” is the quantity and “P” is the price. Note: gigger is the price elasticity of demand, flatter the curve of demand is. (maggiore è l'elasticità dei prezzi della domanda, più piatta è la curva della domanda). So:  if we have a completely inelastic demand, e= 0 and the demand (supply) curve is vertical;  if we have a completely elastic demand, e= ∞ and the demand (supply) curve is horizontal. e >1: elastic; e <1: inelastic; e=1: unit elastic We can also introduce another type of elasticity, called "Cross-price Elasticity of Demand" that measures the responsiveness of the demand of one good to a change in the price of another good ( substitute or supplement). For two goods, X and Y for which prices are Px and Py respectively, the cross-price elasticity of the good X is: e = %∆Qx / %∆Py = [∆Qx /Qx ] / ∆Py /Py ] Cross elasticity > 0: the two goods are substitutes; Cross elasticity < 0: the two good are complements. Question: Can you identify the more elastic curve? The answer: L1D is more elastic than L2D: the same wage variation (∆W) leads to a higher variation in the quantity (∆Q) of the labor demand with L1D than with L2D. APPLICATION OF THE CONCEPT OF ELASTICITY TO LABOR MARKET: To understand the quantitative effects of immigration on the labor market, we want to know when to expect big or small changes in employment or unemployment- which depends on the wage elasticity (elasticità salariale) of labor demand and the labor supply. The wage is simply the price in the labor market:  If the demand curve is relatively elastic, then a change in the wage will lead to a relatively large change in employment.  If the demand curve is relatively inelastic, then a change in the wage will lead to a relatively small change in employment. This is intuitive because the elasticity of labor demand tells us how sensitive firms’ hiring decisions are to changes in the wage (quanto le decisioni di assunzione delle ditte sono sensibili ai cambiamenti di salario).  In particular, an elastic labor demand means that firms will respond to a small positive change in the wage by laying off a large number of workers. (una domanda elastica di lavoro significa che le aziende risponderanno ad un piccolo cambiamento positivo nel salario licenziando un grande numero di lavoratori). Note: The elasticity of labor supply is not relevant if we are concerned only on employment effects. Labor factor earning = N1×W = the area of the rectangle B₁ = the area of the rectangle B 3. What is the area of capital factor earning (profit)? A  FW1E1 The triangle A represents the accounting profits received by firms from the sale of goods after the cost of labor has been paid. (rappresenta il profitto delle aziende ricevuto dalla vendita dei beni dopo che il costo del lavoro è stato pagato). The next situation (post-immigration) - Domestic Labor Market in the host country with an influx of immigrants Assumptions: 1. Now consider what happens when there is an increase in the population due to an influx of new immigrants, suppose of a total of M. These new immigrants increase the total labor supply from N1 to N2 = N1+M, and the labor supply curve shifts from 𝐿1𝑆 to 𝐿2𝑆 . 2. We assume also that immigrants and natives are perfect substitutes in production. 3. As depicted in the figure of the following slide, the supply curve shifts to 𝐿2𝑆 and the market wage falls to W2 . The new Equilibrium is set in E2 . 4. At the new equilibrium E2 , wages are W (W < W ), so the immediate effect of the influx of new₂ (W₂ < W₁), so the immediate effect of the influx of new ₂ (W₂ < W₁), so the immediate effect of the influx of new ₁). immigrants is to drive down the wage. Now firms pay wage income to workers (N×W ), corresponding to rectangle C, to the native₂ (W₂ < W₁), so the immediate effect of the influx of new population, and W ×M, corresponding to rectangle D, to immigrants.₂ (W₂ < W₁), so the immediate effect of the influx of new 1) What is the area of total income (after immigration)? Total income is now given by the area FE2N2O (= A+K+H+C+D); 2) What is the area of total income (before immigration)? It is given by the area FE1N1O = A + K + C; Definition: The immigration surplus represents the benefit that accrues to the native population from an inflow of new immigrants. FE2N20 – FE1N1O- E3E2N1N2 = A+K+H+C+D – (A + K + C) – D = H = E1E2E3 3) What is the area of immigrant’s wage? The figure shows that the total wage paid to immigrants is given by the area in the rectangle E3E2N1N2 (= D); 4) What is the area of Immigration surplus? The triangle E1E2E3 (= H) is the immigration surplus and measures the increase in national income that occurs as a result of immigration and that accrues to native. (misura l’aumento del reddito nazionale che si verifica a seguito di una migrazione che si accumula ai nativi). The immigration surplus (or the Net Migration surplus) = Total income after immigration – Total income before immigration – immigrant’s total wage = FE2N20 – FE1N1O- E3E2N1N2 = A+K+H+C+D – (A + K + C) – D = H = E1E2E3 To summarize, in this simple theoretical model of the labor market, the influx of immigrants initially drives down wages, but native incomes still rise in the aggregate due to the immigration surplus. So, why does the host country benefit? Because the market wage equals the productivity of the last immigrant hired. As a result, immigrants increase national income by more than what it costs to employ them. Put differently, all the immigrants hired except for the last one contributes more to the economy than they get paid. (tutti gli immigrati assunti tranne l’ultimo contribuiscono all’economia più di quanto vengono pagati). B How big is the immigration surplus? As we already known, the immigration surplus is equal to the area of the triangle H. Remind that to find the area of a triangle, it is necessary to multiply the height by the base, and then divide by 2, consequently, the immigration surplus is equal to: Area of a triangle = (Height. Base)(1/2) H = (1/2) (W1 – W2 ) M. = - (1/2) (W2 – W1 ) M Restated as a fraction of total output Y, the immigration surplus equals (Ridefinito come una frazione della produzione totale Y, l'eccedenza di immigrazione è uguale a): H / Y = - (1/2) (W2 – W1 ) (M / Y). H / Y = - (1/2) (M/N1 )^2 * (W1N1 /Y) ξ LL = - (1/2) m2 s ξLL Where: ξLL : is the elasticity of factor price for labor, that is, the percentage change in wages divided by the percentage change in labor between point E1 and point E2 , or more generally, the percentage change in the wage resulting from a 1 percent change in the size of the labor force. ξLL = (∆W/W) / (∆L/L). = la variazione percentuale del salario risultante da una variazione dell’1% nella dimensione della forza lavoro. W1N1 /Y= s: represents the share of income initially paid to natives. M / N1= m: is the size of the immigration surge (aumento dell’immigrazion) relative to the native workforce. Proof that H / Y = - (1/2) (W2 – W1 ) (M / Y). H / Y = - (1/2) (M/N1 )^2 * (W1N1 /Y) ξLL = - (1/2) m^2 s ξLL 1) H / Y = - (1/2) (W2 – W1 ) (M / Y). Knowing that (W1 – W2) = ∆W, we can write: H / Y = - (1/2) (∆W) (M / Y) 2) Knowing that ξLL = (∆W/W1 ) / (∆N/N1 ), we can deduce that: (∆W) = ξLL (∆N/N1 ) W1 3) Dividing ∆W by Y and replacing ∆N by M (because M= N2 – N1 = ∆N) lead to: ∆W/ Y = ξLL (∆N/N1 ) (W1 /Y) = ξLL (MW1 /N1Y) 4) When we replace in H/Y the ratio ∆W/ Y by its last expression, we get: H / Y = - (1/2) ξLL (MW1 /N1Y) (M) Borjas (1995) proofed that the change in native labor earning in percentage of the national income is also approximately given by: K / Y = (W1N1 / Y) ξLL (M / N) (1 – (M / N))= s ξ LL m (1-m) EFFECTS ON THE CAPITALISTS: The loss of native workers plus the immigration surplus accrues to capitalists. Expressed as a fraction of national income, the net change in the incomes of capitalists is approximately given by: Change in the Capitalists earning / Y = (K +H)/ Y = - s ξ LL m (1 – (1/2)m) Proof: The gains accruing to capitalists are calculated by adding the absolute value of the loss of native workers to the immigration surplus: Change in the Capitalists earning / Y = - s ξLL m(1-m) + (- (1/2)m2 s ξLL) = -s ξLL m ((1-m) + (1/2)m) = - s ξLL m (1 – (1/2)m Numeric illustration (Borjas 1995 for the USA): If the elasticity of factor price is – 0.3, native workers lose about 1.9 percent of GDP, or $133 billion in a $7 trillion economy; native capital gains about 2.0 percent of GDP, or $140 billion. The small immigration surplus of $7 billion thus disguises a sizable redistribution of wealth from workers to the users of immigrant labor. Borjas (1995) notes that: “the relatively small size – l’entità relativamente modesta - of the immigration surplus - particularly when compared to the very large wealth transfers caused by immigration- probably explains why the debate over immigration policy has usually focused on the potentially harmful – dannosi - labor market impacts rather than on the overall increase in native income. In other words, the debate stresses the distributional issues (the transfer of wealth away from workers) rather than the efficiency gains (the positive immigration surplus). If the social welfare function depends on both efficiency gains and the distributional impact of immigration, the slight benefits arising from the immigration surplus may well be outweighed by the substantial wealth redistribution that takes place, particularly since the redistribution goes from workers to owners of capital (or other users of immigrant services)” (I) EXTERNAL EFFECTS AND THE IMMIGRATION SURPLUS – SOME EXTENSIONS OF THE BASIC MODEL Immigration expands the size of the market. It can introduce many new interactions among workers and firms, so that both workers and firms might "pick up" knowledge (acquisire la conoscenza) without paying for it. As a result, even though the production technology at the firm level has constant returns to scale, the external effects resulting from immigration might lead to increasing returns on the aggregate. (gli effetti esterni derivanti dall'immigrazione potrebbero portare a rendimenti crescenti sull'aggregato). Note: In economics, the term “scale returns” indicate the relationship between the change in production inputs in a production unit and the change in output. They may be:  constants (constant returns to scale): if an increase (decrease) of the inputs follows a proportional increase (decrease) of the output;  increasing returns to scale : if an increase (decrease) of the inputs follows an increase (decrease) more than proportional of the output;  decreasing returns to scale : if an increase (decrease) of the inputs follows an increase (decrease) less than proportional of the output; Note: In the economy an externality is manifested when the activity of production or consumption of a subject influences, negatively or positively, the well-being of another subject, without that who has endured such consequences receives a compensation (in the case of negative impact) or pay a price (in case of positive impact) equal to the cost or benefit incurred/received. In economia un'esternalità si manifesta quando l'attività di produzione o di consumo di un soggetto influenza, negativamente o positivamente, il benessere di un altro soggetto, senza che chi ha subito tali conseguenze riceva una compensazione (nel caso di impatto negativo) o paghi un prezzo (nel caso di impatto positivo) pari al costo o al beneficio sopportato/ricevuto. As illustrated in Figure 3, the external effects of immigration can increase the size of the immigration surplus substantially: As the economy expands, the marginal product of labor curve shifts from L1D to L2D:  The change in national income accruing to natives is then given by the sum of the triangle E5E4E1 (G) and the area of the trapezoid ME5E1F (H) , which measures the impact of immigration on natives' total product.  Total income is now given by the area ME4N2O (H+G+F+D+B+A); Instead, the area of total income before immigration is the area FE1N1O (A+B).  The figure shows that the total wage bill paid to immigrants is given by the area in the rectangle E1E4N1N2 (D) , so that the increase in national income accruing to natives is given by the sum of the areas of the trapezoid ME5E1F and the triangle E1E4E5;  This sum is the immigration surplus and measures the increase in national income that occurs as a result of immigration and that accrues to natives. The immigration surplus (or the Net Migration surplus) Total income after immigration – Total income before immigration – immigrant’s total wage = ME4N20 – FE1N1O- E1E4N1N2 = E1E4E5 + ME5E1F = H + G B D F G H A i. What is the area of total income (before immigration)? This area is now given by the area FE1N1O = a+b+c+f+g; ii. What is the area of total income (after immigration)? FE3N30 = a+b+c+f+g iii. What is the area of total immigrant wage? E2E3N3N2 = f+e iv. What is the area of immigration surplus? (i-ii-iii) = a+b+c+d+e+f+g –(a+b+c+f+g) – (f+e) = d-f v. What is the change in the native’s worker wage? g – (b+c+f+g) = - (b+c+f) vi. What is the change in the native’s capital gain? (a+b+c+d)- a = b+c+d (IV) Immigrant Skills and the Immigration Surplus The basic model we started with ignores the skill differentials that exist both within and across the native and the immigrant’s population. Since immigration policy can encourage or prevent the admission of certain classes of workers, it is interest to investigate the relationship between the immigration surplus and the skill composition of the immigrant’s flow. In other words: Which type of immigrant flow (a skilled flow or an unskilled flow) generates the largest increase in national income for native workers? Note: the distinction between the two types of workers is sometimes made on the basis of what type of jobs they perform, but more often it is imputed on the basis of how many years of schooling or educational qualifications they have accumulated. The theoretical literature shows that: a) Natives benefit from immigration only if immigrants are different from natives; b) The magnitude (entità) of the immigration surplus depends on exactly how different immigrants are; c) As long as the immigration of skilled workers reduces the wage of skilled workers or the immigration of unskilled workers reduce the wage of unskilled workers, there is a positive immigration surplus; (finché l'immigrazione di lavoratori qualificati riduce il salario dei lavoratori qualificati o l'immigrazione di lavoratori non qualificati riduce il salario dei lavoratori non qualificati, vi è un surplus di immigrazione positive); d) Although there is a great deal of dispersion in the estimated elasticities, many studies suggest that the elasticity of factor price is greater (in absolute value) for skilled workers than for unskilled workers; The fact that the wages of skilled workers are more responsive to a shift in supply than the wage of unskilled workers introduces a new set of incentives that suggest the immigration surplus may be larger when the immigrant flow is composed of skilled workers. So, the author conclude that this result provides an economic rationale for admitting skilled foreign workers. Remember that H / Y = - (1/2) m2 s ξLL Suppose that:  (ξSM) = -1 for skilled migrants  (ξUM) = - 0.5 for unskilled migrants In absolute value, (ξSM) is higher than (ξUM) . Also suppose that:  “m” and “s” are the same for the two types of labor. The immigration surplus associated to an influx of skilled migrants (H/Y)sm will be higher than that associated to an influx of unskilled migrants (H/ Y)um: (H / Y)sm = - (1/2) m2 s (-1) = 0.5 m2 s > (H / Y)um = - (1/2) m2 s (-0.5) = 0.25 m2 s The evidence In this section we are going to show how the effect of immigration on native employment and wages were estimated and what is the empirical evidence (prove empiriche) on the effects of immigration on wage and employment of resident workers. Although an increasing number of studies have been conducted over the last years for countries other than the US, most analyses on the impact of migration that can be found in the literature are for the US. Globally, we can distinguish between four methodologies in the empirical literature dealing with the immigration impact on host labor market: 1. Estimating production functions; 2. The Spatial Correlation Approach; 3. The Simulation Based Approach; 4. The Skill Cell Correlation Approach. ESTIMATING PRODUCTION FUNCTIONS Some of the first paper in the literature trying to empirically assess (valutare) the impact of immigration on wages and employment in the host economy were guided by neoclassical input demand theory, estimating production functions, and distinguishing between different labour inputs and capital. Note: in 1928, Charles Cobb and Paul Douglas presented the view that production output is the result of the amount of labor, and physical capital invested. The Cobb-Douglas production function reflects the relationships between its inputs - namely physical capital and labor - and the amount of output produced. Y=F ( K ,L ) Y=A∗Lβ∗K α=Q(L ,K ) Where:  Q is the quantity produced from the inputs L and K;  L is the amount of labor expended, which is typically expressed in hours;  K represents the amount of physical capital input, such as the number of hours for a particular machine, operation, or perhaps factory;  A, represents the total factor productivity (TFP) that measures the change in output that is not the result of the inputs;  The Greek characters alpha and beta reflect respectively, the elasticity of output and input. The estimated parameters from these models inform about the substitutability or complementarity between the different factors and thus allow assessing which effects changes in their relative supply might have. (I parametri stimati di questi modelli indicano la sostituibilità o la complementarità tra i diversi fattori e consentono quindi di valutare quali effetti potrebbero avere le variazioni della loro offerta relativa). The case of the USA Jean Grossman (1982) was among the first to estimate such models. In her study she estimates a translong production function for the US to obtain elasticities of factor complementarity between natives, second generation natives, foreign-born workers, and capital. Among her main findings we can find that: a) Second generation workers and foreign-born workers are both substitutes for native workers in production, with the former (I primi) being more highly substitutable for natives than the latter; b) Foreign-born workers substitute for second generation workers more easily than for natives (I lavoratori nati al l'estero sostituiscono i lavoratori di seconda generazione più facilmente dei lavoratori nativi); c) Capital is complementary with all types of labour, but strongest with foreign-born and weakest with native workers (Il capitale è complementare a tutti i tipi di lavoro, ma più forte con i nati all'estero e più debole con i lavoratori nativi) d) With regard to the impact of immigration, she finds small but non-negligible effects (effetti piccolo ma non trascurabili) on employment and wages of natives and other immigrants which vary with the maintained assumption on wage flexibility in the economy. The case of Italy Alessandra Venturini (1999) examines the Italian case. In her empirical analysis she focuses on the effect of illegally working immigrants on native Italian’s legal employment, using Central Statistical Office figures for the period 1980 to 1995. Based on a production function with three labour input (regular, non-regular native and non-regular foreigners) she estimates elasticity of labour demand which provide evidence of the relationship between these types of labour. She found that: a) Non-regular labour, both of natives and immigrants, has a small adverse effect on legal employment. The estimated long-run elasticities vary between -0.02 and -0.01 meaning that an inflow of illegal workers by 10% reduces demand for legal employment by 0.1% to 0.2%. We found that for France, as well as for USA, the use of Spatial correlation approach did not permit to find significant and negative effects of immigration on the regional labour market. How can we explain this result? In light of our theoretical discussion, (when we looked at the basic model and the extension, we found some effects on the labor market, especially, we found negative effects on native wages and the relative surplus) it is surprising that an immigration induced increase in the relative supply of labour in a country would not depress relative wages for native workers. (È sorprendente che un aumento dell'offerta di lavoro in un paese, indotto dal l'immigrazione, non deprimerebbe i salari relativi dei lavoratori nativi). The literature offers several possible explanations of the empirical results obtained in subnational (regional) levels: i. An immigrant influx in a region induces natives to move out (l'afflusso di immigrati in una regione induce i nativi a trasferirsi), such that estimating the labour impact of immigration at the subnational level understates its true effects; ii. Immigration induces firms to raise investment and increase innovation, partially or fully offsetting the wage impacts of labor inflows (l'immigrazione induce le imprese ad aumentare gli investimenti e ad aumentare l'innovazione, compensando parzialmente o totalmente gli impatti salariali degli afflussi di manodopera); iii. Immigrant and native workers are imperfect substitutes in production. SIMULATION BASED APPROACHES Simulation based approaches are aimed at avoiding identification of the effects of immigration from local labour market information only. (Gli approcci basati sulla simulazione sono volti ad evitare l'identificazione degli effetti dell'immigrazione unicamente sulla base delle informazioni locali sul mercato del lavoro). The counterfactual (that is, the labour market conditions in the absence of immigration) is constructed by simulation. The basic idea of what these authors call “the aggregate factor proportions approach” is a comparison of the actual supplies of workers, in particular skill group, to those that would prevail in the absence of immigration. (un confronto delle forniture effettive dei lavoratori in particolare il gruppo di lavorati qualificati, a quelle che prevarrebbero in assenza di immigrazione). These changed factor proportions due to immigration will lead to different wages and employment situations for native skilled and unskilled workers. (queste proporzioni di fattori modificati a causa dell'immigrazione, porteranno a diverse situazioni salariali e occupazionali per i lavoratori qualificati e non qualificati nativi). This approach is creating the counterfactual situation based on a structural economic model and pre- estimated parameters than on direct estimation. A key parameter is the responsiveness of relative wage to relative skill supplies, the elasticity of substitution. (Un parametro chiave è la reattività del salario relativo ai relativi rifornimenti di abilità, l'elasticità della sostituzione). The case of USA Richard Freeman and Lawrence Katz (1992) analyse how immigration and trade have affected the aggregate supply of workers (OFFERTA AGGREGATA DEI LAVORATORI), in particular skill groups in the US economy between 1980 e 1988. They then compare the prevailing wages and employment outcomes (SALARI E RISULTATI OCCUPAZIONALI) to the case which would have occurred in the absence of immigration or trade, using an economy-wide estimated elasticity of substitution (UN’ELASTICITA’ DI SOSTITUZIONE STIMATA A LIVELLO DI ECONOMIA) to simulate the counterfactual outcomes. (esiti controfattuali) The motivation for this study is to investigate whether immigration and trade are possible reasons for the increasing wage inequality in the US over the 1980s. They observe that both immigration and trade increase the factor, which is relatively scarce in the US, unskilled labour, and found that: i) Immigration had only a small effect on the college/high school wage differential (differenziale retributive) in the 1980s; ii) The effect on the relative earnings and employment opportunities of the least-skilled workers (high school dropouts) is negative and substantial: the changes in relative skill endowments induced by trade and immigration together can explain over 40% of the relative wage earnings decline of high school dropouts during the 1980s. (L'effetto sui guadagni relativi e sulle opportunità di lavoro dei lavoratori meno qualificati (diplomati) è negativo e sostanziale: I cambiamenti nelle dotazioni di competenze relative indotti dal commercio e dal l'immigrazione insieme possono spiegare oltre il 40% del relativo calo dei salari degli abbandoni scolastici negli anni '80). THE SKILL CELL CORRELATION APPROACH An alternative estimation method to retrieve (recuperare) possible wage and employment effects is the skill cell correlation approach. Contrary to the spatial correlation approach, which may lead to an underestimation of wage and employment effects, the cell correlation is base on the national level and therefore robust to the problem of out- migration. This approach argues that workers are not necessarily perfect substitutes within education groups, as labour market experience is adding another important component of human capital, thus leading workers to become distinct even in the same education group according to the human capital they have accumulated.  Following this argument skill groups as education-experience cells may be defined with the assumption that workers within education-experience groups are perfect substitutes. (Seguendo questo argomento i “skill group” come cellule di istruzione-esperienza possono essere definiti con il presupposto che i lavoratori all'interno dei gruppi di istruzione-esperienza sono sostituti perfetti). Consequently, immigrants in the lowest education group compete only with workers in their experience cell - examples of groups or cells: university degree with an experience of less than 5 years; university degree with an experience of 10 years,..). The impact of immigration on native employment and wages is then estimated by regressing the cell- specific native outcomes on the immigrant share in the respective education-experience group. (L'impatto dell'immigrazione sull'occupazione e sui salari nativi viene quindi stimato facendo regredire i risultati dei nativi specifici per cellula, sulla quota di immigrati nel rispettivo gruppo di istruzione-esperienza). The case of USA George Borjas (2003) supposes that individuals with similar education, but different experience are not perfect substitutes but separate labour inputs. Skill groups are then defined in terms of education and work experience. Changes in relative supplies of these skill groups are observed on the national level, hence avoiding the problem of migratory responses of natives. He found that between 1980 and 2000, a 10% increase in the immigrant share reduces the wages of competing native workers by 3-4%. (Ha scoperto che tra il 1980 e il 2000, un aumento del 10% della quota di immigrati riduce i salari dei lavoratori nativi concorrenti del 3-4%). More specifically, the actual immigrant inflow between 1980 and 2000, which: a) increased the labour supply of working men by 11%, b) reduced the (absolute) wages of the average native by 3.2%, c) reduced the high school dropouts by 8.9%, d) reduced the college graduates by 4.9% e) reduced and the high school graduates by 2.6%. Gianmarco Ottaviano and Giovanni Peri (2006) claim that the assumption of perfect substitutability within experience education cells, as assumed by Borjas, may be inappropriate:  they suppose imperfect substitutability between natives and immigrants within skill cells. They defined skill groups by education and experience and found the average wage rate (tasso di salario medio) of all U.S.-born workers experienced a significant increase of 1.8% as a consequence of immigration during the 1990 to 2004 period. The only native group suffering a negative wage effect are the least educated workers with a long-run real wage decline of moderate 1.1%. All other native groups gained from immigration with wage increases between 0.7% and 3.4%. The case of Canada Applying a similar approach to Canada, Aydemir & Borjas (2007) found comparable evidence of the wage effects of migration. In Canada, where immigration has been dominated by workers toward the top end of the skill distribution, immigration is negatively correlated with wages across education-experience cells, with more-educated workers being the ones who have suffered the largest wage effects. The case of the United Kingdom Following the skill cell correlation approach and allowing for imperfect substitutability between immigrants and natives within the same skill group, Marco Manacorda, Alan Manning, and Jonathan Wadsworth (2006) investigate for the UK in how far the immigrant inflows over the period 1975 to 2005 have affected both native and immigrant relative wages:  their empirical findings then show that immigration has raised the return to education for natives by a very modest 0.4% (l’immigrazione ha aumentato il “ritorno all’istruzione”) but has increased the native-migrant wage differential by 5.5%. They conclude that the immigrant impact on the wage distribution of the native population is small and that immigration in the UK primarily impacts the wages of immigrants who are already in the country. This implies a distributive effect of immigration resulting from its impact on housing prices: migration has therefore had a negative impact on the real wages of unskilled workers, as they are more likely to live in low- income housing units. The author also finds evidence of a decrease in housing prices in response to migratory inflows, which can be explained by the fact that higher-income residents have decided to leave Miami. This would have reduced the demand for higher quality rental units. c) Saiz (2006) investigating the short and long-term impact of immigration on rents and prices, finds a positive effect of immigration on rents: an increase of 1% of immigrants is associated with an increase in rents of 1%. d) These results are supported by a study conducted by Gianmarco Ottaviano and Giovanni Peri, who find a strong positive association between immigration and house prices. The overall wage plus housing income effect of immigration is positive for natives of all skill levels. In particular even for the average native low-skilled worker, the small negative wage effect from immigration is more than offset by the positive effect on housing prices which they can reap due to their higher house ownership rates. (L'effetto complessivo del l'immigrazione sul salario e sul reddito degli alloggi è positivo per i nativi di tutti i livelli di qualificazione. In particolare, anche per i lavoratori indigeni medi poco qualificati, il piccolo effetto negativo del l'immigrazione è più che compensato dal l'effetto positivo sui prezzi delle abitazioni che essi possono trarre dal l'aumento dei tassi di proprietà delle case). Those most negatively affected from immigration are thus low-skilled natives that are renting and do not own any equities in housing, since for them wages fall while rental rates increase. FISCAL EFFECT  Where immigrants pay more taxes than they receive in state subsidies, immigration reduces the net tax burden on native taxpayers, therefore, the total impact of immigration on native residents would be unequivocally positive.  Instead, in contexts where immigrants pay less in taxes than they receive in government benefits , immigration increases the net tax burden on natives. Note: There are also dynamic fiscal effects from immigration. If the net tax burden on residents of a country is expected to increase in the future, immigration increases the tax base over which this burden can be spread and reduces the increase that natives would have to bear. (Vi sono anche effetti fiscali dinamici dovuti all'immigrazione. Se si prevede che l'onere fiscale netto sui residenti di un paese aumenterà in futuro, l'immigrazione aumenterà la base imponibile sulla quale tale onere può essere ripartito e ridurrà l'aumento che i nativi dovrebbero sostenere) However, calculating the overall tax consequences of immigration is not very simple. To estimate them correctly, you need to know some details of the immigrant population, such as income, spending, or employment behaviour. Some recent studies, unlike in the past, have adopted a dynamic approach considering the tax impact of immigrants over time, such as: a) Storesletten (2000) shows that the government’s net income from immigration varies according to the age and skill levels of new immigrants. For this reason, the government should aim to attract highly qualified immigrants, probably without children and between 40 and 44 years of age. (USA) b) Following an approach similar to Storesletten (2000), Lee and Miller (2000) find a larger net present value of immigrants’ contributions to the fiscal system of around $99,000. Their results suggest that a policy of admitting only highly skilled immigrants could be particularly beneficial. However, they also conclude that overall, the fiscal impact of immigration is quite small. (USA) c) Bonin (2006) calculating the net contribution of foreigners to the public purse in Germany shows that in 2004 tax revenues exceeded payments for foreigners. d) In Spain, Collado, Iturbe-Ormaetxe and Valera (2004) analyse the impact of migration by simulating the effects of a number of different immigration policies. Their calculations reveal a positive net contribution of immigrants. e) In the United Kingdom, Gott, and Johnston (2002) point out that immigrants are heterogeneous and that those who have a particular economic success are the biggest contributors, because they pay more taxes and national insurance contributions. Economic results, of course, are influenced by characteristics such as age, skills, qualifications, or knowledge of the English language. PART 4: Economic Consequences of immigration in the sending Countries 1. Remittances. 2. Brain drain. 3. Some other issues. REMITTANCES Remittances are usually understood as financial or in-kind transfers (trasferimenti monetari o in natura) made by migrants to friend and relatives back in the communities of origin. The International Monetary Fund (FMI) defines remittances as the sum of two main components in their Balance of Payments Statistics manual: “Compensation of employees” and “Personal transfers”: COMPENSATION OF EMPLOYEES This refers to income earned by temporary migrant workers in the host country, and the income of workers who are employed by embassies, international organizations (like the UN), and foreign companies. (or “the income of border, seasonal, and other short-term workers who are employed in an economy where they are not resident and of residents employed by non-resident entities”) PERSONAL TRANSFERS These are all current transfers in cash or in kind made or received by residents (be it migrants or non- migrants) from or to individuals in other countries. (“all current transfers between resident and non- resident individuals”) Note: measuring of remittances does often not include small money transfers such as small amounts of money sent by migrants to their families not via banks but money transfer operators, post offices, mobile phones, or informal transfers. SOME KEY TRENDS For migrant workers, the COVID-19 pandemic has meant a decline in wages and employment, so the remittance flows of 2020 to low- and middle-income countries are expected to fall by 19.7%, representing one of the most abrupt declines in recent history. In addition, the World Bank expects a decline in remittance flows in all regions, from Europe to Central Asia (-27.5%), to Africa (-23.1%)… In 2019, the first 5 countries receiving remittances were:  India (83.1 billion)  China (68.4 billion)  Mexico (38.5 billion)  Philippines (35.2 billion) a) Temporary immigrants have a higher probability of remittance (about 18%) b) The total amount transmitted is approximately 25-50% for migrants wishing to return to their country of origin. c) Support for family members has a non-altruistic component of insurance and exchange. d) the intention of migrants to return changes the patterns of accumulation of property both in the host countries and in those of origin, as well as the investments made in the country of origin. Their study therefore shows the importance of taking into account the potential nature of migration which has different effects on remittances. 2. Having migrants abroad may also provide insurance for a family. Migration helps family’s smooth consumption over time by keeping remittances high when sending-country income is low relative to the destination country, and low when sending-country income is relatively high.  Consistent with consumption smoothing, Yang(2008) found that for Philippines in 1997-1998, remittances increased more for households whose migrants resided in countries that experienced stronger currency appreciation against the peso. Since income shocks associated with movements in exchange rates are largely transitory in nature, the response of remittances reveals the extent to which migrants share transitory income gains with family members at home. Yang finds that a 10% depreciation of the Philippine peso is associated with a 6% increase in remittances. Economic Impact of Remittances According to Lucas (2005), the economic consequences of remittances may be divided in two (Lucas, 2005): 1. the influences upon investment, growth, and macroeconomic stability. 2. the effects on poverty and inequality. 1.Significant empirical evidence indicates that remittances lead to positive economic growth, whether directly or through increased consumption, savings, or investment. 1a: DIRECT POSITIVE IMPACT ON GROWTH According to the results of a study by the World Bank (WB 2007) on the effects of remittances on the economic growth for a panel of developing and developed countries during the period 1970-2003, remittances (proxied by the ratio of remittances to GDP) appear to have a positive and statistically significant impact on growth (proxied by the growth of real per capita GDP). In a recent paper, Sutradhar (2020) find that remittances have a positive impact on economic growth in India. 1b: INDIRECT POSITIVE IMPACT ON GROWTH Lucas (2005) cites several case studies that show signs that remittances may indeed have accelerated investment in Morocco, Pakistan, and India. León-Ledesma and Piracha (2001) show support in 11 transition economies of Eastern Europe during 1990– 99 for the view that remittances have a positive impact on productivity and employment, both directly and indirectly through their effect on investment. There is also evidence of important multiplier effects from remittance spending, particularly from housing construction. There is some evidence that increases in remittances are associated with increased expenditure on education. Alejandra and Ureta (2003) for example find that in El Salvador households that receive remittances are more likely to allow children to stay in school, with the effect being stronger in rural areas. Note: there are, nevertheless, at least two points of reservation regarding these optimistic conclusions: (1) the possibility that countries can face a situation similar to the Dutch disease, in which the inflow of remittances causes a real appreciation or postpones depreciation. (2) More importantly, research by Chami, Fullenkamp, and Jahjah (2003) ascertained that income from remittances may be plagued by a moral-hazard problem, permitting the migrant’s family members to reduce their work effort (Confirming the latter pessimistic view, Sutradhar (2020) find a negative effect of remittances on economic growth in Bangladesh, Pakistan and Sri Lanka). 2.Remittances, Poverty, and Inequality Remittances contribute to household income and thus, in the short run, reduce poverty. Adams and Page (2005) find empirical confirmation of a statistically significant impact of remittances on poverty. Their estimates show that a 10% increase in per capita official remittances has led to a 3.5% decline in the share of people living in poverty. Some find that remittances sharpen inequality (Stark, Taylor, and Yitzhaki 1986; Adams 1991), while others claim that in the long run, income distribution becomes more equal as a result of the liquidity provided for capital accumulation. BRAIN DRAIN The term “brain drain” was coined by the British Royal Society to refer to the exodus of scientists and technologist from the UK to the USA and Canada in the 1950s and 1960s. Nowadays it is more typically used to refer to the emigration of a nation’s most highly skilled individuals. Docquier and Rapoport (2006) note that it is most commonly used to denote the “migration of engineers, physicians, scientists, and other very highly skilled professionals with university training”. These movements are typically from developing to developed countries. The term “brain drain” dominates popular discourse on high skilled migration. This phenomenon worries many policymakers in migrant-sending countries. Governments complain about decimated medical system, shortages of teachers and engineers and poaching of talent that their national education system had pay to train. The term brain drain is different from that of brain waste and from that of brain gain. a) The phenomenon of brain waste refers to the fact that not all educated migrants end up working in skilled occupation after they have migrated. This is the case for example for the stereotype of boring workers with Ph.D.’s driving taxis. For the USA, Gibson, and McKenzie in 2011 calculated that, in 2008, 79% of working migrants from developing countries with a bachelor’s degree or more are working in occupation in which the majority of workers have post-secondary education, as are 19% of those with a master’s degree of more than 96% of those with a PhD. They conclude that the stereotype of foreign workers with PhD driving taxes is certainly the exception: only two of the 1.936 developing country migrants with PhD in the American community Survey sample are taxi drivers. b) The phenomenon of “brain Gain” refers to the benefits accruing to the country of origin as a result of high skilled immigration. These benefits can take the form of remittances, investment, networks, The determinants of Brain Drain Recent empirical research at both the macro and micro levels offers evidence on what factors make migration of high skilled individuals more likely: a) Docquier, Lohest and Marfouk (2007) examine the patterns of brain drain across countries. They found that the strongest association is with country population size - that is :  countries with less population have a higher proportion of brain drain. In addiction brain drain rates are higher in countries with religious fractionalization and political instability and with low levels of human capital. b) At the microeconomic level, some empirical evidence underscored the role of factors other than income gaps. For example, Gibson and McKenzie in 2011 found that immigration decision are driven by broader career concerns – preoccupazioni di carriera più ampie (such as the quality of opportunities to conduct the research to work with leaders in the profession and to learn from the best) and by lifestyle and family reasons more than by of much additional income people could earn abroad. Also, Clemens, in 2009 summarised survey evidence from health workers in Africa who similarly indicate professional advancement, better facilities to work in, and safety for the family as prime motives for migrating, in addition to the higher incomes they can earn. To sum up, the evidence is consistent with the high skilled wanting to be in places in which they can live well without fears of violence or instability and in which they act facing the opportunity to advance their careers and work with like-minded people. The potential POSITIVE effects of brain drain on the sending countries The benefits that a sending country might receive from high-skilled immigration are usually listed in terms of remittance, investment, circular migration and expertise and knowledge flow from migrants back to the sending country. REMITTANCES & BRAIN DRAIN Remittances are the most visible channel through which migrants contribute to households back home. Existing empirical evidence therefore does support the idea that high-skilled migrants remit, particularly back to lower-income countries and the level of this remittances can be sizable relative to per capita income in their own countries. INVESTMENT & BRAIN DRAIN Less empirical evidence is available about the extent to which high skill immigrants invest especially for the types of countries for which brain drain rates are highest. At the macro level, Javorcik, Ozden, Spatareanu, and Neagu (2011) find a positive relationship between the number of skilled migrants a country has in the USA and level of foreign direct investment from the US economy to that country. (trovano un rapporto positivo tra il numero di migranti qualificati che un paese ha negli Stati Uniti e il livello di investimenti esteri diretti dall'economia statunitense a quel paese). However, their data set contains only two countries with population rates below 1,000,000 (one million). At the micro level Gibson and McKenzie find very low rates of high skilled migrants being involved in trade facilitation or investment in business start-ups in their own countries. (trovano tassi molto bassi di migranti altamente qualificati coinvolti in agevolazioni commerciali o investimenti in start-up di imprese nei propri paesi) They estimate a small country like Tonga or Micronesia might gain at most $500 to $2,000 per high skilled migrant from trade and foreign direct investment and conclude that this contribution is a positive one but unlikely to have large effect on development. (essi stimano un piccolo paese come Tonga o Micronesia potrebbe guadagnare al massimo $ 500 a $ 2.000 per ogni migrante altamente qualificato dal commercio e investimenti diretti esteri e concludere che questo contributo è positivo, ma improbabile che abbia un grande effetto sullo sviluppo) EXPERTISE AND KNOWLEDGE FLOW High skilled migrants can reduce transaction costs between countries and those facilitate trade, foreign direct investment, and technology transfers between host and home countries. They can also provide information about educational and work opportunities abroad, and advice to home country companies or governments. CIRCULAR MIGRATION Return or circular (repeated return) migration is a promising route for allowing host and home countries to share the benefits of high skilled labour mobility. In developing countries, the possibility of temporary immigration increases the returns to education and has the same effect on human capital formation. The additional knowledge and financial capital acquired while abroad generates important benefits, especially for technology adoption, entrepreneurship, and productivity. (Le conoscenze supplementari e il capitale finanziario acquisiti all'estero generano importanti benefici, in particolare per l'adozione di tecnologie, l'imprenditorialità e la produttività). Although return migration is probably at least documented aspect of international migration, it is commonly accepted however that historical example of massive return migration of high-skilled workers are more a consequence than a cause of development and sound policy reform in all countries. The potential NEGATIVE effect of brain drain on the sending countries  The brain drain has long been viewed as detrimental to the growth potential of the home country and the welfare of those left behind. It is usually expected to be even more harmful for the least developed countries (paesi meno sviluppati) because, with increasing development, positive selection in emigration and brain drain rates fall.  The brain-drain literature agrees that the brain-drain leads to significant losses for those who lag behind and increases global inequality. La letteratura sulla fuga di cervelli è concorde nell’affermare che la fuga di cervelli comporta perdite significative per chi rimane indietro e aumenta la disuguaglianza globale. However, there is no empirical evidence that demonstrates how the brain drain affects the externalities of production and health that may arise through education (for example, there are no studies with credible estimates that, for example, the benefit of 1,000 less skilled migrant workers is an increase of X in the productivity of other workers, or that the benefit of having 100 doctors who do not emigrate is a rescue of Y lives). Tuttavia, non vi è alcuna prova empirica che dimostri come la fuga dei cervelli influenzi le esternalità della produzione e della salute che possono sorgere attraverso l’istruzione (ad esempio, non ci sono studi con stime credibili sul fatto che, ad esempio, il beneficio di 1.000 lavoratori meno qualificati che emigrano è un aumento di X nella produttività di altri lavoratori, o che il beneficio di avere 100 medici che non emigrano è un salvataggio di Y vite)  A negative effect is inducing shortages of manpower in key activities (carenza di manodopera nelle attività-chiave), as when engineers or health professionals emigrate in disproportionately large numbers, undermining a country’s ability to adopt new technologies or deal with health crises.  The brain drain increases the technological gap between leading and developing nations because the concentration of human capital in the most advanced economies contributes to their technological progress. Revision 1. An increase in the average wage in the destination country will (un aumento del salario medio nel paese di destinazione): (i) increase the likelihood (probabilità) that the worker moves to it; (ii) decrease the likelihood that the worker moves to it. (iii) decrease the likelihood that the worker stays home. 2. A decrease in the average wage in the home country will (una diminuzione del salario medio nel paese d'origine): (i) increase the likelihood that the worker stays home; (ii) decrease the likelihood that the worker moves abroad; (iii) decrease the likelihood that the worker stays home. 3. If the ratio of foreign wage to local wage is lesser than 1 (Se il rapporto tra salario straniero e salario locale è inferiore a 1) (i) the worker will be motivated to move abroad; (ii) the worker will be not motivated to move abroad; (iii) the worker will not decide to migrate. 4. A wage differential in the favour of the country of destination is (un differenziale salariale a favore del paese di destinazione) (i) a sufficient condition for the worker to decide to stay home; (ii) a sufficient condition for the worker to decide to migrate; (iii) a necessary but a not sufficient condition for the worker to decide to migrate. 5. Migration costs are affected by: (i) transportation costs; (ii) migration policies in the countries of destination; (iii) Language and cultural factors; (iv) Other factors 6. The literature on the immigration determinants find that the immigrant influx increases with: (i) A higher differential wage in the favor of the country of origin; (ii) A higher differential wage in the favor of the country of destination; (iii) A lower geographical distance between the country of origin and the country of destination 7. A perfectly inelastic curve of labor supply implies that: (i) the supply of labor increases with an increase in the wage rate (ii) the labor supply curve is horizontal (iii) the variation of the wage rate has no effect on the labor supply 8. The immigration surplus represents: (i) the benefits accruing to the native owners of capital (ii) the benefits accruing to the native owners of labor (iii) the benefits accruing to the native population 9. In the basic model of immigration effects, the employment of native population: (i) decrease after an influx of immigrants (ii) increase after an influx of immigrants (iii) remain constant after an influx of immigrants 10. The immigration surplus is calculated as: (i) the national product in the situation with an immigrant influx (ii) the sum of the native and the immigrant wages (iii) the sum of the variation of native worker wage and native capital revenues 11. In the basic model of the effects of an influx of immigrants, the size of the immigration surplus depends on: (i) the number of immigrants relative to natives; (ii) the native’s share of income; (iii) the size of the wage effect of immigration 12. In the basic model of immigration effects, the wage elasticity of labor demand affects: (i) the total immigrants surplus; (ii) the immigrants surplus accruing to the native owners of capital (iii) the immigrants surplus accruing to the native owners of labor 13. Compared with that of the basic model, in the model with external effects, the immigration surplus is: (i) higher; (ii) lesser; (iii) unchanged; 14. In the model assuming that immigrants bring capital with them, the native’s immigration surplus: (i) accrues to native owners of capital (ii) accrues to native workers (iii) accrues to immigrants 15. Because the wage elasticity of skilled labor is supposed to be higher in absolute value than that of unskilled labor, it is more likely that: (i) immigration surplus will be larger when the immigrant flow is composed of skilled workers (ii) immigration surplus will be larger when the immigrant flow is composed of unskilled workers (iii) immigration surplus will be not affected by the immigrants skill composition;