Do Return Migrants Make Better Leaders?

While migration per se is not found to affect the quality of political institutions, it appears that leaders who studied abroad are associated with higher levels of democracy (p. 3).

That is from this interesting paper by Marion Mercier.

Migration, Financial Constraints, and Entrepreneurship: Evidence from Mexico

This is an interesting paper with encouraging results on the effects of migration on entrepreneurship. It is by Qing Wang. 

There has been evidence on the entrepreneurial behavior of migrants in receiving countries or after they return to home countries, but little research on the entrepreneurship of left-behind persons when migrants are still abroad. Using data from the Mexican Family Life Survey, this paper examines the effects of ongoing migration on the entrepreneurship of left-behind family members. Striking evidence shows that migration stimulates the entrepreneurship of left-behind members through improved financial status. The preferred estimates indicate that having migrant family members increases an individual’s rate of participation in entrepreneurship by at least 50% relative to the mean. The analysis also demonstrates the differential migration effects and differential motives pertinent to becoming new entrepreneurs by gender. These findings have profound implications for the empowerment of women and how public policies such as microcredit may promote entrepreneurship through the relaxation of financial constraints.

There is no agreement on the literature on this issue, with some papers finding evidence for the opposite, meaning that migration reduces entrepreneurship via a moral hazard effect created by remittances. Results depend on gender, and rural/urban location.  

How Do Migrants Choose Their Destination Country? An Analysis of Institutional Determinants

Good education and health systems tend to attract migrants, while generous pension systems deter them.

That is from the abstract of this paper (draft) by Wido Geis, Silke Uebelmesser, & Martin Werding.

How distance is important for knowledge diffusion and exports

This is an interesting paper by Dany Bahar, Ricardo Hausmann and Cesar A. Hidalgo on the importance of distance in knowledge diffusion and exports. The abstract 

The literature on knowledge diffusion shows that it decays strongly with distance. In this paper we document that the probability that a product is added to a country’s export basket is, on average, 65% larger if a neighboring country is a successful exporter of that same product. For existing products, having a neighbor with comparative advantage in them is associated with a growth of exports that is higher by 1.5 percent per annum. While these results could be driven by a common third factor that escapes our controls, they are what would be expected from the localized character of knowledge diffusion.

From the concluding remarks

This paper has established that neighboring countries are very similar in their patterns of comparative advantage, a similarity that decays with distance. In a classical Heckscher-Ohlin model, this would be a reflection of the similarity in factor endowments. But after taking account of a large set of controls, including similarity in incomes, sizes, conventional factor endowments, culture and institutions, among others, and after excluding goods not pinned down by geology or climate, the resemblance in the composition of the export baskets of neighboring countries remains very strong. The factors causing the similarity we document go beyond the classical ones: physical capital, human capital, labor and land, including geology and climate. 

Moreover, the similarity we document is not obvious as the greater intensity of trade at short distances should have incentivized neighboring countries to specialize in different rather than in similar goods. In fact, our static results show that there is a negative correlation between bilateral trade in- tensity and export similarity.

The authors argue that probably the key variables for knowledge diffusion are trade, foreign direct investment, and migration. 

Yesterday MR linked to this piece. It says that 40 per cent of auto jobs on the continent are in Mexico. According to the article above the geographic distance between Mexico and the US is important for product diversification in Mexico. That might be good news for Central America as well, which might eventually start producing more high-technology products. There are time-lags however and the determinants of the duration are still unclear. 

Wikipedia has a fascinating account on the automobile industry in Mexico. An excerpt

A Short time after the end of the armed struggle, Buick became the first automobile producer to be officially established in Mexico, beginning 1921. In 1925, Ford Motor Company was too established and began manufacturing vehicles in the country, and as of 2011 remains the longest-running brand in the country. 

In 1959, Mexico produced its first fully domestic vehicle, a small truck called the Rural Ramírez, produced by the Ramirez truck company.

HT: Laura Stefanescu

Who Crossed the Border? Self-Selection of Mexican Migrants in the Early 20th Century

From a paper by Edward Kosack & Zachary Ward

We explore the self-selection of Mexican migrants to the United States in 1920. We hand-collect data for migrants from manifest lists for towns along the United States-Mexico border. Officials recorded the heights of migrants, a measure that we use to proxy migrant quality and measure self-selection into migration. Migrants, despite being relatively more unskilled than stayers, came from the middle to upper portion of the height distribution in Mexico, and so were positively selected. The result holds within skill group, suggesting that the United States received the best unskilled, skilled and professional workers.

In the conclusions, they add

Mexican migrants were over four centimeters taller than members of the Mexican military and only one and a half centimeters shorter than passport holders. Since the military drew from lower classes of Mexican society and the passport holders were elite, the fact that migrants were taller than those in the military and nearly as tall as passport holders tells us that they were positively selected from the Mexican population.

 

Migration, Remittances, and Social Networks (Mozambique)

From a paper by Juan M. Gallego & Mariapia Mendola 

This paper examines the role of labor migration and remittances in shaping group participation and social networks in village economies left behind. By using an original household survey containing detailed information on family migration status, group participation and inter-household informal exchanges from two regions in the south of Mozambique, we find that households with successful migrants, i.e. those receiving remittances or return migration, engage more in community based social networks. (pp. 26-7).

A draft is here.  

Remittances: Good or Bad?

Wikimedia Commons. Author: Tomas Castelazo

Migration is a hot topic. And if you are an economists and you do not support free migration, and even more, open borders, there is something wrong with you (the evidence is overwhelming). There are some contrarians out there, if we can call them that. 

In the past few decades some highly successful antipoverty programs have come out: China's reforms, India's reforms, and in a less comparable scale some cash transfers programs in Mexico. Immigration is another highly successful antipoverty program. And it is interesting how our perceptions of migration have changed, from the "brain-drain" - with a negative connotation - point-of-view in highly popular econ-development textbooks, to "brain-circulation," and finally the recognition that plain migration brings many benefits even for those left behind. 

I am puzzled however by some evidence of the effects of remittances on the labor market in remmittances-receiving countries. Simplifying, remittances can affect labor markets in two ways: (1) they provide capital for consumption and entrepreneurial ventures, and (2) they can discourage workers who substitute labor for leisure. The particular effects can be highly contextual and the issue is definitely empirical. I came across this paper by Pablo Acosta 

This paper uses a 4-year rural panel survey from El Salvador to analyze the effects of international migration and remittances on labor force participation. To account for the possible endogeneity of remittances, the author uses a fixed effects probit on the 4-year panel. Results suggest that with the receipt of international remittances, labor force participation falls more for women than for men. For instance, urban females in remittance-receiving households are 42.2 percent more likely to quit the labor market, while urban males in remittance-receiving households are only 9 percent more likely to quit. The authors also find both males and females reduce their total hours worked per week when they receive remittances. Urban males and females in remittance-receiving households reduce their hours worked per week by 24.4 and 20.8 percent, respectively.

I have posted other papers on that issue. How can we make sense of those apparently different results? The case of El Salvador in the paper above suggests a possible negative effect. But as we will see, that is not totally clear, and even incorrect. 

We would like to see more investment instead of more leisure as a consequence of remittances. But if we think carefully leisure is also an economic good, and more consumption of it can be also a good thing. Can we say that remittances are harming some societies because they reduce labor supply in formal (or even informal) markets? Probably not, because when people substitute work for leisure their preference reflect that they are choosing something that is "better" [some arguments from behavioral economics can complicate this]. 

In the conclusions of the paper cited above the author indicates that some people who leave the labor market might become self-employed, and even employers. That being said, the long term consequences are hard to predict. Some people might become dependent on remittances and their leaving of the labor market for a long time can handicap them if they don't do anything at all, and in that case they might not get the skills to compete if (when) remittances stop coming or are reduced. 

There is room for public policy, and even better, for private financial institutions in developing countries to provide services and products to inform migrants of the ways they could invest remittances. My colleague Diego Aycinena has an interesting co-authored paper on that

While remittance flows to developing countries are very large, it is unknown whether migrants desire more control over how remittances are used. This research uses a randomized field experiment to investigate the importance of migrant control over the use of remittances. In partnership with a Salvadoran bank, we offered US-based migrants from El Salvador bank accounts in their home country into which they could send remittances. We randomly varied migrant control over El Salvador-based savings by offering different types of accounts across treatment groups. Migrants offered the greatest degree of control over savings accumulated the most savings at the partner bank, compared to others offered less or no control over savings. Effects of this treatment on savings are concentrated among migrants who expressed demand for control over remittances in the baseline survey. We also find positive spillovers of our savings intervention in the form of increased savings at other banks (specifically, banks in the U.S.). We interpret the effects we find as arising from the joint effect of the bank account offers and the marketing pitch made to study participants by our project staff.

Labor Migration and Democracy (Moldova)

Communities with more westward migration vote significantly less for the Communist Party. P. 16.

That is from a paper on the effects of labor migration over diffusion of democracy in Moldova in the late 1990s by Toman Omar Mahmoud, Hillel Rapoport, Andreas Steinmayr, & Christoph Trebesch. 

3 Research Links

1. Minimising Misery: A New Strategy for Public Policies Instead of Maximising Happiness?
2. Return-Migration, Race, and Political Trust.
3. Scholars' physical appearance, research performance and feelings of happiness.

HT: Viviana Di Giovinazzo.

Immigrants Equilibrate Local Labor Markets

This paper has demonstrated that low-skilled Mexican-born workers’ location choices responded very strongly to the geographic variation in labor demand generated by the Great Recession. This behavior is in sharp contrast to low-skilled native-born workers who show little response, and their elasticity even exceeds that of highly skilled natives. Further, the reallocation of Mexican immigrants reduced the variation in employment outcomes for natives living in cities with substantial Mexican-born share. This novel finding represents economically significant behavior, and it is quite robust to a number of alternative interpre- tations.

That is from the conclusions of a new paper by Cadena & Kovak (August 2013). Something I find interesting is how difficult it is to get a visa (not even a working visa) for say a Nigerian or Indian to travel to Guatemala. In other words, some governments of developing countries would like to see more open borders and better treatment to immigrants in the US and Europe when they themselves make things very difficult for immigrants from other developing countries. 

Do better roads promote migration or do they discourage it?

Empirical evidence on the impact of improving road networks and transportation systems on migration in developing countries remains scarce and generally provides mixed results. This paper fills part of this empirical gap in the Tanzanian context by answering the following question: do better roads promote migration or do they discourage it? A difference-in-difference estimation is implemented using the Kagera Health and Development Surveys (KHDS), coupled with information on trunk roads upgraded to bitumen standards in the region. On average, migration decreases as upgraded roads improve local living conditions. The impact proves to be greater in absolute value for well-connected communities, as well as for the probability of moving within the Kagera region. However, the effect decreases over time.

That is from a paper (Journal of African Economies, July 2013) by Marie Castaing Gachassin. I did not find the full paper online. By the same author, but from a different paper, I took a table of road density in African countries (other tables and graphs in the paper are also interesting). 

Migration flows and trade

International migration flows increase bilateral trade flows between countries through different channels, including creation of diasporic networks that transmit information. These networks have the potential to reduce information barriers and search costs in international trade. This paper quantifies the information effect of diaspora networks, using a panel data set of bilateral migration stocks and bilateral trade data that has been classified into intermediate and final goods. It shows that the migrants' role in exchange of information through business networks does lead to a significant increase in trade among countries. Moreover, the paper finds that this effect is greatest in the case of differentiated goods and that the highly educated migrants are most effective in business networking. Also, this paper addresses the issue of direction of causality between international migration and trade by creating a unique instrumental variable based on citizenship laws of the countries of destination.

That is from a new published paper by Seema Sangita in the Review of International Economics (May 2013). I did not find the full paper online.  

3 Research links: (1) migration and manufacturing (2) blogs, tweets, and science (3) digital music

1. The effects of migration on manufacturing (Italy).
2. Tags, Blogs, Tweets: Social Media as Science Tool? “Our studies confirm that most institutions don’t [yet] recognize social media use as part of tenure and promotions activities,” says Gruzd. In contrast, its users— particularly junior faculty members—already note both its direct and indirect benefits.
3. Digital music: Economic perspectives. 

Benefits of return migration?

The results show that return migration promotes self-employment among household members that have not migrated. However, left-behind individuals are less likely to be self-employed when compared to those living in non-migrant households.

Source. 

Women left behind (Mexico)

. . . [W]omen increase their participation and labor time in unpaid work but reduce participation and time in paid work when their husbands migrate to the United States. In other words, left-behind women become more likely to be self-employed workers and family workers in household-owned businesses. Such a shift of female labor from paid work to unpaid work is probably driven by the need to replace migrants’ labor at home. These results are in line with the literature and previous findings.

Source: "Male Migration and Female Labor Force Participation: New Evidence from the Mexican Family Life Survey" (Qing Wang, January 2013). 

The political economy of migration (the US)

Democratic legislators are systematically more likely to support the liberalization of migration policies than their Republican counterparts, while the opposite is true when it comes to trade policy. 

From the paper "The political economy of trade and migration: Evidence from the U.S. Congress" by Conconi, et al (December 2012). 

From the abstract:

. . . Representatives from more skilled-labor abundant districts are more likely to support both trade liberalization and a more open stance vis-`a-vis unskilled immigration. Still, important systematic differences exist: welfare state considerations and network effects have an impact on the support for immigration liberalization, but not for trade . . .

HT: Eugene Beaulieu

Economic Geography: Decline in Interstate Migration in the United States 1991-2011

From a new paper by Kaplan & Schulhofer-Wohl (November 2012) which explains why interstate migration has delined in the U. S.:

We analyze the secular decline in interstate migration in the United States between 1991 and 2011. Gross flows of people across states are about 10 times larger than net flows, yet have declined by around 50 percent over the past 20 years. We argue that the fall in migration is due to a decline in the geographic specificity of returns to occupations ["it matters less where your job is than what your job is"], together with an increase in workers' ability to learn about other locations before moving there, through information technology and inexpensive travel. These explanations find support in micro data on the distribution of earnings and occupations across space and on rates of repeat migration. Other explanations, including compositional changes, regional changes, and the rise in real incomes, do not fit the data. 

This is how the authors define gross migration flows:

". . . the fraction of U.S. residents at least 1 year old who lived in a different state one year ago . . ."

And net migration flows: 

The numerator of the net migration rate is one-half of the sum of absolute values of inflows minus outflows in each state. This number is the minimum number of moves that would have to be prevented to set net migration to zero in every state. The denominator of the rate between years t and t + 1 is the U. S. population at t minus deaths between t and t + 1 [not very intuitive].

The Wikipedia definition of "net migration rate" is here. 

Mobile Phones, Networks, and Migration (Uganda)

Personal networks can help rural workers find urban jobs. When information flow increases due to the expansion of mobile phone use, the new information flow may strengthen existing types of personal network, such as ethnic networks, or provide opportunities to those who were previously outside of these networks. We examine the combined impacts of mobile phone use and personal networks by using panel data from 856 households in 94 communities in rural Uganda, where the number of communities with mobile network coverage increased from 41 to 87 communities over a 2-year period between the first and second surveys, conducted in 2003 and 2005, respectively. We find first that the possession of mobile phone handsets at the household level increases an individual's chance of leaving his or her rural village to find a job, and second, that mobile phone use increases the chance that an individual will choose migration to a greater degree for individuals who belong to a smaller ethnic group than to a larger group in the capital city, Kampala.

That is from the paper "The impacts of mobile phone and personal networks on migration: evidence from Uganda" by Megumi Muto, published in the recent number of the Journal of African Economies (November 2012). A draft is here. 

That number of the Journal is a special issue on impact evaluation (IE) in Africa. See a good post by Justin Sandefur on IE here. 

HT: @m_clem

Graph of the Day (Net Migration by Region 1950-2010)

Source.

Understanding the Age of Mass Migration

Fascinating article by Abramitzky, Boustan, and Eriksson in the new number of the AER. They conclude:

We know surprisingly little about how migrants during the Age of Mass Migration were selected from the European population and about the economic return from their journey. In this paper, we construct a new dataset of Norwegian-to-United States migration to estimate the return to migration in the presence of selection into migration. We compare the occupation-based earnings of men who moved to the United States and their brothers who stayed behind in Norway. This approach eliminates the component of migrant selection that takes place across households. We gather further evidence about the nature of migrant selection by comparing the economic outcomes of fathers of migrants and nonmigrants. 

We estimate a return to migration from Norway to the United States of around 70 percent, which is substantially smaller than the 200–400 percent return for migra- tion from Mexico to the United States today (Hanson 2006). The contemporary return to migration may be higher than in the past because of the sizeable cost of migration—both the bureaucratic costs of legal immigration and the cost of evading detection for the undocumented—which together reduce the supply of immigrants to the country. In the late nineteenth century, the border was open to almost all prospective migrants and, therefore, the return to migration was relatively low. We note, however, that the decision to migrate in the nineteenth century (as today) may have entailed other nonpecuniary considerations that would have increased the total return to migration (Bertocchi and Strozzi 2008). For example, at the time, Norway was under Swedish control and limited its franchise to men with wealth, while the United States offered the opportunity (for white men) to participate in the demo- cratic system even to new migrants.

The authors add in the conclusion:

We find mixed evidence on selection for rural migrants, with some methods sug- gesting positive selection and others suggesting negative selection. In contrast, we consistently find that men from urban areas who faced poor economic prospects in Norway, as measured by occupation, were more likely to migrate to the United States. One result of this negative occupational selection is that the naïve return to migration underestimates the true return by 20 to 30 percent for the urban sam- ple. The fact that migrants to the United States appear to have been drawn from the lower end of the occupational distribution is consistent with a standard Roy model of migration, as in Borjas (1987), which predicts that men at the lower end of the occupational distribution would have more to gain by moving from relatively unequal European countries to the New World. Furthermore, the fact that European migrants from urban areas, when unhindered by entry restrictions, were negatively selected from the sending population may explain why the United States eventually closed its border to the free flow of labor in 1924 (Hatton and Williamson 2006) and why some countries explicitly select for more skilled applicants in their immigration policies today. 

See the complete article here.