JRC Research on Migration Modelling

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1 JRC Research on Migration Modelling d Artis Kancs Competence Centre for Modelling, Task Force on Migration, Regional Economic Modelling DG Joint Research Centre European Commission Conference EU and Global Asylum-Related Migration Research EASO, Malta, 16 May 2016 The author is solely responsible for the content of the paper. The views expressed are purely those of the author and may not in any circumstances be regarded as stating an official position of the European Commission.

2 Structure of presentation Joint Research Centre of the European Commission Migration modelling in JRC JRC's migration modelling example with the RHOMOLO model Concluding remarks 2

3 JRC at a glance Established institutes in 6 locations 3000 staff in December 2015 Budget: 374 million annually, plus 72.8 million earned income Institute for Reference Materials and Measurements IRMM Geel, Belgium Institute for Transuranium Elements ITU Karlsruhe, Germany Institute for Energy and Transport IET Petten, The Netherlands Institute for the Protection and Security of the Citizen IPSC Ispra, Italy Institute for Environment and Sustainability IES Ispra, Italy Institute for Health and Consumer Protection IHCP Ispra, Italy Institute for Prospective Technological Studies IPTS Seville, Spain 3

4 JRC s vision, mission and values To play a central role in creating, managing and making sense of collective scientific knowledge for better EU policies. As the science and knowledge service of the Commission our mission is to support EU policies with independent evidence throughout the whole policy cycle. We are open and honest, innovative and accountable and treat everyone with respect. We offer opportunities for our staff to realise their potential. 4

5 JRC is supporting political priorities of the Commission Boosting Jobs, Growth and Investment Connected Digital Single Market Climate Action and Energy Deeper and fairer Internal Market Deeper and fairer Economic and Monetary Union Free Trade Agreement with the US Area of Justice and Fundamental Rights New policy on Migration Stronger Global Actor Union of Democratic Change 5

6 Structure of presentation Joint Research Centre of the European Commission Migration modelling in JRC JRC's migration modelling example with the RHOMOLO model Concluding remarks 6

7 Enhancing EU s Action on Migration the role of the JRC Support Europe s more immediate actions on migration Enhance the capacity of FRONTEX and Europol in border management through the JRC's work on internet monitoring, maritime risk analysis and technological solutions based on remotely piloted aircraft systems Support better management of a legal migration and asylum policy Help to improve EU s underlying IT systems by means of the JRC's work on biometrics, digital identity management and smart card security Support reducing incentives for an irregular migration Establish an EU migration index that addresses the root causes of irregular migration and forced displacements in third countries as well as the pull factors in the Union 7

8 Examples of JRC research projects on migration Analysis of root causes, migration incentives and determinants, and map the diasporas Socio-economic modelling to understand better the factors enabling migrant integration, and measure the impact of migration on health, welfare, education, well-being, or demographics Analysis of human mobility scenarios at the EU and global level Evaluation of measures and modelling of the impact of legislative proposals related to migration Anticipate future demographic, economic and geopolitical trends, develop and test future scenarios, e.g. additional legal migration scenarios or integration issues and run simulations to measure their impact for the EU Produce dynamic maps of migration flows for a trend analysis 8

9 Examples of JRC research projects on migration (2) Analysis of the migration and diversity impact on the economic growth using historical migration stock data Analysis of differences in education outcomes (skills and qualifications) between immigrants and natives across different EU countries Analysis of the relationship between school ethnic composition and student achievement across EU countries Develop alternative scenarios for assessing likely push factors for Africa and Middle East by combining demographic projections with assumptions on different stresses that trigger migration (e. economic, environmental) Dynamic mapping of conflicts worldwide as a key factor for migration Analysis of legal migration by taking into account future needs of the EU labour market as an asset for the EU economy Analysis of pull factors based on four-dimensional model of EU population dynamics (age, sex, education and participation) aiming at integration 9

10 Examples of JRC research projects on migration (3) Develop an EU migration inclination index based on derivation of relevant indicators and statistical modelling on available data on root causes of migration and forced displacement Analysis of the climate change as driver of an international migration Analysis of the role of education and other factors for the integration of migrants in the EU Modelling longer term migration flows into the EU on the basis of gravity and spatial interaction models Assessment of the short- and medium-term macro-economic and labour market impact of the refugee crisis 10

11 JRC's Task Force on Migration To further strengthen its support to Commission services in their response to the management of the refugee crisis specifically and migration generally, in 2015 the JRC established a Task Force on Migration The TF on Migration aims to support the migration-related work of Commission services with independent, evidence-based scientific support In 2016 the JRC's Task Force on Migration grows into a Commission-wide Knowledge Centre on Migration and Demography 11

12 Knowledge Centre on Migration and Demography Launch of the European Commission's Knowledge Centre on Migration and Demography in Brussels, Berlaymont, on 20 th June 2016 The KC on Migration and Demography will be hosted by the JRC Internal stakeholders: DG Migration and Home Affairs DG Humanitarian Aid and Civil Protection DG Research and Innovation European Political Strategy Centre (EPSC), and others External stakeholders: International Institute for Applied Statistics Analysis (IIASA) International Organisation for Migration (IOM), and others 12

13 Knowledge Centre on Migration and Demography (2) Governance structure: Steering Group provides strategic direction Core Team assures execution of the action plans Main activities: Building the evidence base, conducting analysis and foresight Exploiting the knowledge base and facilitating uptake by stakeholders Partnerships and networking to extend the knowledge base 13

14 Policy-oriented Research and Evidence-based Analysis Dynamic information hub that provides a continuous situational awareness on migration (e.g. new routes, smuggling/trafficking networks, social unrest) to improve the anticipatory and preparedness of EU institutions Socio-economic modelling, qualitative and quantitative analysis and foresight to improve the understanding of the role that certain factors (e.g. education) play in the integration of migrants, impacts of migration on the human capital, economy and well-being in the EU EU migration index to inform EU actions aimed at reducing the incentives for irregular migration Studies and workshops on topics of relevance to policymakers at national and EU levels to meet both their short and long term information needs 14

15 Observatories and Partnerships Improve accessibility to relevant knowledge on migration flows into, and within, the EU and population movements linked to crises and other factors by means of a pilot European Migration Observatory The Observatory will be established and maintained by the JRC on behalf of the European Commission A close cooperation with the European University Institute in Florence and the European Migration Network will be forged Liaise with, and pool knowledge from, the existing competent national and/or international bodies 15

16 Capacity Building Strengthening the EU border management capability through improving its main underlying IT systems (Schengen Information System, EURODAC, the Automated Border Control system underpinning Europe s revised Smart Border initiative) and the Blue Card scheme Capacity building of affected third countries, particularly in Africa, through making available JRC in-house tools and knowledge for enhanced maritime situational awareness Support the EU and national authorities active in the EU Hotspots through providing enhanced biometrics for fingerprinting incoming migrants 16

17 Structure of presentation Joint Research Centre of the European Commission Migration modelling in JRC JRC's migration modelling example with the RHOMOLO model Concluding remarks 17

18 Types of migration models Migration forecasting models Attempt to predict migration flows based on the current situation and expected future developments Ex-post and ex-ante impact assessment models Attempt to assess socio-economic impacts of a policy action or a change in the external environment, e.g. the Syrian Civil War The JRC's focus of migration modelling activities is on both forecasting and impact assessment of migration (policies) Impact assessment models are particularly relevant in the context of migration policy preparation / revision 18

19 Why models for impact assessment? Direct and indirect effects Migration (policy) induces changes in relative prices on input markets (e.g. downward pressure on low-skill wages) and output markets Relocation of labour between economic sectors and countries Short-run and long-run impacts E.g., a refugee integration policy boosts demand for goods, services and production factors in the short run, e.g. through public demand Increases labour market participation in the long-run Confounding factors coinciding with EU migration policy interventions Internal policy actions, e.g. national migration policies External developments, e.g. civil wars in third countries 19

20 Why models for impact assessment? (2) Because of these complexities, the specific impact of migration and migration policies cannot be identified by simply looking at data In order to capture all direct and indirect, short-run and long-run effects of migration (policy) and assess the impact which can be attributed to it, one has to compare a simulation of the economy as if migration (policy) was absent with one which includes migration (policy) This exercise generally requires the use of macroeconomic models, which can simulate both the baseline scenario (which we do not know) and counterfactual (with alternative policies) scenarios 20

21 Impact assessment in the policy cycle 21

22 Structure of presentation Joint Research Centre of the European Commission Migration modelling in JRC JRC's migration modelling example with the RHOMOLO model Concluding remarks 22

23 Modelling framework In the present analysis we undertake scenario simulations and analysis using the dynamic spatial general equilibrium model RHOMOLO RHOMOLO is a micro-economically founded macroeconomic model rooted in three strands of economic theory: general equilibrium, semiendogenous growth and new economic geography Channels of labour market adjustments Participation, unemployment, education, migration, wage adjustments Three skill levels: low-skill, medium-skill and high-skill Geographical coverage All EU Member States at the NUTS2 regional level 23

24 Simulation of alternative policy scenarios Low integration scenario: the current level of integration Assume the current level of government expenditure on refugee integration into labour markets, and the current level of refugee employment rate (low-, medium-, high-skill) Partial integration scenario of admitted refugees Assume an increase in the current integration expenditures, implying higher than the current employment and participation rates of refugees Full integration scenario of admitted refugees Assume an increase in integration expenditures to achieve comparable professional and language skills to natives, and the same employment and participation rates as of natives 24

25 Scenario assumptions: scenario-uniform public costs The inflow of asylum seekers raises public expenditure, implying a negative effect on public budgets in the short-run During the application procedure, asylum seekers benefits include accommodation costs, healthcare costs, in-kind benefits, cash benefits,.. In addition, successful applicants will have access to welfare benefits, and increase costs of public administration, childcare and education No reliable estimates on public expenditure for accommodating and integrating refugees, the German Council of Economic Experts estimates an overall public cost of around 0.5% of GDP in 2016 and 0.75% in 2017 EUR 800 per asylum applicant EUR 6600 welfare benefits per year for successful applicants Not accounted for: additional public administration costs 25

26 Scenario assumptions: scenario-specific integration costs Two types of integration costs that are different between scenarios are assumed for refugees: Language training costs Upper secondary, professional and/or tertiary education costs Language training costs National data Language training costs are Member State-specific, e.g. EUR 2000 per year per successful applicants in Germany in the baseline scenario Upper secondary, professional and/or tertiary education costs Eurostat data (educ_uoe_fine09) Education costs are Member State-specific, they range from EUR/student/year in Romania to EUR/student/year in Denmark 26

27 Preliminary results of RHOMOLO simulations Permanent growth effects depend strongly on the level of refugee integration Higher levels of refugee integration are more costly for public budget, however, benefits more than outweigh costs The key channels of adjustment are: Short- to medium-run increase in public expenditure Increase in private consumption Medium- to long-run increase in labour supply Medium- to long-run increase in government revenue Medium- to long-run increase in GDP Growth effects depend strongly on the way how the additional public expenditure is financed 27

28 Preliminary results of RHOMOLO simulations (2) Economic growth will be boosted by additional public spending for refugees Government spending to host refugees in reception centres and during the asylum application process will have an immediate positive impact on real GDP growth In addition, language courses and professional training will boost public consumption in the short- to medium-run The net growth effect depends on the way how the additional public expenditure is financed (additional taxes, national budget relocations, EU budget relocations, public borrowing..) 28

29 Preliminary results of RHOMOLO simulations (3) Private consumption and government expenditure for integration measures rise gradually along with the number of accepted asylum applications Welfare benefits will increase the aggregate disposable income of households Housing, clothing, and furnishing needs will directly feed into private consumption Again, the net growth effect depends on the way how the additional public expenditure is financed 29

30 Preliminary results of RHOMOLO simulations (4) Accepted and trained asylum seekers will gradually become available for the labour market, increasing labour supply The share of refugees at working age (15-74) is assumed at 75%, following common estimates in literature Language knowledge and professional skills (both level and profession) will determine how quickly they will become employed, until the acquaintance of necessary skills, no impact on the labour supply In the short- to medium-run, most refugees will enter low-skill jobs The rise in the labour force due to increased migration will have a positive effect on growth in the medium- to long-run Depending on complementarity of refugee skills, immigration will exert a downward pressure on wages Competitiveness, demand and hence production of goods will increase 30

31 Preliminary results of RHOMOLO simulations (5) In the medium- to long run the fiscal impact of refugees will be positive The inflow of asylum seekers will increase public revenue gradually over time, implying a positive effect on public budgets in the long-run Immigration will have a positive impact on public revenue due to higher indirect tax revenue and, as the integration of the immigrants into the labour market advances, increasing revenue from payroll taxes and social contributions 31

32 Structure of presentation Joint Research Centre of the European Commission Migration modelling in JRC JRC's migration modelling example with the RHOMOLO model Concluding remarks 32

33 Concluding remarks Migration offers opportunities and leads to impacts on Europe s resilience (economy, human capital and well-being) To fully exploit the benefits of migration and to mitigate its adverse aspects, the EU must develop a deeper knowledge and understanding of it Enhancing EU s capability in implementing a policy on migration and being better prepared for future challenges requires timely access to the relevant knowledge and evidence-based research Meeting these expectations implies overcoming several challenges including poor data, inadequate models, insufficient information sharing, inaccessible, non-comparable and fragmented knowledge, networks and activities across Europe 33

34 Additional slides 34

35 References to the RHOMOLO model Kancs. D. et al (2016)."Long-term socio-economic and fiscal effects of immigration into the EU: The role of the integration policy", JRC Technical Report JRC101816, European Commission. Ciaian P. and Kancs, D. (2016), "Assessing the Social and Macroeconomic Impacts of Labour Market Integration: A Holistic Approach", JRC Technical Report JRC99645, European Commission. Brandsma, A., Kancs, D., Monfort, P. and A. Rillaers (2015). "RHOMOLO: A Dynamic Spatial General Equilibrium Model for Assessing the Impact of Cohesion Policy", Papers in Regional Science, 94. Brandsma, A., Kancs, D. and D. Persyn (2014). "Modelling Migration and Regional Labour Markets: An Application of the New Economic Geography Model RHOMOLO", Journal of Economic Integration, 29. Brussels, May 12, 2016 DG AGRI 35

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