Migration and Labor Market Outcomes in Sending and Southern Receiving Countries

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1 Migration and Labor Market Outcomes in Sending and Southern Receiving Countries Giovanni Peri (UC Davis) Frederic Docquier (Universite Catholique de Louvain) Christian Dustmann (University College London) Giovanni Facchini (University of Milano) Berlin, Feb 24 th 2011

2 Description of the Project The research is articulated in 8 different studies combining empirical and theoretical analysis and new data on three topics: 1) The labor market effects of international migrations in sending and receiving countries: focus on Europe (Peri and Docquier)- and South Africa (Facchini). 2) The motivations, size and effects of temporary migration (return). Analysis of migration for learning, migration and asset accumulation at home (Dustmann). Focus on Romania, Eastern Europe (Peri) and Mexico (Peri). 3) The size and effects of brain drain in its potentially most damaging form: Medical Brain Drain (Docquier).

3 1) New Data From censuses of 70 countries in 1990 and 2000 we have constructed data on net migration by education level, : tertiary and more, secondary and less. First important finding is that migrants are much more education-intensive than non migrants, both relative to the sending and to the receiving countries. The rhetoric of low skilled immigration is not supported by the data

4 1)Total migration Emigration rate to OECD vs to All Gross vs. net emigration rates Bubble sizes are proportional to total emigration stocks

5 Immigration as % of nationals in 1990 Emigration as % of nationals Low Education High education Low Education High education U.S Canada Australia U.K Belgium France Germany Greece Italy Netherlands Portugal Spain Sweden Czech R Hungary Poland Turkey Mexico

6 1) Impact on Wages Accounting for the fact that they take different jobs from natives, that they are slightly more educated than natives, that they stimulate investments and increase productive activity immigration has a small positive effects on native wages. Emigration has a negative effect instead, when we do not consider potential return, incentive effects on non-migrants.

7 Basic results (Docquier, Ozden Peri) 1a. Impact on average wages of non-movers Western Europe Eastern Europe Immigration Emigration

8 Wage-effect of immigration and emigration (Best-case and Worst-case scenarios) Immigration Emigration

9 1) Policy Discussion and Implications The economic worries about immigrants and wages are misguided for Western Europe. Receiving country wages rise with immigration. Emigration hurts productivity of sending country but the effect is not large. More open policies of migration for economic reasons can be beneficial to receiving countries and to migrants. Study the determinants of anti-immigrants opinions (Facchini and Mayda, for South Africa) Should we worry about emigration? Let s consider temporary migration, incentive to return

10 South-South migration Even to South Africa, immigrants are more educationintensive than natives, considering college graduates as high skilled. Micro evidence on the competition effects of immigrants does not support any wage effect on natives, possibly some competition for highly educated. Including the positive effect of college educated even South Africa may have positive effect from immigrants

11 Educational attainment, South Africa, men (2007) Natives Migrants Less than primary completed Less than secondary completed Secondary completed University completed

12 2) Return Migration New data: it is a very significant phenomenon (see Table) New theoretical understanding: not only the premium to skills matters but the learning possibilities on the job (Dustmann, Fadlon and Weiss). New focus: Romania, using census, plus national demographic survey: very positive skill selection of migrants to some countries and returnees (see picture).

13 From Ambrosini, Peri, Mayr and Radu 2010 Imputed return relative to gross migration flows (any OECD destination) ; Selected Eastern European source countries Source Return Flows (imputed) Gross flows Return/Gross Albania Bulgaria Czechoslovakia Estonia Hungary Lithuania Latvia Poland Romania

14 Selection of Romanian emigrants Figure 1: Selection over Education Panel 1: Non Migrants and Returnees (Romania Census) Panel 2: Non Migrants and Migrants to USA (US census) Share of Employment Share in Employment Less Primary Primary Secondary University Education Groups Non Migrants Returnees Less Primary Primary Secondary University Education Groups Non Migrants Migrants to the USA Panel 3: Non Migrants and Migrants to Austria (Austria census) Panel 4: Non Migrants and Migrants to Spain (Spanish Census) Share in Employment Share in employment Less Primary Primary Secondary University Education Groups Non Migrants Migrants to Austria Less Primary Primary Secondary University Education Groups Non Migrants Migrants to Spain

15 Figure 3 Kernel density of non migrants and returnees over skill, Census 2002 Monthly wages, in 2003 US $ density $ 600 $ 1100 $ 1810 $ 2980 $ ln(monthly wages) Non Migrants Returees

16 2) Main Findings Migrants are positively selected in their earning ability. Returnees as well, moreover they earn a significant wage premium over non migrants (Romania, Mexico) In this context temporary migration is skill-enhancing for the sending country. Simulated effect of higher openness of western countries to migrants from Eastern Europe, generates increase in average wages and average schooling of Eastern Europeans.

17 2) Policy implications Making labor market of European countries more accessible to Eastern European results in a gain for both groups in terms of average wages if return migration is widespread. Manage temporary migrations, and enact policies to encourage return (fiscal incentives to return). This may increase benefits for sending countries. Accumulation of wealth of returnees takes place in large part in the sending country if migrants intend to return (Dustmann and Mestres). Facilitate productive investments at home.

18 3) Physician emigration Bhargava, Docquier, Moullan (2011), Modeling the effects of physician emigration on human development, Economics and Human Biology, forth. New database on physician emigration rates for 195 countries (emigration to 18 destinations, by country of birth, from 1991 to 2004) Medical Brain Drain not only from very poor countries.

19 Physician emigration Geographical distribution of physician emigration rates in 2004

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21 Physician emigration and growth in number of Physicians Efficient estimates for growth rates of physicians Dependent variable: Growth rate of number of physicians Specification: (1) (2) (3) (4) (5) Explanatory variables: RE 3 RE 3 RE 3 RE 3 FE 4 ln ( 1 + Medical brain drain rate) * * * * (0.064) (0.065) (0.091) (0.146) (0.391) ln (Total number of physicians) * * * * * (0.007) (0.012) (0.012) (0.030) (0.058) Sub-Saharan Africa dummy * * * * - (0.029) (0.030) (0.032) (0.058) ln (Number of medical schools) * * (0.011) (0.016) ln (Number of medical students) * * - (0.012) (0.028) ln (GDP per capita) (0.009) (0.009) (0.010) (0.019) ln (Remittances per capita) (0.006) (0.006) (0.007) (0.011) Constant * * * * 3.583* (0.088) (0.114) (0.086) (0.158) (0.538) Chi-square (12) test for exogeneity of lagged number of physicians * * Significant incentive effect: increasing emigration prospects stimulates medical training decisions

22 Physician Brain Drain (PBD) 1) The incentive effect attenuates it but does not eliminate the drain. 2) However children mortality and other health variables are not significantly affected by the PBD. 3) GDP per capita, literacy rate are much more relevant

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24 Physician emigration and Child Mortality Elasticity of child mortality rates with respect to numbers of physicians conditional upon adult literacy rates Although all coefficients are significant, the global effect of staffing levels on human development is low Reducing physician brain drain only induces small effects on human development

25 3) Findings of the empirical analysis: Significant incentive effect of emigration on getting a medical degree. This attenuates the drain. Physicians/1,000 people in the country matter but not too much for child mortality and vaccination intake. However when controlling for other determinants of medical services (spending, structures) the effects are very small. Especially in countries with large schooling levels. Reducing physician Brain Drain has likely small empirical effects on human development. Physician abroad are not correlated negatively to health outcomes in the country.

26 3) Policy Implications 1) This form of brain drain from very poor countries can be particularly bad. Evidence, however, suggests that there is also an incentive effect, and that its effect on health outcomes is small. 2) The type of specialization may be affected by the migration perspectives. Migration for learning may not be working. Privilege locally needed specialization. 3) Increase the supply of strategic complements: nurses, medical structures. Encourage return of doctors with wage incentives. 4) Black-listing doctors from developing countries may hurt the more vulnerable ones. May be better to ask recruiting countries to fund medical schools.