International Migration: Seizing the Opportunity Gabriel Felbermayr Munich Economic Summit June 30 / July 1, 2016 Ifo Center for International Economics
G. Felbermayr 22 AGENDA A huge potential Natives gain from immigration (on average) On the quality of immigrants (and emigrants) How to create mutual benefits
G. Felbermayr 33 Push factor: Youth bulge UN forecasts, million Persons, some migration included 50 40 30 20 10 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 Deutschland Nord Afrika Afghanistan Pakistan Syrien Irak Source: UN World Population Prospects, Medium Variant, Oct. 2015 2080 2085 2090 2095 2100
G. Felbermayr 44 Pull factor: Demographic divergence UN forecasts, million Persons, some migration included 500 400 300 200 100 0 2015 2020 2025 2030 Nordafrika Af-Pak 2035 2040 2045 2050 2055 2060 2065 Naher Osten Deutschland 2070 2075 2080 2085 2090 2095 2100 Source: UN World Population Prospects, Medium Variant, Oct. 2015
G. Felbermayr 55 Pull factor: Development gaps Per capita incomes in PPPs (USD, 2005 prices), Germany = 100%, 2014 100% 80% 60% 40% 20% 0% Germany 35 000 USD 28% Serbia 22% 21% Quelle: Penn World Tables 8.1. Expenditure-side real GDP at current PPPs (in mil. 2005US$). Push factor: Climate change Push factor: Religious strife Bosnia & H. Albania 17% 14% 13% Egypt Syria Iraq 9% 8% Nigeria Pakistan 3% Ethiopia
G. Felbermayr 66 AGENDA A huge potential Natives gain from immigration (on average) On the quality of immigrants (and emigrants) How to create mutual benefits
G. Felbermayr 77 The effects of immigration on natives Assumptions: neoclassical labor market 1. Downward-sloping labor demand 2. No labor market imperfections 3. No welfare state 4. Static economy Wages of competing workers (low skilled) Returns to noncompeting factors (capital, highly educated) Distribution effects But winners gain more than losers lose: aggregate surplus Opposite effects in sending countries Short-lived effects Source: Felbermayr et al., 2015.
G. Felbermayr 88 Ifo migration model Integrated approach Native income, status quo vs. autarky, 2012 Immigration surplus Labor market imperfections: Denmark Austria Canada USA France 0.8% Unemployment Wage bargaining Sweden 0.6% Netherlands 0.5% Welfare state: UK 0.4% restribution Germany 0.3% through transfers and public goods 0.2% Source: Battisti, Felbermayr, Peri und Poutvaara, 2014. 0.8% 1.2% 1.9% 1.8%
G. Felbermayr 99 Ifo migration model Integrated approach Native income, status quo vs. autarky, 2012 Immigration surplus Labor market imperfections: Denmark Austria Canada USA France 1.2% Gross effect: 0.8% Taxes and Transfers: 0.8% Unemployment Net: Wage bargaining Sweden per capita: 0.6% Netherlands 0.5% Welfare state: UK 0.4% restribution Germany 0.3% through transfers and public goods 0.2% Source: Battisti, Felbermayr, Peri und Poutvaara, 2014. 1.9% 1.8% + 17 bn - 9 bn + 8 bn 120
G. Felbermayr 10 10 What factors favor aggregate gains? Requirements Germany OECD Share of high-skilled immigrants relative to natives: HIGH Unemployment rate of low-skilled immigrants relative to natives: LOW Degree of redistribution between rich and poor:* LOW Size of immigration flows:** MEDIUM 0.7 1.0 1.8 1.6 46% 45% 15% 17% * Government spending as a share of GDP ** Share of immigrants in total labor force Source: Battisti, Felbermayr, Peri und Poutvaara, 2014.
G. Felbermayr 11 11 AGENDA A huge potential Natives gain from immigration (on average) On the quality of immigrants (and emigrants) How to create mutual benefits
G. Felbermayr 12 12 Germany: Emigrants positively selected Emigration and immigration of German citizens, 1967-2013 IN OUT NET 2012: 70% highly educated Average age: 37 Source: SVR, 2015.
G. Felbermayr 13 13 Germany: Immigrants negatively selected Germany, 2013, gross wages 20 50 / hour 16 12 8 4 40 30 20 10 % 0 0 Year of entry > 2007 2003-07 < 2003 > 2007 2003-07 < 2003 Origin West Non-West Natives Medianlohn, li. Achse Median wage, left axis Source: Battisti et al., 2015. Data from SOEP. % unter Mindestlohn, re. Achse % below minimum wage, right axis
G. Felbermayr 14 14 What drives selection? Policy: Canada, Australia, Relative scarcity: distribution of gross wages GER Welfare state: distribution of net incomes Individuals with high earnings potential: prefer low redistribution (low taxes, low transfers) Opposite für low earnings potentials A problem for host countries with generous welfare states and regional / global efficiency Source US Source: Borjas (1987), for empirical evidence by ifo researchers see Borjas et al. (2015) for Denmark and Waldinger et al. (2015) for Germany.
G. Felbermayr 15 15 AGENDA A huge potential Natives gain from immigration (on average) On the quality of immigrants (and emigrants) How to create mutual benefits
G. Felbermayr 16 16 An impossible trinity Free labor mobility gains from integration Welfare state insurance, public goods Inclusion principle equal treatment Source: Drifill and Sinn (2015).
G. Felbermayr 17 17 What is needed for a success story? Mutual benefits for migrants, host country populations and source countries Extra-EU migration A proactive, qualificationbased immigration policy Cooperation with source countries: minimize red tape, ensure consistency with development goals Intra-EU migration End the inclusion principle to guarantee productive efficiency and safeguard social systems Improve portability of social security claims Promote functioning of labor markets!