Migration and ethnicity

The relationship between climatic shocks, climate related disasters, and migration has received increasing attention in recent years and is quite controversial. One view suggests that climate change and its associated natural disasters increase migration. An alternative view suggests that climate change may only have marginal effects on migration. Knowing whether climate change and natural disasters lead to more migration is crucial to better understand the different channels of transmission between climatic shocks and migration and to formulate evidence-based policy recommendations for the efficient management of the consequences of natural disasters.

Remittances have risen spectacularly in absolute terms and in relation to traditional sources of foreign exchange, such as export revenues. Remittances can improve the well-being of family members left behind and boost growth rates of receiving economies. They can also create a culture of dependency, lowering labor force participation in recipient nations, promoting conspicuous consumption, and accelerating environmental degradation. A more thorough understanding of their impacts can help formulate policies that enable developing economies to harness the most out of these monetary inflows.

Many immigrant destination countries face considerable pressure to change their immigration policies. One of the most innovative policies is auctioning the right to immigrate or to hire a foreign worker to the highest bidders. Visa auctions would be more efficient than current ways of allocating visas, could boost the economic contribution of immigration to the destination country, and would increase government revenues. However, visa auctions might weaken the importance of family ties in the migration process and create concerns about fairness and accessibility. No country has yet auctioned visas, although several have considered doing so.

Many migrants do not stay in their host countries permanently. On average, 15% of migrants leave their host country in a given year, many of whom will return to their home countries. Temporary migration benefits sending countries through remittances, investment, and skills accumulation. Receiving countries benefit via increases in their prime-working age populations while facing fewer social security obligations. These fiscal benefits must be balanced against lower incentives to integrate and invest in host country specific skills for temporary migrants.

New Zealand is a small open economy, with large international labor flows and skilled immigrants. After the global financial crisis (GFC) employment took four years to recover, while unemployment took more than a decade to return to pre-crisis levels. Māori, Pasifika, and young workers were worst affected. The Covid-19 pandemic saw employment decline and unemployment rise but this was reversed within a few quarters. However, the long-term impact of the pandemic remains uncertain.

There are a myriad of economic and non-economic forces behind the decision to migrate. Migrants can be “pushed” out of their home countries due to deteriorating economic conditions or political unrest. Conversely, migrants are often “pulled” into destinations that offer high wages, good health care, strong educational systems, or linguistic proximity. In making their decision, individuals compare the net benefits of migration to the costs. By better understanding what forces affect specific migrant flows (e.g. demographic characteristics, migrant networks, and economic conditions), policymakers can set policy to target (or reduce) certain types of migrants.

In knowledge-based economies, attracting and retaining international students can help expand the skilled workforce. Empirical evidence suggests that open migration policies and labor markets, whereby students can remain in the host country post-study, as well as good quality higher education institutions are crucial for successfully attracting international students. Student migration can positively affect economic growth in both sending and receiving countries, even though migrants themselves reap most of the gains, mainly through higher earnings.

Extreme weather events are increasing in frequency and intensity, threatening lives and livelihoods around the world. Understanding the short- and long-term effects of such events is necessary for crafting optimal policy. The short-term economic impacts of natural disasters can be severe, suggesting that policies that better insure against consumption losses during this time would be beneficial. Longer-term economic impacts are more complex and depend on the characteristics of the affected population and the affected area, changes in migration patterns, and public policy.

How migration affects labor markets in receiving countries is well understood, but less is known about how migration affects labor markets in sending countries, particularly the wages of workers who do not emigrate. Most studies find that emigration increases wages in the sending country but only for non-emigrants with substitutable skills similar to those of emigrants; non-emigrants with different (complementary) skills lose. These wage reactions are short-term effects, however. If a country loses many highly educated workers, the economy can become less productive altogether, leading to lower wages for everyone in the long term.

Immigrants tend to live in clusters within host countries. Does clustering in ethnic enclaves explain the persistent differences in skill, employment rates, and earnings between immigrants and the native population? Empirical studies consistently find that residing in an enclave can increase earnings. While it is ambiguous whether employment probabilities are also affected or whether earnings benefits accrue to all immigrants, irrespective of their skill levels, it is clear that effects are driven by enclave “quality” (in terms of income, education, and employment) rather than enclave size.