In Europe and North America immigration is a central topic in the public debate. Over the past 40 years economists have produced a wealth of knowledge on the effects of immigration on the wages and employment of natives, and also on economic growth, crime, and other outcomes. What is often overlooked is that migration also affects the sending countries; every immigrant to one country is also an emigrant from another country. Some countries have experienced large emigration waves. For example, after 1850 around 20% of the population of Ireland emigrated. Or take Mexico: currently around 10% of all the people who were born in Mexico reside in the US. If immigration affects people in the receiving countries, we should expect emigration to also affect those who have stayed behind in their countries of origin.
Shouldn’t the effects of emigration be just the mirror image of the effects of immigration? Not quite. Many sending countries are low- or middle-income countries, where the effect of migration may be felt differently compared to advanced economies that are typically the destination countries for migrants. Also, many migrants are among the most skilled in their own countries, but they often take up low-skilled jobs after arriving in the destination countries. Workers leaving high-skilled jobs presumably have a different effect than workers entering low-skilled jobs somewhere else.
Economic theory can help us to understand the channels through which emigration may affect the wages of stayers. The mechanisms of supply and demand should play a role here: if the emigrants are predominantly high-skilled, we would expect high-skilled workers who stay behind to be better off, because they are competing against fewer workers in the labor market. But there can be distributional effects: the emigration of high-skilled workers may reduce the need for low-skilled workers, which may reduce the wages of low-skilled workers. Moreover, large emigration waves may trigger adjustments in the macroeconomy, such as changes in trade patterns, remittances, or industrial composition, which, in turn, may affect the wages of stayers. Which of these mechanisms dominates is an empirical question.
Studying emigration empirically is challenging due to a lack of suitable data. Receiving countries have a strong interest in counting the number of immigrants, but it is difficult for countries of origin to track how many people have emigrated and the characteristics they have. Researchers often rely on immigration data from the main destination countries to calculate how many people have emigrated: for example, the number of Mexicans in the US provides a good estimate for the number of people who have left Mexico. A second challenge is to separate causation from correlation. Emigration is a deliberate choice that may be driven by factors that also determine wages, such as the decline of certain industries or labor market regulations for certain workers. Researchers typically overcome this problem by looking at large unforeseen migration shocks such as the emigration of Mexicans after the peso crisis in the 1990s, or the emigration from central European countries after EU enlargement in 2004.
The evidence shows that emigration has a positive effect on wages on average, although not all workers gain. Perhaps the most convincing case of strongly positive long-term effects is Ireland. Economic historians have shown that Irish living standards in the late 19th/early 20th century would have been much lower had it not been for the mass emigration seen several decades earlier. A more recent emigration episode is the mass migration from Poland and Lithuania after the countries joined the EU in 2004 and workers could move freely. Research documents strong wage gains for younger workers who stayed behind—not surprising given that most emigrants were young—but losses for older workers. Work on Latin American emigration, in contrast, finds that the effects differ by education level. Highly educated workers who stayed in Mexico or Puerto Rico gained from the emigration of mainly high-skilled workers, whereas less educated workers saw decreases in their wages.
Emigration can have profound effects on the economy of the country of origin and, thus, affects the wages of workers who stay behind. Studies have documented strong distributional effects on wages, with gains for workers whose skills are similar to those of the emigrants and losses for workers with different skills. What is less understood is how emigration affects the broader economy, for example, innovation, structural change, or the wage setting policies of unions.
© Benjamin Elsner
Read Benjamin Elsner’s IZA World of Labor article: “Does emigration increase the wages of non-emigrants in sending countries?”
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