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Submitted by Jaime Alvarez on

Albricias, albricias, Shanta! This is a very good piece and I am encouraged by the Bank's research on migrations, long overdue. I also noticed that the 2015 WDR will be on Mind and Culture (looking forward to their take on the effect of migrations). I participated in early activities on the subject, and recall Aaditya Mattoo’s initial moves. At the time I expressed him that this topic ought to be studied more, it’s gone a long way already.

We are in agreement that positive structural reform usually comes with migration. Apparently economists, with few exceptions, have a hard time seeing the obvious. Invasions, conquests, and dramatic forms of displacements have given us EVIDENCE that (by most part) migrations bring structural transformation. For good or bad.

I agree with you that many of the "statements made about the effects of migration on the receiving and sending countries are based on rhetoric rather than evidence". However, the robust evidence is not only found on recent research, as you imply, even if one decides that reality is optional. For example, in addition to hundreds of history books that put migration in context, Sowell's Conquest and Cultures, and Migration and Cultures, shed light into the effect of mobility around the world.

Now, I have to point-out to what I perceive as a shortcoming on your piece. And I have to be fair, and give to you that you did not have 20 pages to elaborate. The problem with research is that "evidence" is often what is available for research or what is sought (and desired) for the purpose of that research. This is applicable not only to social sciences but even biological and physical sciences. For example, you state:

“The effects of migration on the receiving country are positive. While some native workers (who are easily substitutable for migrants) may see their wages decline, most of the economy will see an increase in wages and employment, as migrants perform jobs—such as childcare services—that permit the economy to be more productive (for instance, by allowing both spouses to work outside the home).”

I wonder whether this statement suffers from the same lack of evidence you mention in your piece. What you said in the above paragraph may be correct, yet it is very incomplete. In a “welfare state” one wonders whether the effects of migration are positive for the receiving country. And let me state for the record that as a libertarian I tend to agree with the proposition that mobility enhances the general welfare. However, I have no evidence that this is so in a “welfare state” and may have perceive that the opposite is the case.

If you go to the slums of the Bronx, Los Angeles, or any other city in the USA you may be able to elaborate a hypothesis to challenge the conclusion that the recipient country is better off. Unlike the migrations from the early 1900s, that were basically workers going into the USA free market in exchange for a worker’s compensation the reality today could be (in many instances) completely different. Just recently the EU expressed its concerns about welfare transfers to immigrant from its member countries.

There are anecdotal evidence of people working for a salary in the informality, paying no taxes while collecting unemployment benefits, child support, spousal support and many other forms of welfare benefits that are likely to be a drain rather than a gain for the receiving country. In other words, the effects of free migration has to consider benefits (not only the benefits that allow people we know to have child care and have two incomes) but to the economy as a whole. To my knowledge, this research has not been undertaken completely, and the parts that have been done may have been recently modified because of political expediency?
Further, you talk about the net gains emanating from a developing economy sending a doctor overseas. I ask you, what are the costs assigned to the death of a child who is not served by the doctor that migrates to an industrialized nation and later sends money back home? And I am not yet getting into the crime and related matters brought about in the informality and an underclass. But let me refocus and go back to my point on immigration in a welfare state.

In a "rent seeking" global world, it is hard to find-out where the benefits and costs are really located. And when you find them they are hard to measure. Some well-connected corporations or industries may be interested in using cheap labor to be competitive in the short term, leaving a segment of the population unemployed and even as an underclass. Interesting to see how many economies are now showing more income disparities than before, revealing that the rent seekers at the top are doing pretty well. While some immigrants in these economies may be improving their lives at the expense of displaced workers that become an underclass, or simply takers, is that a desirable outcome? Too bad for those former workers as they were “the suckers” that contribute to the welfare that is feeding the newcomers? Is this outcome either efficient or fair?

In explaining the net impact of migration you went into the non burden nature that new populations have into medical systems of recipient countries. If reads as if medical systems are the only welfare feature in those systems. About education, transport, water and sanitation. But you are also limiting yourselves to one or two examples. What about populations that come as immigrants and malnutrition, in addition to other illnesses that may not put a burden on hospitals but may have public health implications for the society as a whole? If one include the negative externalities that contagious diseases and other things could bring, maybe the picture is not that clear. Among my friends we still discuss whether The Discovery was positive or negative. I will speculate that for some countries it was the transition from the Stone Age to the Renaissance, including the introduction of the concept human rights in the New Continent despite the dismal record in applying it in the New Colonies (measure this). Detractors of my view counter me by pointing at the negative externalities LAC received from The Discovery. In your example of migration from the farm to the cities, what did the urban taxpayer got in exchange for the rural migrant? Higher taxes, the slums, congestion, pollution, and crime and violence?

I know that my take is not based on research "evidence" and that my quest for answers may sound as if I disagree with free flows of workers. One thing I have clear: Workers and firms respond to market and non market rents. I am afraid that the data is not isolating what the mind is able to perceive, and the human action is very quick to capture. But maybe my feelings are based on "evidence", after all. Circa 1986 I had a discussion with a researcher at a think tank. I recall that individual debunking my argument for free migration by stating that in the welfare society, free migration was non-viable. I recently heard that same institution favoring migration. Why their change when the logic remains? I will be inclined to follow the money.

Once more, I welcome the Bank’s push for looking into the impact of migrations in economic development. Very promising.