Lecture notes
International migration as an investment
- Institution
- University Of Bath (UoB)
Looking at migration as an investment into human capital, the economic consequences of migration
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International Migration as an investment• Individuals will move if they can increase the present value of benefits by
greater that the costs of moving
1. Migration as an investment in human capital
• Costs
◦ Divided into direct(money) and indirect(non-money)costs
◦ Money costs
‣ Out of pocket expenses
‣ Increased expenditure on food lodging and transportation
◦ Non money
‣ Opportunity costs of migration
‣ Earning foregone while moving, searching for work or training for
the new Job
◦ Psychic costs of moving- reluctant to leave family behind
◦ However author wants to separate these costs and focus on the real
resource costs
• benefits
◦ Investment benefit- higher income in new country
◦ returns of migration represent a higher productivity
◦ Author when calculating the net present value of migration, accepts he
only bases it on real resource costs, however notes that the psychic
costs and benefits aren’t quantitative
◦
• Net present value of migration (NPVm) calculation
◦ NPVm = Discounted benefits - Discounted costs(resource + psychic)
◦ migration will be greater when:
‣ The greater the annual income differential (Ya-Yh), lower age allows
for a longer period over to which enjoy increased net earnings
‣ Smaller direct and indirect costs, young people will have fewer
possessions, less things to take across
‣ Smaller psychic costs, youngers have a less extensive network of
friends
• Implications
◦ it is young, more entrepreneurial , single individuals with no kids
that are likely to have a positive NPVm
◦ As long as there are large income inequalities between countries, the
pressure to migrate will be great
2. The economic consequences of migration
• 3 sets of individuals to consider when analysis consequences of migration:
◦ The migrants themselves
◦ individuals in the destination country (receiving)
◦ Individuals in the home country (origin)
• Taxonomy
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