Postwar Migration in Southern Europe, 1950-2000 : An Economic Analysis

Migration promises to be one of the most pressing topics to be debated throughout the 21st century. Emigrants are now leaving from an ever increasing number of countries and their destinations are equally varied so that it is necessary to consider the phenomenon, using a much abused word, as global. The rapid fall in transport costs, the availability of cheap information, the political and economic upheavals in East Europe as well as the outbreak of local conflicts have all meant that the number of potential emigrants has multiplied. At the same time many former emigration countries have now reached an overall standard of living which makes them potential destination areas. Thus, one of the most difficult challenges of the 21st century will be how this new situation is managed. Destination countries would like to control the inflows of foreigners but their policies risk being ineffective as the flows are changing and becoming more and more complex because labour immigration is being replaced or largely integrated by family reunion (about 50% of the foreigners in Europe entered as family members) and refugees . Further, development policies designed to help countries of origin to raise their standard of living will take some time to have any effect so that the individual’s propensity to emigrate will not fall in the short run. The political changes which are necessary in many countries of origin cannot be completed easily and consequently the demand and supply of migrants will not be balanced out in the near future. The South European countries are a very interesting case to study for if the other industrialised countries find managing migration is a difficult task, it will be much more difficult for them. This is because they have just come out of their emigration phase and they now have to learn how to manage immigration in a period of “large” emigration. They are also close to areas where the pressure to emigrate is extremely high, that is to say, North Africa and East Europe, there are, of course, inflows from more distant countries, too. These “new” receiving countries are attractive for their increased level of income, but they also have a high level of unemployment rate (above the EU average) and a large informal sector,15% to 25% of the economy , two factors which complicate the management of the immigration policy . This book, the fruit of many years of research, aims at analysing this special case using an economic approach. I am deeply convinced that migration is not only an economic phenomenon but also a social one. However the economic analyses of its interaction provide a very thorough tool which can help us to understand its dynamics. The volume tries to cover all the aspect of the migratory phenomenon which are the basis of the economic and not only economic debate. Such questions as what determines the choice to migrate, what effect immigration has on the receiving country, what the consequences of emigration are on the country of origin and how effective migration policies and the policies which involve the area of migration are in managing the migratory phenomenon are considered. In the literature it is not usual to divide the topic in these four themes but such a division makes it possible to separate different methodological approaches which can then be brought together into a single model so that the causes and the effects of migration can be analysed drawing on a wide range of different studies. These themes were analysed within the context of European migration and especially the migratory phenomenon of the south European countries after the Second World War. The migratory phenomenon in Italy, Spain, Portugal and Greece, despite their national differences, evolved in a similar way. There was trans-oceanic and, especially in the immediate post war period, European emigration; while in the eighties new flows sprang up and there was immigration from the developing countries and from east Europe. The first chapter lays out the main numbers so that emigration from South Europe can be compared with Immigration into South European countries. The evolution of emigration from the south European countries in the post-war period and the recent immigration to those countries are highlighted, showing the similarities and the differences between these flows regarding sex, age, activities, professional standing and the direction of the emigration flows and the immigrants’ countries of origin. Then there is a survey of the theoretical approaches and the contents of the debate so as to facilitate the identification of the four most important topics, dealt within the later chapters What determines the choice to migrate is considered in the second chapter. An initial survey of the economic approaches to the migratory choice highlights a wide variety of models which questions the role wage differentials play in determining whether to emigrate or not. Other interpretations emphasise for example, the importance of spreading risks when income is uncertain or the importance of budget constraints and of the level of income in the country of origin. The wealth of the theoretical models is countered by the limited data available in the case of the south European countries, thus the choice of emigration is tested while the choice made by immigrants is left until better information is available. In addition, due to the availability of data, a different approach has been adopted in the empirical analysis. The micro-economic model of an individual’s or a family’s choice as a function of expected wage differentials is compared with the gravity model, where distance plays a key role in slowing down migration and with the sociological model, which identifies family and social ties (migratory chain) as the effective driving force of migration. The results of the empirical tests show that, despite national differences, the best interpretation of how emigration from the south European countries evolved is a combination of the sociological factor of the migratory chain with the traditional economic variables in the form of wage differentials. Thus, although the theoretical models question the importance of wage differentials in explaining the choice to migrate, it is true that overall flows of emigrants respond positively to a rise in wage differentials, and to an increase in the probability of getting a job but there is also an important dynamic relationship with past flows of emigrants. The migratory phenomena analysed are influenced very little by changes in policies governing entry to the labour market, instead, family reunion policies, which influence what effect the migratory chain can have, seem to be important. The lesson driven by these empirical text indicate that in managing immigration countries should in the short run control the domestic demand for foreign labour and the policy of family reunion while foreign aids to favour labour intensive growth in the origin countries reduce migratory pressure only in the long run. The theme, which has attracted most attention in the debate regarding the south European countries, is certainly the effect that immigration has on the destination country and it is dealt with in the third chapter. The theme is arranged in five strands which are dealt with in the first part of the chapter where the theoretical models and the empirical evidence for Europe are presented critically. The second part of the chapter is dedicated exclusively to the question of competition in the labour markets of the south European countries and some completely new empirical results are presented. The analysis of the effect of immigration on the destination country begins by considering what impact of foreign workers have on the labour market (the first strand). The effect can be complementary or competitive. It depends on various factors such as how the labour market operates, the presence of trade unions and on the wage and employment aims proposed by the trade unions. Various models are presented critically and the implications for labour market equilibrium are highlighted. Two important differences emerge in the Southern European case: the first refers to the competition produced by foreigners working in the informal sector, and the second more specific difference is the displacement of native internal mobility namely native unemployed in less developed areas. The second strand is wage assimilation, that is to say, whether a foreigner, during his/her life cycle, can achieve a wage profile similar to that of a comparable native worker. A survey of the theoretical approach and of the problems of empirical estimates is followed by comments on the main US and north European findings, where the difficulty for most recent immigrants to achieve a similar wage pattern to that of the natives can be traced mainly to three factors: they have less human capital, falling economic growth, and the different kind of characteristics immigrants have today; many of them are refugees. While Southern Europeans were able to assimilate in the destination countries the little evidences on immigrants working in the Southern European countries is favourable or at least they do not seem discriminated in wages. The third sub-theme examines the effect of immigration on the growth in the destination country’s per-capita income. It is closely linked to how much human capital the foreigner possesses compared to native workers. If it higher than the national average, there is an increase in per-capita income while if it is lower there is a fall. According to the findings of some researches into the European case, the average human capital of an immigrant is lower than the national average, which leads to the growth in per-capita income slowing down. However, above all in the case when the demand for labour is linked to a shortage, employing foreigners with lower than average human capital also favours an overall growth in production. Less attention has been paid in the south European countries to the fourth strand, that is to say, the impact of immigration on social expenditure, probably because the phenomenon is still recent and there is not yet sufficient data available to carry out an adequate analysis. The theoretical approach is outlined and the main US and European findings are presented. In the American case it is seen that during the first migratory wave, foreigners made less use of the welfare services than similar natives; while in the case of the more recent flows it seems that the situation is reversed and foreigners are extremely well-aware of the benefits which they can claim and they settle where these benefits are most generous. In the European case there has been less research but it seems that there are two contradictory models: a Swiss model, where foreigners contribute with positive transfers to the social expenditure of the native workers and a German model, where, instead, they are net users of social services. The last strand concerns the impact of foreigners on the demographic structure of the population of the destination country and on the pension system. The importance of this strand is seen in that recent immigration into the south European countries occurred in countries with a high rate of ageing and so immigrants are also considered positively for their overall generational contribution. The positive contribution made by foreigners to the structure of the population and to the pension system must not be confused with the probability of both reaching a stationary population and of reducing the pension deficit with flows of immigrants who, as the present research shows, in the medium term, would make the problem worse. The second part of the third chapter develops in greater detail the theme of complementarity and competition between foreigners and natives in the south European countries. A brief description of the findings of the cases of the US, Canada, Australia and north Europe highlights two general rules, which favour complementarity: a selective migratory policy and a flexible labour market. The absence of these two factors would suggest that there is competition between native workers and foreigners; however, empirical findings suggest that complementarity prevails at least in regular labour markets. Evidence of competition, instead, emerges between the irregular and regular activities of foreigners in both Italy and Greece however limited in absolute value. Results differ according to the model of analysis used a micro test on individual data which in general suggests complementarity or an aggregate general computable equilibrium model which is less optimistic. In the second case the aggregate economy is under control and its equilibrium conditions the results of the labour market. A less optimistic view should prevail because many implicit effects of immigration are missing in the empirical analysis, just to name one the displacement of internal mobility. The effect of emigration on the departure country is analysed in the Fourth chapter. Destination countries are also involved in this issue with the aim of reducing migratory pressure, they emphasise the negative effects of emigration on economic growth in the country of origin and have considered whether giving development aid can slow down emigration. There are two main lines of research on this question. The first considers the effect of emigration on the structure of the population and on total human capital and how this affects the growth of the country of origin. The second line what effect emigrants’ remittances have on savings, the distribution of income and the growth of production in the country of origin. Some studies show that the emigrants are selected positively (they are willing to risk, have entrepreneurial ability and sometimes their qualifications are higher than the national average). Therefore their departure is a loss for the productive system in the area of origin, which means that its rate of growth is slowed down. However, other theoretical and empirical studies come to the opposite conclusion, that is to say, there is an increase in average productivity as a result of a reduction in the labour force. Remittances even when they are not directly invested in the productive sectors can also have important multiplier effects on growth. In addition to the findings of the theoretical models, empirical data regarding changes to the age and sex structure of the population caused by emigration of south Europeans are presented. Changes to the labour market and economic growth are also considered together with evidence on the so-called brain drain. The empirical findings cover countries in the Mediterranean basin and the effect of remittances on the balance of payments, on income, on economic growth was considered analytically. Empirical evidence shows that some south European countries and others in the Mediterranean find it difficult to replace the export of workers with the export of goods. The last chapter considers how effective migratory policies are in managing migratory flows and provides a quite discouraging scenario. Migratory policy in its strictest sense is a blunt weapon. German and French experience in the 70s teaches us that if entry for work is reduced, pressure on the other channels of entry increases: family reunion, applications for political asylum and lastly illegal immigration. All of these channels of entry are examined and evidence is provided of how difficulty it is to pursue specific objectives. The high cost and the limited effectiveness of border controls and the economic effects, which an increase in the alternative channels of entry has on the dynamics of the migratory phenomenon are highlighted, too. The problems connected to regularisation measures, especially those introduced in the Southern European countries which experienced repeated regularizations (one every 3-4 years) in a context of large irregular economy are also discussed at length. If it is difficult to control entry and manage the entry of foreigners into a country, it is even more difficult to reduce their presence. The policy of offering incentives to return home has been shown to be of limited effect and deportation is often difficult to carry out without first making repatriation agreements with the countries of origin. Other policies which consider the sphere of citizenship are mentioned and as such they define who is a foreigner and therefore who is subject to the application of the migration laws. The importance of a knowledge of the language as a prerequisite for economic integration is the only theme dealt with in the debate about a foreigner’s integration. This theme is still an initial stage in the south European countries because the migratory phenomenon is recent but it will certainly receive much more attention from economic researchers in the next few years. A synopsis of the characteristics, which can make migration laws more effective in the Southern European case concludes the chapter. However, details will not be revealed here and the reader is invited to consider them later.