Why Do People Move to Norway? Analysis of Determinants in Source Country

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Why Do People Move to Norway? Analysis of Determinants in Source Country Why do people move to Norway? Analysis of determinants in source country Rasa Svedaite-Palm Thesis for the Master of Philosophy in Economics Department of Economics UNIVERSITY OF OSLO May 2016 II Why do people move to Norway? Analysis of determinants in source country III © Rasa Svedaite-Palm 2016 Why do people move to Norway? Analysis of determinants in source country Rasa Svedaite-Palm http://www.duo.uio.no/ Printed Reprosentralen, University of Oslo IV Acknowledgments This thesis was written as a completion of the Master of Philosophy in Economics at the University of Oslo. First and foremost, I am grateful to my supervisor Professor Karen Helene Ulltveit-Moe for her guidance and valuable feedback throughout the writing process. I would also like to thank Margarita for the words of encouragement during our many coffee breaks and lunches. To Zivile and Chris, thank you for the proofreading, for always checking in with me and supporting me emotionally throughout my studies. Finally, I am grateful to my husband Aksel for his support, encouragement and endless patience, and to our son Matias for always putting things into perspective for me. V Summary In this thesis, I study the determinants of migration to Norway for the period of 2003 – 2013. I adapt the migration model developed by Clark et al. (2007) to Norway in order to explore the background factors in the source country that drive migration to Norway. I use panel data for 76 source-countries from 2003 to 2013 and run a panel data regression using a STATA statistical analysis tool in order to quantitatively assess the importance of these factors. I conclude that income, inequality, stock of previous immigrants and distance to the destination country are all significant factors affecting migration from EU/EEA-countries to Norway. For non-EU/EEA countries, stock of previous immigrants is found to be the single most important determinant affecting migration flow to Norway. In addition to this, I compare the results found by Clark et al. for the United States to migration determinants to Norway, concluding that the results differ significantly due to differences in the purpose of migration to the United States and Norway. VI Table of contents 1 Introduction ........................................................................................................................ 1 2 Migration to Norway- Styled Facts .................................................................................... 3 3 International Migration: a Review of Theory and Empirical Evidence ............................. 7 3.1 International migration theory ..................................................................................... 7 3.2 Empirical Evidence on the Determinants of Migration ............................................. 11 4 Modelling migration to Norway ....................................................................................... 16 4.1 Modelling migration .................................................................................................. 16 4.2 Adapting model to Norway and data collected ......................................................... 20 5 Econometric results .......................................................................................................... 27 5.1 Results ....................................................................................................................... 27 5.2 Discussion .................................................................................................................. 32 5.3 Econometric Issues .................................................................................................... 35 6 Conclusions ...................................................................................................................... 38 References ................................................................................................................................ 40 Table 1. Number of immigrants living in Norway, by country of origin ................................... 3 Figure 1. Immigrants and Norwegians born to immigrant parents, by country of origin .......... 4 Figure 2. Non-Nordic Immigrants, by reason for migration ...................................................... 5 Table 2. Immigrants by reason for immigration and country of background, 2013 .................. 6 Figure 3. Ricardo-Viner model .................................................................................................. 8 Figure 4: Wage disparities in source and destination countries ............................................... 10 Table 3. Explaining U.S. Immigration ..................................................................................... 19 Table 4. The Balanced Panel For Immigration to Norway, 2003 - 2013 ................................. 22 Table 5. Numbers in the Panel and Total Immigration, 2003 - 2013 ....................................... 23 Table 6. Multicollinearity Diagnostics of Independent Variables ........................................... 24 Table 7. Immigration Rate Regression ..................................................................................... 28 Table 8. Immigration Rate Regression- EU/EEA-countries .................................................... 30 Table 9. Reason for migration to Norway by origin, 2013 (Percent of total for each source) . 31 Table 10. Class of Admission to United States by Source Area, 1998 .................................... 34 VII 1 Introduction The massive migration flow into Norway and other European countries over the last several decades has precipitated debate about the gains and losses from immigration. More than a million migrants came into Europe in 2015, causing a crisis in the recipient countries as they struggle to cope with the influx. Moreover, the open borders and single labor market - the founding principles of the European Union - are threatened as the countries struggle to find a common solution for coping with mass immigration. Hungary has closed its border to Croatia and Germany has reimposed its border controls with Austria in 2015. Migration has huge political and economic implications for the destination countries, raising the question whether the welfare of the developed countries can be sustained if the crisis continues and more refugees are admitted. Immigration to Norway has increased significantly over recent years, and as of the beginning of 2016 there were 700 000 immigrants living in Norway. Economists predict that the increase in the number of refugees in Norway will threaten the welfare of Norwegian society, which is already affected by the potential economic crisis due to oil price reduction. Furthermore, as the government has tightened legislation and started returning refugees to Russia in order to deter asylum seekers, society has become divided between those wanting to accept as many refugees into the country as possible, and those wanting to close the borders. There is a great deal of economic literature on the implications of migration for the destination and source countries. Here, I will focus on the determinants of migration in the origin country. Several recent studies have examined the economic and demographic determinants of migration. Karemera et al. (2000) studied migration flows to North America and found that the population of the source country and the income in the receiving country are the two main determinants of migration to the United States and Canada. Mayda (2010) and Pedersen (2008) analyze migration flows to OECD countries, while Clark et al. (2007) look at economic and demographic determinants in source countries that influence migration to the U.S. They find that income, inequality, stock of previous immigrants, distance and education are all important factors for migration decision making. The main objective of this study is to adapt the model developed by Clark et al. (2007) to Norway, explore the background factors in the source country that drive migration to Norway, 1 and quantitatively assess the importance of these factors. For this purpose, I use panel data for 76 source-countries from 2003 to 2013 and then run a panel data regression using a STATA statistical analysis tool. I conclude that income, inequality, stock of previous immigrants and distance to the destination country are all significant factors affecting migration from EU/EEA-countries to Norway. For non-EU/EEA countries, stock of previous immigrants is found to be the single most important determinant affecting migration flow to Norway. In addition to this, I compare the results found by Clark et al. for the United States to migration determinants to Norway, finding that they differ significantly due to differences in the purpose of migration to the United States and Norway. First, I will present the economic theory of migration by summarizing the main findings of previous theoretical and empirical works. Following this, I will describe the model developed by Clark et al. (2007) for migration to the United States, show the results of their study and explain how their model can be adapted to immigration to Norway. Moreover, I will describe the data collected for this study and explain the results obtained when analyzing determinants of migration to Norway. Finally, I will discuss how and why these results differ when analyzing EU/EEA countries and non-EU/EEA countries separately, and how the results differ from findings by Clark et al. I will conclude with section 6. 2 2 Migration
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