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The Economics of Circular Migration

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The Economics of Circular Migration A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Constant, Amelie F.; Nottmeyer, Olga; Zimmermann, Klaus F. Working Paper The economics of circular migration IZA Discussion Papers, No. 6940 Provided in Cooperation with: IZA – Institute of Labor Economics Suggested Citation: Constant, Amelie F.; Nottmeyer, Olga; Zimmermann, Klaus F. (2012) : The economics of circular migration, IZA Discussion Papers, No. 6940, Institute for the Study of Labor (IZA), Bonn This Version is available at: http://hdl.handle.net/10419/67308 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu IZA DP No. 6940 The Economics of Circular Migration Amelie F. Constant Olga Nottmeyer Klaus F. Zimmermann October 2012 DISCUSSION PAPER SERIES Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor The Economics of Circular Migration Amelie F. Constant DIW DC, George Washington University and IZA Olga Nottmeyer IZA Klaus F. Zimmermann IZA and Bonn University Discussion Paper No. 6940 October 2012 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 E-mail: [email protected] Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. IZA Discussion Paper No. 6940 October 2012 ABSTRACT The Economics of Circular Migration* Circular migration receives increasing attention due to its empirical relevance and as a policy concept to manage labor flows. This review discusses the advantages and disadvantages of circular movements for all parties. It studies the characteristics of circular movers worldwide and investigates the consequences of restrictive migration policies. Recent policy initiatives that aim to manage circular labor movement are also analyzed. JEL Classification: J61, F22, F24 Keywords: geographic labor mobility, immigrant workers, international migration, remittances Corresponding author: Klaus F. Zimmermann IZA P.O. Box 7240 D-53072 Bonn Germany E-mail: [email protected] * We thank the anonymous referee for many helpful comments on earlier drafts. This paper will be published as a chapter in the forthcoming handbook of Constant and Zimmermann (2013). 1. Introduction The economics of migration literature saw an increasing interest in circular or repeat migration in the last two decades. At the same time, more and more programs concerning circular, revolving-door or "va-et-vient" migration started sprouting. By the year 2003 about 176 bilateral labor agreements have been signed among the Organization for Economic Cooperation and Development (OECD) countries alone (Newland et al., 2008). The importance of circular migration is underscored in the September 2005 communiqué on migration and development of the European Commission. The benefits of this labor movement "back and forth" between the home and host countries as well as labor movements involving third countries are listed in the Global Commission on International Migration (GCIM), the International Organization for Migration (IOM), the World Bank, the European Commission, and the House of Commons International Development Committee. The emerging importance of circular migration comes from its potential benefits to all countries involved in migration - be it the home or sending country, the host or receiving country or a third country, as well as to the migrants themselves. Circular migration is not a new phenomenon or a new form of migration that suddenly appeared in the late 20th century. Looking back in time before even current national borders existed, many migration moves were de facto circular. Nomads, traders, and other seasonal laborers have been pursuing livelihood strategies by consciously taking advantage of opportunities in time and space in order to meet their needs under scarce resources. These needs include food security and access to institutions such as welfare, insurance, access to credit markets and risk diversification. In developing countries, circular migration has also been the road to eliminate poverty. 1 In neoclassical economic theory1 in which rational labor migrants (the agents) have complete information, maximize utility under income constraints, make decisions at the margin, are optimizers, and pursue their own self-interest, it is natural that labor migrants move multiple times taking advantage of each situation in each country. Migrants optimize their income, savings, and investment strategies according to employment options and possibilities in both the home and host country and therefore improve their economic, social, and personal situation in every move and reach equilibrium (Constant and Zimmermann, 2011). With technology allowing relative inexpensive travels and with communications allowing easier information access, the last couple of decades have witnessed circular migration in a larger scale. The creation of de facto migration markets ensures the efficient allocation of the scarce resource labor. In addition, circular migrants can be the buffer during periods of economic volatility and provide employers with a flexible labor force. Agreements about free labor mobility among countries can also foster circular migration. Such examples we find in the European Union of 27 and between Australia and New Zealand.2 Besides the receiving and sending countries, the migrants themselves can profit from repeated or circular moves. As there are benefits there are also disadvantages and costs associated with circular migration that we will cite and discuss in a later section. In addition to theoretical arguments empirical studies can enlighten our understanding of circular migration and produce sound evidenced-based policy recommendations. Unfortunately, empirical evidence about circular migration is scarce and empirical analyses are limited due to missing or problematic data. A thorny issue in the data collection is whether a free democratic country should prohibit its residents from going abroad and/or gather 2 information about their exit and re-entry.3 Even if this information could be obtainable, often reliable data do not exist because there is no matching information in home and source countries. A notable exception is the Mexican Migration Project (MMP), a bi- national study that surveys Mexicans on both sides of the U.S.-Mexican border since 1983. MMP allows for unique insights into the characteristics and determinants of circular migration. For example, these data show that Mexicans are indeed practicing circular migration; they are going to the US to work for a couple of months, and return to Mexico to live. Other limitations arise because surveys may follow migrants only for a limited period of time and report observations of only parts of migrants’ lives, or they even do not ask about migration history at all. Availability of better datasets such as the German Socio Economic Panel (GSOEP) that is done since 1984 and has rich information on before and after migration experiences make empirical studies on circular migration possible. According to the analysis of Constant and Zimmermann (2011), male and single migrants and those who have lower levels of education and are closer attached to the labor market are more likely circular migrants in their GSOEP sample. The New Immigrant Survey (NIS) is another exceptional migration dataset combining information from US
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