Theory of Migration Research Paper

1. Neoclassical Economics

The oldest and best-known theoretical model, neoclassical economics, argues that migration is caused by geographic differences in the supply of and demand for labor (Lewis 1954, Ranis and Fei 1961). A region with a large endowment of labor relative to capital will have a low equilibrium wage, whereas an area with a limited endowment of labor relative to capital will be characterized by a high market wage. The resulting wage gap causes workers from the low-wage or laborsurplus area to move to the high-wage or labor-scarce region. As a result of this movement, the supply of labor decreases and wages eventually rise in the capital-poor area, while the supply of labor increases and wages ultimately fall in the capital-rich area, leading, at equilibrium, to a geographic wage differential that exactly reflects the costs of inter-regional movement, pecuniary and psychic.

Associated with this macroeconomic theory is an accompanying microeconomic model of individual choice (Todaro 1976). In this scheme, rational actors decide to migrate because a cost-benefit calculation leads them to expect a positive net return, usually monetary, from movement. Migration is conceptualized as a form of investment in human capital (Sjaastad 1962). People choose to move where they can be most productive, given their skills; but before they can reap the higher wages associated with greater labor productivity they must invest in the material costs of travel, the costs of self-support while moving and looking for work, the effort involved in learning a new environment and possibly a different culture, the difficulty experienced in adapting to a new labor market, and the psychological costs of cutting old ties and forging new ones.

Potential migrants estimate the costs and benefits of moving to alternative locations and migrate to where the expected discounted net returns are greatest over their projected working lives. Net future returns are estimated by taking earnings observed in the destination area and multiplying them by the probability of obtaining a job there to derive ‘expected destination earnings,’ which are then subtracted from earnings estimated for the place of origin (observed earnings times the probability of employment). The difference is then summed over future years and discounted by a factor that reflects the greater utility of money earned in the present than in the future. From this integrated difference the estimated costs are subtracted to yield the expected net returns to migration. In theory, a potential migrant goes to wherever the expected net returns are greatest.

2. The New Economics of Migration

In recent years, a ‘new economics of labor migration’ has arisen to challenge the assumptions and conclusions of neoclassical theory (Stark 1991). A key insight of this approach is that migration decisions are not made by isolated individuals, but within larger units of interrelated people—typically families or households but sometimes entire communities—and that people act collectively not only to maximize expected income, but also maximize status within an embedded hierarchy, to overcome barriers to capital and credit, and to minimize risk.

In most developed countries, risks to household income are managed through institutional mechanisms. Crop insurance programs and futures markets give farmers a way of protecting themselves from natural disasters and price fluctuations, whereas unemployment insurance and government transfer programs protect workers against recessions and job loss through structural transformation. Private or government-sponsored retirement programs, meanwhile, offer citizens a means of insuring against the risk of poverty in old age.

In the absence of such programs, households are in a better position than individuals to control risks to economic well-being. They can easily diversify sources of income by allocating different family workers to different labor markets. As long as economic conditions across labor markets are negatively or weakly correlated, households minimize risk by geographically diversifying their labor portfolios. In the event that economic conditions at home deteriorate and productive activities there fail to generate sufficient income, the household can rely on migrant remittances for support.

Markets for credit and capital are incomplete or inaccessible in many settings, and in the absence of an efficient banking system, migration becomes attractive as a strategy for accumulating funds that can be used in lieu of borrowing. Families send one or more workers to a higher wage area to accumulate savings or send them back in the form of remittances. Although most migrant savings and remittances go toward consumption, some of the funds may also be channeled into productive investment.

A key proposition of the new economic model is that income is not a homogeneous good. The source of the income really matters, and households have significant incentives to invest scarce family resources in activities that provide access to new income sources, even if these activities do not increase total income. The new economics of migration also questions the assumption that income has a constant effect on utility—i.e., that a $100 real increase in income means the same thing to a person regardless of community conditions and irrespective of his or her position in the local income distribution. It holds that households send workers abroad not only to improve absolute incomes, but also to increase them relati e to others, and, hence, to reduce relati e deprivation compared with some reference group (Stark 1991). A household’s sense of relative deprivation depends on the total income earned by households above it in the income distribution. If utility is negatively affected by relative deprivation, then even if a household’s income and expected gains from migration remain unchanged, it may acquire an incentive to migrate if there is a change in other households’ incomes.

3. Segmented Labor-market Theory

Although neoclassical theory and the new economics of labor migration offer divergent explanations for the origins of migration, both are micro-level decision models. What differs are the units assumed to make the decision (the individual or the household), the entity being maximized or minimized (income vs. risk), the assumptions about the economic context of decision making (complete and well-functioning markets versus missing or imperfect markets), and the extent to which the migration decision is socially contextual (whether income is evaluated in absolute terms or relative to some reference group).

Standing distinctly apart from these models is segmented labor-market theory, which argues that migration stems from the intrinsic characteristics built into modern industrial society. According to Piore (1979), migration is not caused by push factors in sending regions (low wages or high unemployment), but by pull factors in receiving areas (a chronic and unavoidable need for migrant workers). The built-in demand for inexpensive and flexible workers stems from three basic features of advanced industrial economies.

The first is structural inflation. Wages not only reflect conditions of supply and demand; they also confer status and prestige, social qualities that inhere in jobs. In general, people believe that wages should reflect social status, and they have clear notions about the correlation between occupational status and pay. As a result, employers are not entirely free to respond to changes in the supply of workers. A variety of informal social expectations and formal institutional mechanisms (union contracts, civil service rules, bureaucratic regulations, company job classifications) ensure that wages correspond to the hierarchies of prestige and status that people perceive and expect.

The demand for cheap, flexible labor is also augmented by social constraints on motivation within occupational hierarchies. Most people work not only to generate income, but also to accumulate social status. Acute motivational problems arise at the bottom of any job hierarchy because there is no status to be maintained and there are few avenues for upward mobility. The problem is structural because the bottom cannot be eliminated from the labor market. Mechanization to eliminate the lowest and least desirable class of jobs will simply create a new bottom tier composed of jobs that used to be just above the bottom rung. Since there must always be a bottom of any hierarchy, motivational problems are inescapable. Thus, employers need workers who view bottomlevel jobs simply as a means to the end of earning money, and for whom employment is reduced solely to income, with no implications for status or prestige. For a variety of reasons, migrants satisfy this need. They begin as target earners, seeking to earn money for a specific goal that will improve their status or wellbeing at home—building a house, paying for school, buying land, acquiring consumer goods. Moreover, the disjuncture in living standards between origin and destination communities often means that low urban or foreign wages appear to be generous by the standards of the sending society.

The demand for migrant labor also stems from economic dualism. Capital is a fixed factor of production that can be idled by lower demand but not laid off; owners of capital must bear the costs of its unemployment. Labor is a variable factor of production that can be released when demand falls, so that workers bear the costs of their own unemployment. Whenever possible, therefore, capitalists seek out the stable, permanent portion of demand and reserve it for the employment of equipment, whereas the variable portion of demand is met by adding labor. Thus, capital-intensive methods are used to meet basic demand, and labor-intensive methods are reserved for the seasonal, fluctuating component. This dualism creates distinctions among workers, leading to a bifurcation of the labor force.

Workers in the capital-intensive primary sector get stable, skilled jobs working with the best equipment and tools. Employers are forced to invest in these workers by providing specialized training and education. Their jobs are complicated and require considerable knowledge and experience to perform well, leading to the accumulation of firm-specific human capital. Primary-sector workers thus tend to be unionized or professionalized, with contracts that require employers to bear a substantial share of the costs of their idling (severance pay and unemployment benefits). Because of these costs and continuing obligations, workers in the primary sector become expensive to let go; they become more like capital.

In the labor-intensive secondary sector, however, workers hold unstable, unskilled jobs; they may be laid off at any time with little or no cost to the employer. Indeed, the employer will generally lose money by retaining workers during slack periods. During down cycles the first thing secondary-sector employers do is to cut payroll. As a result, employers force workers in this sector to bear the costs of their unemployment. They remain a variable factor of production and are, hence, expendable.

The inherent dualism between labor and capital extends to the labor force in the form of a segmented market structure. Low wages, unstable conditions, and the lack of reasonable prospects for mobility in the secondary sector make it difficult to attract local workers, who are instead drawn into the primary, capital-intensive sector, where wages are higher, jobs are more secure, and there is a possibility of occupational improvement. To fill the shortfall in demand within the secondary sector, employers turn to migrants.

In their analysis of the process by which Cuban immigrants were incorporated into the United States, Portes and Bach (1985) uncovered evidence of a third possible sector that blends features of primary and secondary labor markets. Like the secondary sector, ethnic enclaves contain low-status jobs characterized by low pay, chronic instability, and unpleasant working conditions, jobs that are routinely shunned by natives. Unlike the secondary sector, however, they provide immigrants with significant economic returns to education and experience, as well as the very real prospect of upward socioeconomic mobility, thus replicating features of the primary sector.

The existence of a large, concentrated ethnic population creates a demand for specialized cultural products and services that immigrant entrepreneurs are uniquely qualified to fill. In addition, privileged access to the growing pool of migrant labor gives them an advantage when competing with mainstream firms. Migrants working in the enclave trade low wages and the acceptance of strict discipline upon arrival for a greater chance of advancement and independence later on. In order to function effectively over time, therefore, an ethnic enclave requires a steady stream of new arrivals willing to trade low initial wages for the possibility of later mobility, yielding an independent segmented source of labor demand for migrant workers, complementing that emanating from the secondary sector.

4. World-systems Theory

Growing out of the historical–structural tradition in social science, world-system theory argues that migration stems from the penetration of capitalist economic relations into non-capitalist or pre-capitalist areas to create a mobile population (Fligstein 1979 Sassen 1988). Driven by a desire for higher profits and greater wealth, owners and managers of capitalist firms in core regions enter poor peripheral areas in search of land, raw materials, labor, and consumer markets. Migration emerges in response to the disruptions and dislocations that inevitably occur in the process of capitalist development.

In order to achieve the greatest profit from existing agrarian resources, and to compete within global commodity markets, capitalist farmers seek to consolidate landholding, mechanize production, introduce cash crops, and apply industrially produced inputs such as fertilizer, insecticides, and high-yield seeds. Land consolidation destroys traditional systems of land tenure based on inheritance and common ownership. Mechanization decreases the need for manual labor and makes many agrarian workers redundant. The substitution of cash crops for staples undermines traditional social and economic relations based on subsistence; and the use of modern inputs produces high crop yields at low unit prices. All of these forces drive peasant farmers out of local markets and create a mobile labor force of people displaced from the land.

The extraction of raw materials for sale on global markets requires industrial methods that rely on paid labor. The offer of wages to former peasants undermines traditional forms of social and economic organization based on norms of reciprocity and fixed role relations, and creates incipient labor markets based on new conceptions of individualism, private gain, and social change. At the same time, capitalist firms enter developing regions to establish assembly plants, often within special export-processing zones created by sympathetic governments. The demand for factory workers strengthens local labor markets and weakens traditional productive relations. The insertion of foreign-owned factories into peripheral regions undermines regional economies by producing goods that compete with those made locally; by feminizing the workforce without providing factory-based employment opportunities for men; and by socializing women for industrial work and modern consumption without providing a lifetime income capable of meeting these needs. The result once again is the creation of a population that is socially and economically uprooted and prone to migration.

The same capitalist economic processes that create migrants in peripheral regions simultaneously attract them into certain highly developed urban areas. The investment that drives economic globalization is managed from a small number of global cities, whose structural characteristics create a strong demand for migrant labor. In order to ship goods, deliver machinery, extract and export raw materials, coordinate business operations, and manage expatriate assembly plants, capitalists in global cities build and expand transportation and communication links to the peripheral regions where they have invested. These links not only facilitate the movement of goods, products information, and capital, they also promote the movement of people by reducing the costs of movement along certain pathways.

The creation and perpetuation of a global trading regime also requires an underlying system of international security. Core capitalist nations have both an economic interest in, and the military means of preserving, geopolitical order, and leading powers thus maintain relatively large armed forces to deploy as needed to preserve the integrity of the global capitalist system. Threats to the stability of that system are met by military force projected from one or more of the core nations. Each military base and armed intervention, however, creates a range of social and political connections that promote the subsequent movement of migrants.

Finally, processes of economic globalization also create ideological or cultural links between core capitalist regions and their peripheries. In many cases, these cultural links are longstanding, reflecting a colonial past in which core countries established administrative and educational systems that mirrored their own in order to govern and exploit a peripheral region. Ideological connections are presently reinforced by mass communications and advertising campaigns directed from the core urban centers. The diffusion of core cultural patterns and the spread of modern consumption interact with the emergence of a transportation-communication infrastructure to channel migrants disproporationately to global cities.

5. Social Capital Theory

Although it was Loury (1977) who first introduced the concept of social capital, it was Bourdieu (1986) who pointed out its broader relevance to human society. According to Bourdieu and Wacquant (1992, p. 119), ‘social capital is the sum of the resources, actual or virtual, that accrue to an individual or a group by virtue of possessing a durable network of more or less institutionalized relationships of mutual acquaintance and recognition.’ The key characteristic of social capital is its convertibility—it may be translated into other forms of capital, notably financial capital. People gain access to social capital through membership in networks and social institutions and then convert it into other forms of capital to improve or maintain their position in society (Coleman 1988).

Massey et al. (1987, p. 170) were the first to identify migrant networks as a form of social capital. Following Coleman’s (1990, p. 304) dictum that ‘social capital … is created when the relations among persons change in ways that facilitate action,’ they identified migration itself as the catalyst for change in the nature of social relations. Everyday ties of friendship and kinship provide few advantages, in and of themselves, to people seeking to migrate. Once someone in a personal network has migrated, however, the ties are transformed into a resource that can be used to gain access to employment and high wages at points of destination. Each act of migration creates social capital among people to whom the new migrant is related, thereby raising the odds of their migration.

Goss and Lindquist (1995) point to migrant institutions as a structural complement to migrant networks, arguing that interpersonal ties are not the only means by which social capital is created and that ‘migration is best examined not as a result of individual motivations and structural determinations, although these must play a part in any explanation, but as the articulation of agents with particular interests and playing specific roles within an institutional environment … ’ (p. 345). For-profit organizations and private entrepreneurs provide services to migrants in exchange for fees set on the underground market: surreptitious smuggling across borders; clandestine transport to internal destinations; labor contracting between employers and migrants; counterfeit documents and visas; arranged marriages between migrants and legal residents or citizens of the destination country; and lodging, credit, and other assistance in countries of destination. Over time, individuals, firms, and organizations become institutionally stable and offer another source of social capital to would-be migrants.

6. Cumulative Causation

The theory of cumulative causation basically argues that human migration changes individual motivations and social structures in ways that make additional movement progressively likely, a process first identified by Myrdal (1957) and reintroduced to the field by Massey (1990). Causation is cumulative in the sense that each act of migration alters the context within which subsequent migration decisions are made to make additional trips of longer duration more likely. Social scientists have discussed eight ways that migration has cumulatively caused: the expansion of networks, the distribution of income, the distribution of land, the organization of agriculture, culture, the regional distribution of human capital, the social meaning of work, and the structure of production. Feedbacks through other variables are also possible, but have not been systematically treated.

7. A Theoretical Synthesis

Massey et al. (1998) recently completed a systematic review of theory and research throughout the world to derive a synthetic model human migration. Contemporary migration appears to originate in the social, economic, political, and cultural transformations that accompany the penetration of capitalist markets into non-market or pre-market societies (world systems theory). In the context of a globalizing economy, the entry of markets into peripheral regions disrupts existing social and economic arrangements and brings about the displacement of people from customary livelihoods, creating a mobile population of workers who actively search for new ways of earning income, managing risk, and acquiring capital. Migration does not stem from a lack of economic development, but from development itself.

One means by which people displaced from traditional livelihoods seek to assure their well-being is by selling their labor on emerging markets (neoclassical economics). Because wages are generally higher in urban than in rural areas, much of this process of labor commodification is expressed in the form of rural–urban migration; but wages are even higher, in developed countries overseas, and the larger size of these transnational wage differentials inevitably prompts some adventurous people to sell their labor on international markets by moving abroad for work. International wage differentials are not the only factor motivating people to migrate, however. Evidence also suggests that people displaced in the course of economic transformation move not simply in order to reap higher lifetime earnings by relocating permanently to a foreign setting; rather, households struggling to cope with the jarring transformations of early economic development use labor migration as a means of managing risk and overcoming barriers to capital and credit (the new economics of labor migration).

In many regions, markets or government programs for insurance, futures, capital, credit, and retirement are poorly developed or nonexistent, and households turn to migration in order to compensate for these market failures. By sending members away to work, households diversify their labor portfolios to control risks stemming from unemployment, crop failures, or price fluctuations. Migrant labor also permits households to accumulate cash for large consumer purchases or productive investments, or to build up savings for retirement. Whereas the rational actor posited by neoclassical economics takes advantage of a geographic disequilibrium in labor markets to move away permanently to achieve higher lifetime earnings, the rational actor assumed by the new economics of labor migration seeks to cope with market failures by moving temporarily to repatriate earnings in the form of remittances.

While the early phases of economic development promote emigration, transformations in post-industrial cities yield a bifurcation of labor markets. Jobs in the primary labor market provide steady work and high pay for local workers, but those in the secondary labor market offer low pay, little stability, and few opportunities, thus repelling locals and generating a structural demand for migrant workers (segmented labor-market theory). This process of labor market bifurcation is most acute in global cities, where a concentration of managerial, administrative, and technical expertise leads to a concentration of wealth and a strong ancillary demand for low-wage services (world-systems theory). Unable to attract native workers, employers turn to immigrants and initiate immigrant flows directly through formal recruitment (segmented labor-market theory).

Although instrumental in initiating migration flows, recruitment becomes less important over time because the same processes of economic globalization that create mobile populations in developing regions, and which generate a demand for their services in certain cities, also create links of transportation, communication, politics, and culture to make the movement of people increasingly cheap and easy (world-systems theory). International migration is also promoted by the foreign policies of, and the military actions taken by, core nations to maintain international security, protect investments, and guarantee access to raw materials, entanglements that create links and obligations that often generate ancillary flows of refugees, asylees, and military dependents.

However a migration stream begins, it displays a strong tendency to continue because of the growth and elaboration of networks (social-capital theory). The concentration of migrants in certain destination areas creates a ‘family and friends’ effect that channels later cohorts to the same places and facilitates their arrival and incorporation. If enough migrants arrive under the right conditions, an enclave economy may form, which further augments the specialized demand for migrant workers (segmented labor-market theory).

The spread of migratory behavior within sending communities sets off ancillary structural changes, shifting distributions of income and land and modifying local cultures in ways that promote additional out-migration. Over time, the process of network expansion tends to become self-perpetuating because each act of migration causes social and economic changes that promote additional movement (the theory of cumulative causation). As receiving areas implement restrictive policies to counter the rising tides of migrants, they create a lucrative niche into which enterprising agents, contractors, and other middlemen move to create migrant-supporting institutions, providing migrants with yet another infrastructure capable of supporting and sustaining movement (social-capital theory).

During the initial phases of out-migration, the effects of capital penetration, market failure, socialnetwork expansion, and cumulative causation dominate to cause a rapid upsurge of the flow, but as the level of emigration reaches high levels, and the costs and risks of movement drop, movement is increasingly determined by wage differentials (neoclassical economics) and labor demand (segmented labor-market theory). As economic growth in sending areas occurs, wage gaps gradually diminish and well-functioning markets for capital, credit, insurance, and futures come into existence, progressively lowering the incentives for emigration. If these trends continue, the country or region ultimately becomes integrated into the global or national economy, whereupon it undergoes a transformation: massive out-migration progressively trails off and shifts to a pattern of circulatory movement whose net balance fluctuates in response to changing economic conditions at origin and destination (Hatton and Williamson, 1998), yielding a characteristic curve in the course of the mobility transition that Martin and Taylor (1996) have called the ‘migration hump.’ Crossing this so-called hump quickly and painlessly is one of the fundamental challenges of economic development.

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