Chapter 5 Development and Migration: Lessons from Southern Europe

Abstract

Policy-makers in OECD countries appear to be increasingly concerned about growing migration pressure from developing countries. At the same, at least within Europe, they typically complain about the low level of internal labor mobility. In this chapter, we try to cast some light on the issues of both internal and external labor mobility. We investigate the link between development and migration and argue, on both theoretical and empirical grounds, that it is likely be nonlinear. More precisely, we find that, in a relatively poor sending country, an increase in income will have a positive impact on the propensity to migrate, even if we control for the income differential with the receiving country, because the financial constraint of the poorest become less binding. Conversely, if the home country is relatively better off, an increase in income may be associated with a fall in the propensity to migrate even for an unchanged income differential. Econometric estimation for Southern Europe over the period 1962–1988 provides substantial support to this approach. We estimate first the level of income for which the financial constraint is no more binding, around $950, and then the level of income for which the propensity to migrate declines, which is around $4,300 in 1985 prices. We therefore predict a steady decline in the propensity to migrate from Southern European countries. Similarly, our results highlight the possibility that the pressure to migrate from Northern African countries and other developing countries may increase with further growth.