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Defying the Law of Gravity: Defying the Law of Gravity: The Political Economy of International Immigration The Political Economy of International Immigration The Political Economy of International Immigration The Political Economy of International Immigration David Leblang David Leblang David Leblang David Leblang University of Virginia University of Virginia Jennifer Fitzgerald Jennifer Fitzgerald University of Colorado University of Colorado Jessica Teets Jessica Teets University of Colorado University of Colorado University of Colorado University of Colorado

Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

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Page 1: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Defying the Law of Gravity:Defying the Law of Gravity:The Political Economy of International ImmigrationThe Political Economy of International ImmigrationThe Political Economy of International ImmigrationThe Political Economy of International Immigration

David LeblangDavid LeblangDavid LeblangDavid LeblangUniversity of VirginiaUniversity of Virginia

Jennifer FitzgeraldJennifer FitzgeraldUniversity of ColoradoUniversity of Colorado

Jessica TeetsJessica TeetsUniversity of ColoradoUniversity of ColoradoUniversity of ColoradoUniversity of Colorado

Page 2: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

QuestionQuestionQuestionQuestion

What determines international flows of labor?What determines international flows of labor?

“Ignored” aspect of globalization“Ignored” aspect of globalizationIgnored  aspect of globalizationIgnored  aspect of globalizationScholarly: much work on trade and investmentScholarly: much work on trade and investmentPolicy: barriers to commodities and capital have been Policy: barriers to commodities and capital have been dismantleddismantled

Existing scholarship focuses on effects of immigrationExisting scholarship focuses on effects of immigrationIntegration/assimilation of migrantsIntegration/assimilation of migrantsResponse of nativesResponse of natives——Rise of Right; Citizenship PoliciesRise of Right; Citizenship Policies

Page 3: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

ContextContextContextContext

BelgiumAustria

Australia

Annual Average: 2000-2004International Immigration

ItalyIrelandGreece

GermanyFranceFinland

DenmarkCanada

Belgium

SwedenSpain

PortugalNorway

New ZealandNetherlandsLuxumbourg

JapanItaly

0 200 400 600Thousands of Immigrants

USAUK

TurkeySwitzerland

Sweden

Thousands of Immigrants

Page 4: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

ContextContextContextContext

Variation across destinationVariation across destinationTraditional countries of immigration: US, CA, AU, NZTraditional countries of immigration: US, CA, AU, NZNew countries of immigration: SP, PT, GRNew countries of immigration: SP, PT, GR

Variation over timeVariation over timeChanges in labor market conditionsChanges in labor market conditionsAlterations in citizenship policyAlterations in citizenship policy

Page 5: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

The ArgumentThe ArgumentThe ArgumentThe Argument

Migrants minimize riskMigrants minimize riskMove to places where there are prospects for economic gainMove to places where there are prospects for economic gainMove to places where political risks are minimalMove to places where political risks are minimal

Social networks Social networks –– linkages between colinkages between co‐‐ethnic groups in ethnic groups in origin and destination countries origin and destination countries –– provide support and provide support and information functionsinformation functions

These networks can work to decrease traditional barriers to These networks can work to decrease traditional barriers to These networks can work to decrease traditional barriers to These networks can work to decrease traditional barriers to migrationmigration

Page 6: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Neoclassical StoryNeoclassical StoryNeoclassical StoryNeoclassical Story

Migration is costlyMigration is costly“it appears evidently from experience that man is of all sorts of “it appears evidently from experience that man is of all sorts of 

luggage the most difficult to be transported” (Adam Smith, luggage the most difficult to be transported” (Adam Smith, Wealth of Nations, 1776)Wealth of Nations, 1776)

“differences in net economic advantages, chiefly differences in “differences in net economic advantages, chiefly differences in wages, are the main causes of migration” (Sir John Hicks, wages, are the main causes of migration” (Sir John Hicks, Theory of Wages  1932)Theory of Wages  1932)Theory of Wages, 1932)Theory of Wages, 1932)

Borjas; Hatton & WilliamsonBorjas; Hatton & Williamson

Page 7: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

New Economics of MigrationNew Economics of MigrationNew Economics of MigrationNew Economics of Migration

Focus on minimization of risk for economic unit (family).Focus on minimization of risk for economic unit (family).

Migration is a mechanism to diversify riskMigration is a mechanism to diversify riskMigration is a mechanism to diversify risk.Migration is a mechanism to diversify risk.

Consistent with neoConsistent with neo‐‐classical view if we broaden classical view if we broaden individual’s utility function beyond wagesindividual’s utility function beyond wagesindividual s utility function beyond wagesindividual s utility function beyond wages

We conceive of three kinds of riskWe conceive of three kinds of risk

Page 8: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Economic/Labor Market RiskEconomic/Labor Market RiskEconomic/Labor Market RiskEconomic/Labor Market Risk

Migration flows to destinations with relatively higher Migration flows to destinations with relatively higher wages.wages.

Net of transactions costs, of course.Net of transactions costs, of course.

Migrants are drawn to destinations with higher Migrants are drawn to destinations with higher probabilities of employment.probabilities of employment.

Migrants are drawn to destinations with better social Migrants are drawn to destinations with better social safety netssafety nets——protection in the event of labor market protection in the event of labor market shocks (welfare magnet)shocks (welfare magnet)

Page 9: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Social RiskSocial RiskSocial RiskSocial Risk

Migrant (coMigrant (co‐‐ethnic) networks produce social capital which ethnic) networks produce social capital which provides information, reduces information costs, and provides information, reduces information costs, and 

ll  d  th   t   f  i till  d  th   t   f  i tigenerally decreases the costs of migration.generally decreases the costs of migration.

Support Function: networks increase destination specific Support Function: networks increase destination specific ili  (fi i l  h i   l   d  i il i  ili  (fi i l  h i   l   d  i il i  utility (financial, housing, employment and assimilation utility (financial, housing, employment and assimilation 

assistance).assistance).

I f i  F i   ll  i di id l     d   h i  I f i  F i   ll  i di id l     d   h i  Information Function: allows individuals to update their Information Function: allows individuals to update their subjective distribution of returns to migration & decreases subjective distribution of returns to migration & decreases ex anteex ante costs associated with migration.costs associated with migration.gg

Page 10: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Political RiskPolitical RiskPolitical RiskPolitical Risk

Political incorporation provides migrant withPolitical incorporation provides migrant withThe opportunity to influence future policyThe opportunity to influence future policyAccess to labor market and welfare benefitsAccess to labor market and welfare benefitsRights for children born in destinationRights for children born in destination

We conceive of these as parts of the “citizenship” offers We conceive of these as parts of the “citizenship” offers made by competing destinationsmade by competing destinationsmade by competing destinationsmade by competing destinations

Page 11: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Political Risk (con’t)Political Risk (con’t)Political Risk (con t)Political Risk (con t)

But, citizenship rights do not ensure acceptance & But, citizenship rights do not ensure acceptance & tolerationtoleration——they are incomplete indicator of the political they are incomplete indicator of the political li tli tclimateclimate

Migrants weight risks across various destinations by Migrants weight risks across various destinations by b i    f     i h   i   ib i    f     i h   i   iobserving support for extreme right wing parties.observing support for extreme right wing parties.

This is a signal regarding hospitality/hostility of This is a signal regarding hospitality/hostility of d i id i idestination.destination.

Page 12: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Empirical Challenge:Empirical Challenge:d id iEndogeneityEndogeneity

Citizenship PolicyCitizenship Policy: Inflows of foreign workers can generate : Inflows of foreign workers can generate either a demand for increased incorporation or a backlash either a demand for increased incorporation or a backlash 

i t th   li ii t th   li iagainst these policiesagainst these policies

Support for Extreme Right PartiesSupport for Extreme Right Parties: Support increases : Support increases h   h    l   i   l ih   h    l   i   l iwhen there are larger migrant populations.when there are larger migrant populations.

Page 13: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Lack of InstrumentsLack of InstrumentsLack of InstrumentsLack of Instruments

Instruments must be relevant and must meet the Instruments must be relevant and must meet the exclusion restriction.exclusion restriction.

No shortage of relevant instrumentsNo shortage of relevant instruments——exploit literatures exploit literatures on citizenship and radical right (as well as the factors that on citizenship and radical right (as well as the factors that 

  h )  h )cause them).cause them).

BUTBUTAlmost all determinants of these variables also influence Almost all determinants of these variables also influence migration flows ormigration flows orAre structuralAre structural——temporally invariant.temporally invariant.Are structuralAre structural temporally invariant.temporally invariant.

Page 14: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

SolutionSolutionSolutionSolution

Policy Convergence Literature: OECD countries Policy Convergence Literature: OECD countries (destinations) exhibit convergence tendencies(destinations) exhibit convergence tendencies

Citizenship policies have convergedCitizenship policies have convergedRight wing support: demonstration effect, platform Right wing support: demonstration effect, platform innovation across countries.innovation across countries.innovation across countries.innovation across countries.

Use lagged average for all countries as the instrumentUse lagged average for all countries as the instrumentExcludableExcludable——only influences migration through country ionly influences migration through country iExcludableExcludable only influences migration through country ionly influences migration through country i

Page 15: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Empirical ModelEmpirical ModelEmpirical ModelEmpirical Model

FlowFlowijt ijt = migrant flow from i into j at time t= migrant flow from i into j at time ti=destination (19 OECD countries)i=destination (19 OECD countries)

j=source (165 countries)j=source (165 countries)

t=time (1960t=time (1960‐‐2005)2005)

Sample>50,000Sample>50,000

Page 16: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

“Control” Variables“Control” VariablesControl  VariablesControl  Variables

Transactions costsTransactions costsDistance between i & jDistance between i & jCommon border between i & jCommon border between i & jCommon official/legal language between i & jCommon official/legal language between i & jColonial relationship between i & jColonial relationship between i & jColonial relationship between i & jColonial relationship between i & jIncome (GDPPC) in sending countryIncome (GDPPC) in sending country

D ti ti  d   i blD ti ti  d   i blDestination dummy variablesDestination dummy variablesCaptures differences in migration policyCaptures differences in migration policyAccounts for differences in measuring migrant flowAccounts for differences in measuring migrant flowAccounts for differences in measuring migrant flowAccounts for differences in measuring migrant flow

Page 17: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Economic RiskEconomic RiskEconomic RiskEconomic Risk

Destination Characteristics:Destination Characteristics:Relative Real GDP Per Capita PPP: (Destination/Source)Relative Real GDP Per Capita PPP: (Destination/Source)Unemployment Rate for active populationUnemployment Rate for active populationGovernment Spending/GDP (logged)Government Spending/GDP (logged)

Page 18: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Social RiskSocial RiskSocial RiskSocial Risk

Two measures of migrant networksTwo measures of migrant networksMigrant Stock from country j living in country i at time tMigrant Stock from country j living in country i at time tMigrant Flow from country j living in country i at time tMigrant Flow from country j living in country i at time t‐‐11

Measures friends and family effectMeasures friends and family effect

Inclusion of lagged dependent variable allows for Inclusion of lagged dependent variable allows for interpretation as a partial adjustment model.interpretation as a partial adjustment model.

Page 19: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Political RiskPolitical RiskPolitical RiskPolitical Risk

Citizenship Policy IndexCitizenship Policy IndexResidency requirement (years)Residency requirement (years)Right to vote for any level of governmentRight to vote for any level of governmentAllowance of dual citizenshipAllowance of dual citizenshipCitizenship by birth (rather than by blood)Citizenship by birth (rather than by blood)Citizenship by birth (rather than by blood)Citizenship by birth (rather than by blood)

Right wing party support (% gained by ‘relevant’ party)Right wing party support (% gained by ‘relevant’ party)

Years that a ”relevant”  party has been in existence & Years that a ”relevant”  party has been in existence & competing.competing.

Page 20: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

MethodologyMethodologyMethodologyMethodology

Instrumental variable (twoInstrumental variable (two‐‐stage least squares) regression.stage least squares) regression.

Standard errors clustered by countryStandard errors clustered by country‐‐pairpairStandard errors clustered by countryStandard errors clustered by country‐‐pairpair

Results robust Results robust TobitTobitTobitTobitTreatment of unemployment and welfare spending as Treatment of unemployment and welfare spending as endogenousendogenous

Page 21: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

IV ResultsIV Results

Page 22: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

IV ResultsIV Results

Page 23: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

IV ResultsIV Results

Page 24: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

IV ResultsIV Results

Page 25: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

ResultsResultsResultsResults

Restrict sampleRestrict samplePoor (nonPoor (non‐‐industrialized) to Rich (industrialized) countriesindustrialized) to Rich (industrialized) countriesLimited to within EuropeLimited to within Europe

Results almost identicalResults almost identical

Page 26: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

Role of Social NetworksRole of Social NetworksRole of Social NetworksRole of Social Networks

Recall: Social networks increase migration by decreasing Recall: Social networks increase migration by decreasing transaction costs and increasing social support.transaction costs and increasing social support.

Test by creating interactions between bilateral migrant Test by creating interactions between bilateral migrant stock and stock and 

Political Risk: Citizenship policy, right wing votePolitical Risk: Citizenship policy, right wing voteTransactions Costs: Distance, income in origin countryTransactions Costs: Distance, income in origin countryLabor Market Risk: Wage ratio  unemploymentLabor Market Risk: Wage ratio  unemploymentLabor Market Risk: Wage ratio, unemploymentLabor Market Risk: Wage ratio, unemployment

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DiscussionDiscussionDiscussionDiscussion

“Unpacked” Citizenship Policy“Unpacked” Citizenship PolicyNo component was insignificant; all part of general set of No component was insignificant; all part of general set of policies that attract migrantspolicies that attract migrants

Further consideration of Sending country characteristicsFurther consideration of Sending country characteristicsDemocracy, human rights, etcDemocracy, human rights, etcAmbiguous effect for labor migrants (contract with refugees)Ambiguous effect for labor migrants (contract with refugees)Ambiguous effect for labor migrants (contract with refugees)Ambiguous effect for labor migrants (contract with refugees)

Page 34: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

External Voting RightsExternal Voting RightsExternal Voting RightsExternal Voting Rights

Page 35: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

ConclusionsConclusionsConclusionsConclusions

Given networks of coGiven networks of co‐‐ethnics you cannot stop immigrants, ethnics you cannot stop immigrants, you can only hope to contain themyou can only hope to contain them

Increase wages in origin relative to destinationIncrease wages in origin relative to destinationLimit employment, citizenship rights & access to welfare in Limit employment, citizenship rights & access to welfare in receiving countries.receiving countries.receiving countries.receiving countries.

Numerous countries have institutionalized “friends and Numerous countries have institutionalized “friends and family” connectionsfamily” connectionsfamily  connectionsfamily  connections

US policy provides 75% of annual visas for purpose of family US policy provides 75% of annual visas for purpose of family (re)(re)‐‐unificationunification

Page 36: Defying the Law of Gravity - Princeton UniversityDefying the Law of Gravity: The Political Economy of International Immigration David Leblang University of Virginia Jennifer Fitzgerald

ExtensionsExtensionsExtensionsExtensions

Three RsThree RsRecruitment: who leavesRecruitment: who leavesReturn: who returnsReturn: who returnsRemittances: capital flowsRemittances: capital flows

Linkages to other international flowsLinkages to other international flowsFinancial transactionsFinancial transactions

Linkages to other Policy ChangesLinkages to other Policy ChangesRise of external votingRise of external voting