Econ midterm info

Economic Impacts of Globalization

- Increased Trade and Investment - Globalization facilitates trade, allowing businesses to access new markets and consumers to enjoy a wider variety of goods and services.

- Economic Growth - Many developing countries have experienced rapid economic growth due to foreign investments and access to global markets.

- Job Creation and Job Loss - While globalization creates jobs in emerging economies, it also leads to job losses in developed countries as companies outsource labor to regions with lower costs.

- Income Inequality - While some benefit from globalization, others are left behind. The gap between rich and poor countries—and even within countries—often widens.

- Technological Advancement - The spread of technology and innovation has increased productivity and efficiency across industries. (AI)

Social Impacts of Globalization

- Cultural Exchange - The sharing of ideas, values, and traditions enriches societies but also raises concerns about cultural homogenization and the loss of local identities.

- Improved Living Standards - Access to international markets and capital has improved healthcare, education, and infrastructure in many developing nations.

- Migration and Urbanization - Globalization has led to increased migration, which enriches societies but also brings challenges such as social integration and pressure on public services.

- Environmental Concerns - Increased industrialization and trade have contributed to deforestation, pollution, and climate change, raising sustainability concerns.

- Health Risks - Global interconnectedness makes it easier for diseases to spread, as seen with pandemics like COVID-19. (AI)

Push factors usually include:

Population growth

Population density

Lack of economic opportunities

Political repression

Pull factors usually include

Demand for labor

Availability of land

Economic opportunities

Political freedoms

Migration transition theory

Development initially boosts emigration, but that beyond a certain level of development, societies transform from net emigration into net immigration countries

Pros of remittances

- Increase well-being of receiving households by smoothing consumption and improving living conditions

- Facilitate the accumulation of human capital by making possible improved sanitary conditions, healthier lifestyles, proper healthcare, and greater educational attainment

- Ease the credit constraints of unbanked households in poor rural areas, facilitate asset accumulation and business investments, promote financial literacy, and reduce poverty

Cons of remittances

- Reduce labor supply and create a culture of dependency that inhibits economic growth

- Can increase the consumption of nontradable goods, raise their prices, appreciate the real exchange rate, and decrease exports, thus damaging the receiving country's competitiveness in world markets

- Can be curtailed, along with international migration, by escalating anti-immigration sentiment and tougher enforcement practices in host countries, including the US and many in Europe

Change in remittances post-covid

saw a slight ~2-3% decrease in remittances, much lower than what the drop was expected to be

- A move from informal channels (e.g. carrying cash across borders) towards more formal channels through an increase digitalization of financial transfers is one of the most important factors in explaining the slower-than-expected decline in remittance flows

-- Mobile money platforms have made the transfer of remittances cheaper and faster than the traditional cash and bank transfers

-- Remittances become more traceable when digital

- Covid may provide the extra push to harness technology to further expand remittance channels and drive down costs

Brain drain

depriving poor countries of their scarce professional resources and draining their investments in education through the migration of the "best and brightest", seeking alternate opportunities

- Only in a limited number of smaller countries, primarily in the Caribbean, the Pacific and some smaller African states have a large share of the high-skilled workers emigrated

- if large-scale emigration of the highly skilled occurs, this is rather a symptom of structural problems rather than its main cause

Brain circulation

- Many high-skilled workers have received at least part of their training abroad, which can potentially benefit origin countries

-- Casts doubt on the assumption that emigration automatically represents a permanent loss.

-- What initially seems to be a loss, may become a gain over the longer term.

- Established migrants may support families over sustained periods, and migrants' ability to engage socially, politically and economically in countries of origin actually increases as their occupational situation in destination societies improves

Migration policy tools

1. Border controls: Surveillance technology, travel visa/permit, ID, entry ban, carrier sanctions, employer sanctions, detention, etc.

2. Legal entry and stay policies: Recruitment/assisted migration programmes, entry visa/stay permit, work visa/permit, quota, regularization, refugee status determination policies, free mobility agreements, etc.

3. Integration policies: Access to social benefits, access to justice and political rights, language, housing and cultural integration programmes, citizenship, etc.

4. Exit policies: Reintegration/return programmes, deportation/expulsion, readmission agreements, exit visa, exit ban, etc.

Guest worker

foreign national who is permitted to live and work temporarily in a host country

Points-based systems

give scores to prospective migrants usually based on age, education and skills criteria. First introduced in Canada and Australia, they have become popular in many destination countries in what is perceived as a 'global race for talent'.

Golden visas

elite visas/citizenships that can be obtained through investment (ex: $500,000 real estate investment, $1 million shares of Spanish company, $2 million investment in public debt, start a business)

Trends of migration in Europe

Creating programs/incentives to attract highly skilled, educated workers (competition for talent); influx of refugees; regional migration

Positive impacts of migration

✔ Fills Labor Gaps: Migrants support key industries (healthcare, agriculture, construction).

✔ Economic Growth: Migrants contribute to GDP and innovation (e.g., many tech startups in the U.S. are founded by immigrants).

✔ Demographic Balance: Helps counteract aging populations and declining birth rates.

✔ Cultural Diversity: Enriches societies, fostering creativity and global connections.

Negative impacts of migration

✖ Strain on Public Services: Increased demand for housing, education, and healthcare can challenge infrastructure.

✖ Political & Social Tensions: Migration is often politicized, leading to debates on integration and national identity.

✖ Risk of Labor Exploitation: Some sectors (e.g., agriculture) rely on low-paid, vulnerable migrant workers.

What is the situation of Rural-Urban Migration in Developing Countries?

Urbanization is leading to increased opportunities within cities in developing countries, and therefore increasing the rural-urban migration within developing countries.

What motivates or forces rural people to migrate?

Push factors to urban areas in developing countries:

- Overpopulation in rural areas - man to land ratio is very high

- Few job opportunities

- Low living standard - low income, malnutrition

- Poor social services and facilities

- *Strongest factor: poverty

Pull factors to urban areas in developing countries:

- Many job opportunities

- High living standard - high income, good nutrition

- Good social services and facilities - transport, education, medical, etc.

- *Most important factor: better jobs

Impacts of Rural- Urban Migration:

- Cheap labour- manufacture growth

-- Model of China, Vietnam, etc.

- Larger consumption

- Better living conditions?

- Rapid population growth:

-- Young adults

- High unemployment

- Conflicts between local people and migrants

- Shortage of facilities and services

- Shortage of houses

Example of impacts: China

- 'World's factory': The backbone of China's export industry since the mid-1990s.

- Rural to urban migration was a very important part in China's recent epic urbanization

Factors that affect economic growth

- Human Resource

- Natural Resources

- Capital Formation

- Technological Development

- Social and Political Factors (Institutions)

Main impacts of international migration

- Labor markets

-- Migrant workers make important contributions to the labor market in both high- and low-skilled occupations

-- Migrants account for 47% of the increase in workforce in the US and 70% in Europe over the past ten years

-- Migrants fill important niches both in fast-growing and declining sectors of the economy

-- Contribute to labor-market flexibility (notably in Europe) - in Europe free movement migration helps address labor market imbalances

- Public purse

-- Migrants contribute more in taxes and social contributions than they receive in benefits

-- Labor migrants have had the most positive impact on the public purse

-- Employment is the single biggest determinant of migrants' net fiscal contribution

- Economic growth

-- Migration boosts the working-age population

-- Migrants arrive with skills and contribute to human capital development of receiving countries

-- Migrants also contribute to technological progress

-- Increase output and productivity

-- Improve macroeconomic outcomes and play an important role in sustaining economic growth in destination economies

Factors that affect international trade:

- Advanced technology (including transportation)