Joint UNU-MERIT/School of Governance Seminar: The link between the high wage gains from international migration and the vulnerability of migrant flows to shocks at destination
An original dataset of migrant departures from the Philippines between 1992 and 2009 was used to identify the responsiveness of migrant numbers and migrant wages to GDP shocks across the wide variety of destination countries in which Filipinos work. A large and significant positive elasticity of migrant numbers to GDP shocks at destination was found, but no significant responsiveness of wages. This is consistent with binding minimum wages for migrant labor.
This result implies that the same labour market imperfections that make international migration so attractive as a means of increasing incomes also make migrant flows more sensitive to global business cycles than they would be if markets cleared. Difference-in-differences analysis of the impact of a change in the minimum wage for overseas jobs as domestic helpers (maids) confirms that minimum wages bind and that migrant demand is price sensitive in the absence of these imperfections.
For more information, see the Calendar of upcoming events on the UNU-MERIT website.
David McKenzie is a Senior Economist in the Development Research Group, Finance and Private Sector Development Unit, World Bank. He received his B.Com.(Hons)/B.A. from the University of Auckland, New Zealand and his Ph.D. in Economics from Yale University. Prior to joining the World Bank, he spent four years as an assistant professor of Economics at Stanford University. His main research is on migration, microenterprises, and methodology for use with developing country data.