Elusive Prosperity, Volatile Politics and International Migration

by Andrés Solimano

At the turn of the twentieth century, a large number of Europeans—mainly Italians and Spaniards—left their homelands and headed to the distant southern shores of Argentina responding to the good economic opportunities, fertile land and a better future that were to be found in this country, at the time one of the most vibrant world economies. Around 7 million people migrated from Europe to Argentina between 1870 and 1930, although nearly 3 million returned at different points in time during those years. Foreign capital also responded to the opportunities opened in Argentina and British financial institutions funded an important part of the construction of national infrastructure needed to support growth. In contrast, since the 1950s, European migration to Argentina virtually stopped and the country became in the next 30 years or so a net exporter of professionals, scientists and intellectuals that were flying economic decline, poor opportunities and authoritarian regimes. Moreover, during this period, financial capital steadily left Argentina looking for safer places. Nowadays, and in the reversed direction of a century ago, Argentineans are leaving in large numbers to Spain, Italy and other destinations. This time, emigration is associated with the collapse of the country’s currency experiment of the 1990s—the convertibility board and its ensuing short lived prosperity— that left a legacy of massive output decline, high unemployment, financial crisis and lost hopes.

International migration is, thus, like a barometer of economic and societal conditions in home countries with respect to the rest of the world. (1) Good times (prosperity, boom) are often matched by cycles of immigration. Conversely, bad times (economic crisis, growth collapses) are followed by emigration pressures, often of those highly educated who are more mobile internationally. Latin America has a long history of cycles of prosperity and boom followed by decline and, at times, economic collapse. From a long run perspective, Latin America in the twentieth century has been a region of net emigration, save for the case of mass immigration to Argentina (and Brazil to some extent) in the first decades of the twentieth century. Several Latin American countries are net emigration economies: Mexico to the US, likewise other Central American and Caribbean countries. More recently, the economic crisis of Ecuador in the late 1990s, the internal conflict in Colombia and political polarization in Venezuela have led to large emigration flows from these three Andean countries.

Economic Determinants of International Migration

Recent economic research on the determinants of international migration identifies real wages and income per capita differentials between sending and receiving countries as a main cause of (voluntary) emigration decisions. (2) In turn, relative income differentials depends on relative growth performance across nations which are ultimately linked to different development paths. Therefore the economics of international migration is closely associated with the economics of international development. In this sense, the large relative income differentials between Latin American and North-America (the US and Canada) prompts emigration from Latin America to the north. In turn, there are significant intra-regional differences in per capita incomes and economic opportunities that drive the movement of workers and families from one Latin American country to another, often to a neighbouring country. In fact, we find significant intra-regional migration from Peru to Chile, from Haiti to Dominican Republic, from Costa Rica to Nicaragua.

Migration theory deals also with issues such as the choice of country of destination, the costs of migrating, the policies towards immigrants in receiving nations and others. The choice of country of destination in international migration is often dictated by the existence of social networks of relatives and friends that have previously migrated to a certain country. Thus, history matters as previous cohorts of migrants affect current migration patterns. There are economic and emotional costs in migrating from one country to another such as travelling costs (e.g. air tickets, shipping costs), living expenses in the host countries, costs of job search and the human costs associated with living away from home. Typically, unskilled and poor migrants are more affected by the economic costs of migration than skilled migrants. Moreover, cultural differences (language, habits) across countries and geographical distances diminish pressures for international migration. An important factor constraining migration flows, in spite of large differentials in per capita income levels and real wages across countries, is restrictive immigration policies prevailing in the receiving countries.

Political Determinants of Voluntary Migration

Outflows and inflows of people do not only depend on economic considerations in sending and receiving countries. The political regimes prevailing in host and source countries—democracy or authoritarianism—also matter in the decision to migrate. Individuals will prefer to live in countries where civic freedoms and rights (freedom of speech, of association, right to elect public authorities) and economic rights (respect for property rights and contracts) are protected. This tends to occur more often in democracies than in dictatorships that curtail individual rights and engage in repressive activities.

Albert Hirschman in his classic book Exit, Voice and Loyalty draws a distinction—useful to understand the economic and political causes of immigration decisions—between purely economic choice and collective action, identifying exit as a predominantly economic choice. In contrast, voice belongs to the realm of collective (political) action. This framework suggests that individuals who are unsatisfied or discontented with current political and economic conditions in their home countries and where ‘voice’ becomes an ineffective expedient to change things, may choose to exit their countries (e.g. to emigrate). Thus (voluntary) migration (different from the problem of refugees and asylum which are instances of forced migration) is a decision affected also by political conditions that are considered unpleasant (or outright threatening) to nationals and foreign residents. This suggests a direct relationship between the emigration of nationals (or the repatriation of foreigners) and the existence of authoritarian regimes that suppress political rights and civil liberties. There are several historical examples in Latin America about this: the onset of military regimes in Argentina in the 1960s and 1970s that curtailed civil liberties and intervened in the universities (suppressing academic freedoms) was followed by a massive outflow of professionals, intellectuals and scientists out of the country with adverse brain drain consequences for the country. A similar situation developed in Brazil in the 1960s and 1970s and later on in Chile in the 1970s and 1980s. In these cases, emigration (very often of individuals with a high stock of human capital) became a response to non-democratic political regimes that failed to respect civic rights and cut resources for teaching, research and cultural activities. Current political trends such as polarization and destabilization in Venezuela, volatility and confusion in Argentina, political fragility in Ecuador and Peru are, undoubtedly, worrisome trends for stability and democracy and its effects on the flight of human capital.

Growth, Macro-economic Cycles and Inequality

An important question is the relationship between growth and international migration. There seems to be a two-way causality between these two variables: rapid growth, expanding opportunities, technological discoveries and land availability in the host country often precedes immigration. This was apparently the case of Argentina and other New World countries (Australia, Canada, the US, New Zealand) at the end of the nineteenth century. At the same time immigration is an important factor in sustaining and reinforcing a dynamics of enhanced growth and prosperity. Various mechanisms can account for a positive effect of migration on economic growth in receiving countries. On the one hand, the immigration of people with entrepreneurial capacities and a favourable attitude towards risktaking was, in history, an important contribution to business creation, resource mobilization, colonization and innovation. On the other hand, the immigration of unskilled labour can help to increase and sustain growth in the host country by moderating the growth of wages therefore contributing to keep profits high, raising the profitability of investment and accelerating growth.

Macro-economic cycles are also correlated with migration flows. The debt and growth crisis of the 1980s in Latin America saw a resumption of emigration pressures from the region. In contrast, the economic boom of Chile during most of the 1990s and in Argentina in the first half of the 1990s attracted migration from lower income neighboring countries as well as the repatriation of nationals living abroad. However, in the late 1990s and early 2000s there has been a resumption of emigration pressures due to regional downturn, economic uncertainty and volatile politics.

Regional and global inequalities can be dampened by international migration as people move from lower real wages to higher wage countries. The empirical evidence from the age of mass migration before 1914 shows that incomes convergence between Europe and the New World was largely driven byinternational migration that contributed to significant narrow wage gaps between sending and receiving countries. In contrast, today we live in a world of large global inequalities and more restrictive international migration regimes.

Summing up, more flexible migration regimes can have a positive effect in boosting economic growth, correcting global labour markets imbalances and reducing international inequalities. In addition, sound domestic economic policies, international cooperation for development, and open markets for goods, capital and labour are critical ingredients for smoothing global emigration pressures, while making people’s mobility (likewise capital mobility) also an integral part of globalization.

(1) Papers by the author on this subject are: ‘Development Cycles, Political Regimes and International Migration: Argentina in the 20th Century’, 2002, mimeo, ECLAC. Also ‘Globalizing Talent and Human Capital: Implications for Developing Countries’, series Macroeconomics of Development, Working Paper no. 15, ECLAC. ‘Globalization, History and International Migration: A view From Latin America’, mimeo, World Commission on Social Aspects of Globalization, ILO, 2002. Contact:

(2) Our discussion of the economic and political determinant of migration refers to voluntary migration. Forced migration and the issue of refugees and asylum is often driven by other determinants more related to the occurrence of civil wars, political and/or religious persecution, ethnic cleansing and the like.

Andrés Solimano is Regional Advisor, United Nations Economic Commission for Latin America and the Caribbean (ECLAC), former Country Director at the World Bank and Executive Director at the Board of the Inter-American Development Bank, and general editor of the series, Development and Inequality in the Market Economy, University of Michigan Press.