World economy and international economic relations

The consequences of International Labor Migration

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3.Seminar notes WE&IER

The consequences of International Labor Migration

Consequences of the international labor migration are various enough. They

show up in the countries of emigration, as well as in the countries of immigration,

bringing certain benefits and losses to both parties. However, as analysis shows, there

are more benefits obtaining by countries of immigration, and losses exceed benefits

in countries of emigration. The world as a whole wins, as migration freedom allows

people to move to the countries where they can bring more significant contribution to

world production.

The countries of immigration obtain following benefits:

a) in the country of skilled labor immigration, rates of growth of economy are

accelerated: additional demand for the goods and services of immigrants stimulates

growth of production and creates additional employment in the country of their stay;

b) there is the competitiveness increase of the goods made by the country owing

to the reduction of the production costs connected with lower price of foreign labor

and possibility to contain growth of a salary of local workers due to increased

competition on a labor market;

c) the host country wins at the expense of the taxes which size depends on

ualifying and age structure of immigrants. The highly skilled experts already

knowing language of host country become large taxpayers at once;

the considerable income brings a transfer of knowledge from the emigration

country. When the host country imports the skilled labor and scientists, it saves

expenditure for education and professional trainings. So, 23 % of members of

National academy of Sciences and 33% of Nobel Prize winners are immigrants in the

USA;

e) foreign workers are often considered as the certain shock-absorber on a case

of growth of unemployment: they can be fired first of all;

immigrants improve a demographic picture of the developed countries,

suffering population aging. In Germany, France and Sweden 10 % of all new-borns

appear in families of immigrants, in Switzerland 24 %, in Luxembourg 38 %.

The countries of emigration also obtain certain benefits:

a) decrease in a rate of unemployment and, as consequence, - social pressure in

the country;

b) free labor training for countries of emigration (new professional skills,

knowledge of high technology, the work management, etc.);

reception of incomes in hard currency as a result of remittances of

emigrants.

The remittances of migrants are a considerable part of currency receipts of states that

positively influences national income of the state. It is one part of consequences of

migration for countries of emigration. On the other part, these countries sustain

essential losses from labor export: a) reduction of tax revenues because of reduction

of number of taxpayers; b) the constant migration cased an outflow of the qualified,

initiative workers, called "the brain drain", leading to slowing down the rates of

increase of scientific and technical and cultural level of the country. By estimates of

experts, these losses reach about 76 billion dollars.

Such measures of the state can be possible ways of removal of negative

consequences of labor emigration:



an emigration interdiction;



the tax introduction for the brain drain to compensate the state investments in

emigrants;



creation of the high profit branches which are carrying out export of labor.

References:



James Gerber - International Economics, 7th edition, published by Pearson

Education, England 2018



Paul R. Krugman, Maurice Obstfeld, and Marc J. Melitz - International

Economics: Theory & Policy, 11th Edition, by published by Pearson Education

2018



Y. Kozak, T. Sporek, M. Zaec - World Economy and International Economic

Relations, Training Manual, Kiev 2015.



Pugel, Thomas A.



Thomas A. Pugel - International economics. Sixteenth edition.

Published by

McGraw-Hill Education, New York, 2016

5. International

capital

migration

and

multinational

companies

Objectives:



What are the main points and forms of international capital movements?



What is foreign direct investment?



What is the nature of portfolio investment?



What are international loan capital flows?

The Main Points and Forms of International Capital Movements

International capital movement is a rather developed component of the

international flows of factors of production. Its nature consists in the partial removal

of the national capital, after which it is included to the manufacturing process or

other turnover in other countries. Under modern conditions, the capital mobility is

relatively high, although it has more restrictions than the international trade. The

growth rates of capital movements between countries are several times greater than

the growth rates of both production and international trade.

International capital movements can replace or complement the international

trade, if the efficiency of use of capital is higher than the result of international trade.

International capital migration is not a physical movement of production means,

but a financial transaction: loans, purchase and sale of securities, the investment.

Specific forms of international capital movements are distinguished by the

following features:



sources of capital origin;



the nature of use of capital;



terms of capital investment;



the purpose of capital investment [19; p. 171].

By the sources of origin, capital is divided into official capital and private capital.

Official capital is funds of the state budget or the budget of international

organizations (IMF, the World Bank, etc.), which move abroad or from abroad

according to the decisions of governments or intergovernmental organizations. Its

source is money of taxpayers.

Private capital is funds of private firms, banks and other non-state

organizations, which are provided in the form of investment, commercial loans,

interbank crediting.

By the nature of use, capital is divided into business capital and loan capital.

Business capital is funds that are directly or indirectly invested in the

production for profit earning. It is usually private capital.

Loan capital is funds that are provided to a borrower to obtain a given

percentage. On an international scale, loan capital is basically official capital.

By terms of investment, capital is divided into short-term, medium-term and long-

term capital.

Short-term capital is capital investment for less than one year, mainly in the

form of the trade credit.

Medium-term and long-term capital is capital investment for more than one

year.

All investments of business capital are mainly in the form of direct investments,

as well as in the form of state credits.

By the purpose of investment, capital is divided into direct and portfolio

investment.

Direct investment is capital investment in order to acquire control over the

object of allocation of capital. It is mainly export of private business capital.

Portfolio investment is capital investment in foreign securities without the right

of control over the investment object. It is mostly export of private business capital

as well.

From a practical standpoint, the most important fact is the functional division of

capital into direct and portfolio investment. The major role in international capital

movements is played by international loans and bank deposits.

The forms of international capital movements are defined in the investment and

banking laws of each country.