International Handbook on the Economics of Integration, Volume III
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International Handbook on the Economics of Integration, Volume III

Factor Mobility, Agriculture, Environment and Quantitative Studies

Edited by Miroslav N. Jovanović

With this Handbook, Miroslav Jovanović has provided readers with both an excellent stand-alone original reference book as well as an integral part of a comprehensive three-volume set. This introduction into a rich and expanding academic and practical world of international economic integration also provides a theoretical and analytical framework to the reader, presenting select analytical studies and encouraging further research.
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Chapter 8: Reforming the System of International Migration

Slobodan Djaji


Slobodan Djajić 1 INTRODUCTION1 Among the striking features of the world economy today is the persistence of large international wage differentials for labour of similar skill and quality, in spite of the ongoing globalisation. A construction carpenter who earns $2 a day in a poor developing country such as India, could easily get 20 to 50 times more for the same services if authorised to work in an advanced country at the same wage as its native workers.2 With such huge differences in the value of a worker’s productivity across countries, the potential gains from liberalising international trade in labour services are estimated by Rodrik (2002) to be roughly 25 times larger than the potential gains from further liberalisation of international capital flows and trade in goods. According to Walmsley and Winters (2005), even a relatively small increase in international migration, amounting to 3 per cent of the OECD countries’ labour force, would raise the income of people from the developing countries by $156 billion per year. Complete removal of barriers to international migration, however, would not be an attractive option for either the host or the source countries. In the host countries it would result in a redistribution of income at the expense of workers who compete with migrants, and in favour of owners of factors of production complementary to migrant labour. For host countries with highly segmented labour markets and a long history of documented and undocumented immigration, with migrants concentrated in certain sectors of the economy, further...

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