Income disparity and migration

I’ve become particularly interested in economics as a tool for understanding social issues and for affecting social change.

So today I went to an interesting lecture by Samuel Bazzi, Assistant Professor of Economics at Boston University. Bazzi spoke about his recent working paper Wealth Heterogeneity, Income Shocks, and International Migration: Theory and Evidence from Indonesia. (Read full report)

At it’s heart this lecture was about mapping individual choices to national trends. This strikes me as a very economics concept. If peoples individual decision making can be explained and predicted by a mathematical model, then those decisions can be aggregated to explain, and predict, larger trends.

This is definitely a vision of social science as epistme, or “scientific” knowledge.

But can people’s decisions really be accurately mathematically modeled?

Well, I’m skeptical, but I have much more to learn. And, even if transforming individual actions into mathematical statements is not an accurate description of reality, I’m not prepared to assume that means there’s no value to this approach.

So let me tell you about migration in Indonesia. 

Indonesia is the fourth most populated country in the world. Immigration, particularly from rural areas, is common. Recruiters are active in rural towns, attracting around 700,000 migrants annually to 2-3 year contract jobs in Southeast Asia and the Middle East.

So what determines whether someone immigrates or stays in Indonesia? 

Well, money, says the economist.

Immigrating for these fixed-year contract jobs can be fairly lucrative compared to rural agriculture. But the costs associated with migration make it difficult for the poorest people to take advantage of these opportunities. Alternately, for the wealthiest Indonesians migration may not be a lucrative enough opportunity.

So you end up with a trend where the poorest and the wealthiest don’t migrate, but those in the middle, do:

Using this data, Bazzi goes on to map and predict migration trends. His model looks particularly at the effects of sudden economic changes on migration. Years with higher rainfall are more profitable for farmers. And the 2004 Indonesian ban on imported rice drove up the cost of buying rice domestically. These economic changes influenced people’s need to migrate for higher wages and people’s ability to afford migration.

By looking at those economic changes and examining income this period, Bazzi says, you can use his model to predict migration next period.

Facebooktwittergoogle_plusredditlinkedintumblrmail

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.