Immigration, Migration Between Countries

From the perspective of established international economic theory, it is obvious that international trade of commodities is in effect trading factors of production such as labor and capital. It follows that if factors of production can be moved internationally, then the need for commodity trade is eased, and trade of commodities and movements of factors of production can be substituted for each other. From this, the conclusion can be reached that movement of factor is a substitute for commodity trade. Allowing people to migrate from one country to another country involves migration of labor the movement of a factor of production. The conclusion that factor flows are a substitute for commodity-trade can be re-stated as international immigration is a substitute for international trade. However, this conclusion does not explain the real world in which both international trade and international immigration have increased over time. Thus, established theory of immigration and trade may not be a reliable policy guide for formulating immigration and/or trade policy. For example, in the case of Australia’s immigration and trade with Asian immigrant home countries, immigrants have long run and short run positive impacts on exports, although immigrants do not have a strong impact on Australia’s imports from Asian migrant home countries. Moreover, the intake of migrants 'causes' exports. The main policy implication of these findings is that Australia can use immigration as a long-term strategy to promote exports. Migration produced a substantial convergence of unskilled real wage rates between sending and receiving countries. There were no real wage losses for unskilled native workers in the receiving countries, but their wages grew at a reduced rate. The convergence itself gradually diminished one of the most important incentives to migrate between these regions. The history of the first wave of globalization dramatically clarifies how migration can be a force for equalization of working conditions among nations that participate.