4. Analytical approaches

• Neoclassical Economics Paradigm


  • Macro Theory
  • Micro Theory (decision making of individuals)
• Propositions and Assumptions(Macro theory)

  • International migration is caused by difference in wage between countries
  • Movement of labour, and migration will not occur in in the absence of wage differentials
  • Labour markets are primary mechanisms to cause the flows of labour
  • Labour market regulations
  • Labour abundant country
  • Labour scarce country
• Micro Theory (decision making of individuals)


  • Model of individual decision to migrate assessing the costs and benefits of the migration decision (person migrates if there are more benefits)
  • People are making rational decision (consider their economic situation and have perfect information-they know exactly what will they earn)
  • Individual rational actors decide to migrate if the cost-benefit calculations indicate a positive net return (usually monetary) from migration) maximisation of income
  • International migration is a form of investment in human capital
  • The theory focuses on differentials in wages and employment conditions in different countries and on migration costs and benefits
• NELM (New Economics of Labour migration) (Household migration theory)


  • Migration decisions are made by larger units of related people (families, household)
  • Migration decisions are based on analysis of costs and benefits considered by family
  • Migration is viewed as rational family decision to maximize income and minimize risks (all the costs associated with migration)
  • Family's decision making (push and pull factors)
• Return migration

  • Neoclassical approach (mistake)
  • New economics of labour migration (success)
• Structural Models. Dual Labour Market Theory

  • Formal labour market (capital intensive): stable job, good salaries, a lot of social securities
  • Informal labour market (labour intensive): more manual work, lower salaries, worse working conditions
  • International migration is supported by labour demands of modern industrial societies, or by governments
• Structural Models

  • World Systems Theory
  • Dependency Theory
• Migration and Consequences of Migration

  • Demographic
  • Social (connected with social system, education)
  • Economic (can result in lower GDP)
• Remittances

  • Earnings migrants send home to family and friends in the form of cash or goods
  • Sizable and stable source of funds that sometimes -exceed offcial aid or financial inflows from FDI
  • May have a significant impact on poverty reduction and can finance economic growth in receiving economies
• IMF


  • The main provider of international remittances statistics
  • Data for remittances are derived from the Central Banks
  • Defines remittances as the sum of two main components in the Balance of Payment Statistics: Compensation of employees and Personal transfers
• Components of remittances

  • Compensation of employees
  • Personal transfers
• Compensation of employees

  • Income earned by temporary migrant workers in the host country
  • Income of workers who are employed by embassies, international organizations and foreign companies
• Personal transfers

  • Current transfers in cash or in kind made or received by residents from or to individuals in other countries
  • Internal remittances sent within countries and not just across borders
• Macro theory

  • Explains labour migration in the process of economic development
  • Caused by geographic differences in the supply and demand for labour
  • Wage differential causes workers from low wage country to move to high wage country
  • Flow of investment capital from capital-rich to capital-poor countries
  • Movement of capital and human capital