Freedom and international migration.

• Author: Ashby, Nathan J.

1. Introduction

   Only 2.5% of the world's total population was classified as migrants in 1960. Between 1970 and 1980, the demographic significance of international migration diminished. However, due to the resurgence of migration in the 1980s and 1990s, the percentage increased to around 2.9% in 1990 and 2000 (United Nations 2005, 2006). The conjecture of this study is that variations in economic and political freedom between countries have had a significant effect on international migration.

   In a previous article, I demonstrated using a modified gravity model that relative economic freedom had a positive, indirect impact on state-to-state migration flows between 1995 and 2000 in the lower 48 U.S. states (Ashby 2007). Apart from this study, little attention has been given to the relationship between economic freedom and migration flows. At the international level, the only analysis conducted to date is by Melkumian (2006). However, his study is not an in-depth look at the relationship between these variables and considers economic freedom only in the origin country and not in the destination country. Rose (2000) finds a positive effect of economic freedom on trade flows using a gravity model, but significant attention is not given to the issue. Karemara, Oguledo, and Davis (2000) find that greater civil freedom in the country of origin has been a significant determinant of migration to North America.

   In this article, I will begin by discussing recent international migration trends. I will then provide a brief theoretical discussion of the impact of economic and political freedom on migration between countries. The data will then be described in detail, along with a model that will be tested using recent bilateral migrant stock data constructed for 226 countries. Given constraints due to data limitations, this study will analyze country-to-country migration between 58 countries. The hypothesis will be tested using various estimation techniques including ordinary least squares and Tobit regressions. The benefit of using these data is the large number of bilateral observations that can be included. The problem with the data is that they are reported as stocks rather than flows, which makes teasing out causality quite difficult. For this reason, I also estimate a panel data set of migration flows into OECD countries between 2001 and 2006 using fixed effects. Although the number of observations is significantly reduced, the relationship between the explanatory variables and migration is easier to interpret.

   I find that economic freedom is significant even when controlling for income and political freedom in the cross-sectional analysis. Political freedom is significant in all of the OLS regressions but is only significant in the Tobit estimation when income is excluded. Economic freedom is positive and significant in all but one of the regressions in the panel data analysis; whereas, political freedom is negative and significant in all three regressions. Economic freedom is negative and significant when political freedom is omitted, an outcome I attribute to omitted variable bias. (1)

2. International Immigration 1960-2000

   The pattern of international migration has changed dramatically during the last four decades. The growth rate of the stock of migrants vacillated around 1% between 1960 and 1975. This number increased to between 2% and 3% between 1975 and 1985. There was a surge in migration between 1985 and 1990, when the migration stock increased to almost 7%, followed by a return to pre-1975 levels after 1990 (United Nations 2005, 2006). Explanations for this phenomenon are numerous. Many of the institutional reforms--both economic and political--during this period may explain a significant portion of this migration.

   In 1970, Asia was the origin of nearly 38% of all migrants, followed by Europe and North America, with 19% and 17%, respectively. Oceania, Latin America, and Africa had the lowest share of emigrants with 3%, 8%, and 12%. The most significant change in migration in terms of region of origin from 1970 to 2000 was the increased share of the population originating from Europe. Indeed, Europe had surpassed Asia as being the source of 33% of all migrants in 1990; whereas, Asia had decreased to about 28%. Much of this change is most likely due to reforms in Europe, including the transition from socialism in Eastern Europe and the development of the European Union. Another change shows that developing regions such as Africa, Latin America, and Oceania were the sources of an even lower percentage of migrants in 1995 than in 1960. More specifically, the makeup of the share of migrants originating from less developed regions has decreased through time. In 1960, the share of total migrants originating from less developed regions was about 60%. The share between developed and less developed practically converged between 1975 and 1990, and the share of migrants from the developed world overtook the less developed world to reach a level of 60% between 1995 and 2000. By the end of the 40 year period, the pattern of migration with respect to developed and less developed countries had reversed itself (United Nations 2006).

3. Utility, Migration, and Freedom

   Researchers from many fields have analyzed what motivates migration of individuals. For economists, the interest in migration is simple: as opposed to other variables, migration ascertains the revealed preferences of individuals. Variables associated with higher migration rates can be associated with higher utility.

   Basic economic theory suggests that when the benefit of a given decision exceeds the cost, a given individual makes the utility-maximizing decision. If [u.sub.B]> [U.sub.A], choice B is made; if [u.sub.B] [less than or equal to] [u.sub.A], choice A is made, where A is the current status of the individual. In the case of migration, choice A is to not migrate. We know that if choice A is made, the marginal cost of migrating is at least equal to the marginal benefit. Otherwise, migration would have taken place.

   Income is often used as a proxy for utility, given that it can be used to purchase goods and services that enhance utility. However, this is an indirect method at best because we cannot measure utility in actuality. Therefore, we cannot know the impact that income has on utility for any given individual. Migration or lack of migration demonstrates the preferences of individuals. (2) Many researchers have analyzed migration empirically to determine the factors that drive the choices of individuals (Cebula and Vedder 1973; Liu 1975).

   The conjecture of this study is that freedom is a significant determinant of migration. As prior research has demonstrated, freedom is associated with greater economic opportunities for individuals. Higher income allows citizens to enjoy more goods and services. Freedom to use income how one sees fit only enhances one's satisfaction. Many metrics have been constructed seeking to measure "freedom." In particular, the two freedoms that economists and philosophers have discussed in great detail are economic and political freedom. Although highly associated, these are fundamentally different in several ways.

   Economic freedom is the freedom to benefit from the fruits of one's labor through voluntary exchange while allowing this same right to others. A society that enjoys economic freedom is organized as a competitive free market in which economic resources are allocated through the private decisions of individuals rather than the bureaucratic regulations of government.

   On the other hand, finding a definition of political freedom is a bit more complex. A common definition of political freedom includes the absence of coercion by others and by the government. In this sense, political freedom would be nearly synonymous with economic freedom in that it is based on protection for the individual. Such protections are often associated with civil liberties, which include freedom of religion, freedom of assembly, rule of law, freedom of the press, and personal autonomy (Freedom House 2004). Nonetheless, other conditions that persons often consider necessary to have true political freedom can arguably lead to coercion of individuals or groups through voting and the influence of special interest groups that obtain special favors at the expense of others. If this aspect of political freedom is considered, political freedom may directly conflict with economic freedom.

   Main proponents for economic freedom as the more important of the two include renowned scholars Friedrich Hayek and Milton Friedman. Hayek's (1944) reasoning is that political freedom, if allowed to be dominated by collectivistic policies, will lead to the control of government in all economic matters. Without freedom with regard to economic decisions, individuals are at the mercy of the government and will eventually have to surrender other freedoms. Simply put, Hayek opined that economic freedom is an essential ingredient in obtaining and maintaining political freedom. Further, Hayek discounted the importance of political freedom if economic freedom is not present, "Perhaps, the fact that we have seen millions voting themselves into complete dependence on a tyrant has made our generation understand that to choose one's government is not necessarily to secure freedom" (Hayek, 1960, p. 14).

   Friedman and Friedman (1979) contend that economic freedom creates both direct and indirect benefits. Individuals indirectly benefit from economic freedom through greater economic efficiency and the incomes it provides. Evidence of indirect economic freedom benefits are too numerous to discuss in detail in this article (Easton and Walker 1997; Ayal and Karras 1998; De Haan and Sierman 1998; Norton 1998; Esposto and Zaleski 1999; Gwartney, Lawson, and Holcombe 1999; Feldmann 2007).

   Friedman (1962) claims that individuals directly obtain a benefit from economic freedom as an...