The economics of mass migrations.

• Author: Williamson, Jeffrey G.

The mass migrations that ended early in this century raise four fundamental questions: What explains them? How did they affect labor markets? Did their impact create a policy backlash? Does the experience offer lessons for today?

Explanations for the Mass Migrations

Almost 60 million Europeans left for the New World during the half century or so prior to World War I. This impressive figure would be even higher if it included the Italians who went north, the Poles who went west, the Irish who went to England, and the other European migrants who sought better lives within Europe. Although wars, pogroms, religious discrimination, ethnic cleansing, and racist restrictions played important supporting roles, the prime motivation for these migrations was economic fundamentals. One way those fundamentals were manifested was through self-selection. Overwhelmingly, the migrants were young male adults, the very people who are most sensitive to and who have the biggest impact on labor market events. Those economic fundamentals also were manifested by the timing of the mass migrations: when to move was driven by unemployment, business cycles, and industrial crises. But who moved and where they moved were determined by long-run fundamentals that underlay labor markets around the globalizing Atlantic economy.

In a series of publications(1) culminating with a book recently published by the Oxford University Press,(2) Timothy Hatton and I have shown that the mass migrations obeyed a predictable law of motion but that the law was far more complex than an economist might guess. The poorest workers in the poorest regions of the poorest countries did not move even though the return to their move would have been highest. Furthermore, every country losing emigrants passed through a life cycle that took many decades to complete: poor agrarian countries registered very low exit rates; rapidly industrializing countries registered rising rates, not falling rates as traditional theory would have predicted; and more mature industrial countries registered declining rates as their labor market conditions improved.

What accounts for the upside of this inverted U-shaped trend? Poor migrants were income-constrained in a very imperfect capital market, but that income constraint was eased by the combination of improved conditions in their home countries and rising remittances from emigrant pioneers abroad. On the upside of the "inverted U," the demand for emigration also was driven by demographic factors at home: declining infant mortality and a delayed decline in fertility created a glut of young adults who were prime targets for emigration.

Thus, the rise and fall of emigration from Europe traced a law of motion as global labor markets became integrated. Then World War I and immigration quotas choked off European emigration abruptly; the decline would otherwise have happened, but more gradually.

Divergence and Convergence

In the first half of the 19th century, the Atlantic economy was characterized by high tariffs, modest commodity trade, very little mass migration, and an underdeveloped global capital market. Two profound shocks occurred in this environment that was still hostile to liberal globalization policy: early industrialization in Britain, which then spread to a few countries on the European continent; and resource "discovery" in the New World, set in motion by sharply declining transport costs linking overseas suppliers to European markets, so that real freight rates fell by 1.5 percent per annum between 1840 and 1910.(3) These two shocks triggered a divergence in wages across countries that lasted until the middle of the century.(4)

This divergence was replaced by long-run convergence between 1846 and 1854. If we exclude Canada and the United States, two "exceptional" rich countries that bucked the convergence tide, then convergence up to 1914 is even more rapid. If we also exclude Portugal and Spain, two countries that failed to play the globalization game, convergence is faster still. The measure of wage divergence drops by more than a third from 1870 to 1900, and divergence drops by perhaps two thirds between 1854 and the end of the century. Gross domestic product (GDP) per capita converged as well,(5) but real wage convergence was much faster. The globalization arguments that follow offer some explanations for why this is...