In “The Gift of Moving: Intergenerational Concepts of a Mobility Shock,” Amy Nakamura, Joseph Sigurdsson and John Steenson examine the long-term benefits of moving to a different field.
For a long time, economists have argued that free trade between countries encourages the movement of resources from areas where they are less valued to those where they are more valuable. For example, if apples are selling for a higher price in the US than in Europe, entrepreneurs will buy apples in Europe and sell them in the US, sensing an opportunity to make a profit. In the case of labor as well. People who live in low-wage countries tend to move to high-wage countries. But such migration does not happen immediately. Various conflicts can discourage people from moving to a different area, even if the geographic difference in wages is much larger than the moving cost. These conflicts may be due to cultural differences, personal concerns, barriers to free immigration, etc. So, in short, there is significant scope for wrong allocation of labor in different regions of the world.
In “The Gift of Moving: Intergenerational Consequences of a Mobility Shock, Amy Nakamura, Joseph Sigurdsson, and John Steenson examine the long-term benefits of moving to a different field. In their paper published in the peer-reviewed journal ‘Economic Studies Review’, the authors study the earnings of a certain population that migrated from the Westman Islands, located off the coast of Iceland. In January of 1973, a long dormant volcano erupted on the island and nearly a third of the residents’ homes were destroyed. Those whose homes remained intact after the volcanic eruption had more reason to stay back on the island, while those who lost their homes to the volcano had more reason to get off the island and start a new life elsewhere. Chances were high. As a result, they were more likely to find new jobs in more productive areas than in the traditional fishing sector of the island.
The researchers note that many earlier studies have already proven the economic benefits of migration. For example, children in Chicago who were forced to relocate after their homes were torn down earned more as adults than the same population. But the volcanic event in the Westman Islands offered these researchers an interesting natural experiment to test the potential economic benefits of migration. They found that more than 80% of those who were under the age of 25 and forced to move out of the island by volcanic eruptions earned more than their peers on the island. This group of young people also received four more bilingual educations than their peers. Researchers estimate that an 18-year-old who moved off the island would have earned about half a million dollars more in a lifetime than his peers. Those who were over the age of 25 who were more likely to be parents of children, however, saw a slight decrease in their earnings. This may be due to the fact that older people are inflexible than younger people, thus affecting their employability. However, the loss in earnings of older people was offset by higher earnings of their children.
The researchers concluded that young people who were born in the West where their skills may not be best suited for a variety of reasons, may be the most likely to benefit from migration. Yet migration is not as widespread as it should be given the significant benefits it offers. One reason may be the significant cost of migration. Many people are not financially capable to take this kind of risk. Another reason for this could be the barriers to free movement of people taken by different governments.
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