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wiiw Seminar Series
'Crisis Management in Central, East and Southeast Europe: What is
to be done?' |
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Allan
Brunner, International Monetary Fund, European Department
Labour Outflows and Economic Convergence in the New Member
States: Theoretical and Historical Perspectives
25 January 2010, 11 p.m.
(organized in cooperation with the Joint Vienna Institute) |
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The objective
of the paper is to better understand the situation of the NMS
from a macroeconomic point of view. In particular, the paper
draws on both theoretical predictions and historical experiences
to answer several questions: How important is migration for
the convergence process? Is the degree of labour migration in
the NMS unusual? What are the longer-term prospects of the NMS?
Outward immigration in the NMS has raised concerns about social
and economic stresses that could intensify in the near future.
However, as argued in the presentation, net outward migration
can be viewed as a natural part of economic convergence, since
shedding labour can raise both the capital-to-labour ratio and
labour productivity. So far, the NMS do not appear to be heading
towards a scenario where both capital and labour are exiting
the country. Rather, capital inflows have been strong, wages
have been increasing, and the employment rate has been rising,
which has more than offset losses in the overall labour force.
Nevertheless, complete economic convergence is a distant prospect,
and some NMS face a number of challenges to achieve a desirable
outcome, where convergence is reached in an orderly fashion
and without significant loss of population. Also, with more
open borders with other EU members in the near future, both
capital and labour flows might look very different in a few
years’ time. Comparing the NMS experiences to historical experiences,
the NMS do not look all that unusual. Indeed, recent rates of
net migration are in line with some historical episodes, and
net migration was an important part of convergence for many
of those countries. Finally, an analytical model indicated that
migration is likely to have a small, positive effect on labour
productivity over the medium term, but it will have no impact
over the longer run.
Allan Brunner is in the European Department at the International
Monetary Fund. He serves as the desk economist for Sweden, and
conducts research on various topics in applied macroeconomics.
He received his PhD from Duke University. |
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