Labour market performance and migration flows - European ...

European CommissionOccasional Paper 60, Volume ITable 1 Analytical structure of the paperMigrationRemittancesActualmigrationProspect tomigrateReturnmigrationFinancialtransferSocialremittances√Supply side of Endowments √ √ √ √the labour market Behavior √ √ √ √√Consumption patterns √ √ √Demand side ofthe labour market Investments,√ √ √entrepreneurshipNeedless to say, not all the multifaceted aspects of migration can reasonably be expected toinfluence the demand or the supply side of the labour market, and Table 1 sets out the ones that wedeem as most relevant, and that will be analyzed in this paper.The paper is structured in two parts. The first part gives a review of the theoretical arguments:section 1 and 2 focus on the impact of migration on the supply side of the labour market, analyzingrespectively the impact of migration on labour-force skill-composition, and the influence thatmigration exerts on the behavior of workers in the labour market. Section 3 and 4 shift the focus tothe demand side, analyzing how migration reshapes the sectoral composition of the economicsystem, and the incentives and capabilities to undertake productive investments. The second part ofthe paper focuses on the existing empirical evidence for the Arab Mediterranean countries. Section5 provides an overview of the salient features of migration out of Arab Mediterranean countriesthat are likely to mediate its impact on the labour markets. Then, Section 6 to 9 explore theempirical relevance of the various theoretical arguments through the analysis of existing evidenceand relevant secondary data for the Arab Mediterranean Countries. Section 10, finally, summarizesthe main findings of the previous sections and it will also offer some conclusions.Part I- Review of the theoretical argumentsSupply side of the labour market1. Labour force - endowmentsThe direct impact of the migration process on a country’s endowment of labour crucially depends onthe prevailing pattern of migration. When migration occurs mostly on a temporary basis, then thepotential for migration to bring relief to the labour market – or to deprive it of valuable humanresources – is clearly limited. By the same token, the influence of the prospect to migrate on theincentives to invest in education fades away when migration is predominantly temporary, as theresponsiveness of the key educational decisions to the characteristics of the foreign labour market ispositively related to the planned duration of the migration episode. A predominantly temporary orcircular pattern of migration conversely increases the relevance of the arguments around the influenceof return migration upon the labour market, as returnees can bring back home relevant skills acquiredin the countries of destination. The arguments around the effects of remittances upon the labour114