Labour market performance and migration flows - European ...

Chapter IIThe impact of migration on labour markets in Arab Mediterranean countriesincome, associated with the migrants’ absence from their families”. 76 This point means that the incomeeffect of remittances differs from the face value of the transfer, but still it could lead to a reduction inthe participation rates of members in recipient households, possibly through an increase in theirreservation wages.A more subtle argument refers to the moral hazard problem that remittances can give rise to (Chamiet al., 2005): the transfer of remittances is – at least partly – motivated by altruistic reasons (seeRapoport and Docquier, 2006 and Bouhga-Hagbe, 2006 for evidence for selected Middle Eastcountries) and this entails that the migrant tends to adjust the level of the transfer in the face of anadverse income shock that may hit their relatives in the home country. Recipients can then exploitthis altruistic behavior: they can reduce the unobservable work effort that they exert, bringing about adecline in their labour earnings which will then be compensated for by the migrant though higherremittances.Remittances can also influence the labour market participation of children and teenagers, asdiscussed in section 1.4.1, if they foster the development of family-run activities.2.4 Social remittancesThe transmission of ideas and social norms from migrant countries of destination can have asubstantial impact on some deeply-rooted behavior, such as female participation in the labour market(see above). Clearly, such an effect is closely related to how migration reshapes the family structure inmigrant-sending households, as discussed in Section 2.1.Demand side of the labour market3. Consumption patternsMigration can profoundly reshape the consumption patterns that prevail in migrant-sending countries,and this influences the sectoral composition of labour demand. Migration stimulates the demand forservices – such as communication and financial services – that are needed to keep strong ties withmigrant communities abroad. The uneven sectoral impact of migration is reinforced by the likelyinflationary effects of remittances that tend to channel resources and labour towards the non-.tradedsector. This includes the building sector, and a boom in real estate – not necessarily limited to migrantsendingareas – is a common experience of countries that undergo intense migration waves. Needlessto say, consumption patterns are highly exposed to the cultural influence of the habits that prevail indestination countries, and the returnees can be a channel of transmission for such an influence.3.1 Actual migrationActual migration modifies the patterns of consumption in migrant households, as it increases the demandfor non-traded services: financial services, communication facilities, and tourist facilities. In migrantsendingareas, where the share of households having at least one member abroad is higher, money transferservices, phone centers and internet services usually experience a boom, and this increases the demand forlabour in these sectors. Clearly, the relevance of these effects depends on several confounding factors,such as the size of the migrant population and the strength of the ties with the diaspora.76 Moreover, it must not be forgotten that migration is a risky venture that can also have a negative income effect for migranthouseholds; this would occur if the migrants fail to find a job in the country of destination, or if they voluntarily decide tobreak up the family ties and not to send back remittances.119