Immigration Patterns from Southern Europe to Germany and Switzerland in response to expected job prospects and welfare gain: 1990-2013 Farah Hamud Khan May 2015 Abstract: From the fall of the Soviet Union in 1990 to the financial crisis of 2008-2009, Europe has undergone major institutional changes that have changed the economies of the member countries, as well as their labor markets. The Eurozone and the Schengen Area, which includes Switzerland, allow free movement of legal workers, and therefore polarities in labor markets and standards of living act as push-pull forces for movement of labor. This paper studies immigration flows from four Southern European Countries (Greece, Italy, Spain, and Portugal) to Germany and Switzerland from 1990-2013. The data analysis examines to what extend immigration changes according to expected welfare gains and improved job prospects from moving to the destination countries, and the effect of the 2008 financial crisis on labor flows is carefully scrutinized. Farah Hamud Khan, Smith College Email:fkhan@smith.edu 1 1. Introduction The political and economic instability created by the cold war and collapse of the Soviet Union after 1989 pushed the European Union (EU) to increase integration, and extend membership to Eastern European Countries. The formation of the Eurozone in 1990 meant that member states had to adhere to strict economic and monetary policies (DokosThanos et al., 2013). The reunification of Germany in 1990 and free movement of workers due to the formation of European Community (which Spain and Portugal joined in 1992) led to a surge of guest workers from the Southern European Countries to Western and Northern Europe (Oezcan, 2004). Switzerland, which is not a part of the Eurozone, experienced a large influx of foreign workers due to rapid economic development in 1980’s. Between 1991-1991, the Swiss Government altered the immigration system so as to ease entry of workers from the member states of the European Union only (Messagerelatif à l’initiativepopulaire, Contrel’immigration de masse, 2012). The financial crisis of 2008-2009 had asymmetrical effects on the economies of European Countries. While recession and unemployment levels rose to record levels for many Southern European countries, levels in Western Europe remained stable. Examples of countries which faced record levels of unemployment and recession were Greece, Spain, Portugal and Italy. Employment rates in Germany and Switzerland however remained stable and their economies grew (Bräuninger, Dieter et al., 2011). Greece for example reported an unemployment rate of 18% in 2011, and Spain an even higher rate of 21.4% in the same year, while Germany reported a rate of 5.8 % in 2011(Source: The World Bank DataBank). Since Eurozone and Switzerland allows the free legal movement of labor from member states of the European Union (EU), an asymmetric distribution of employment rates within the Schengen Area is likely to cause labor migration from areas of low employment to areas of high employment. The 2 increased labor mobility could act as an equilibrating mechanism reducing unemployment in some areas and relieving labor shortages in other areas (Bräuninger, Dieter et al., 2011). Unemployment rates are not the only determinants of immigration because other factors such as cost of living and wages are also taken into account when making the decision to migrate. Higher standards of living and higher wages provide economic incentives for migration. Labor migration often occurs because people want to move to areas where they will be rewarded more for the same amount of work they do in home countries. Higher wages and higher standards of living act as ‘pull factors for migration’. Immigration occurs because immigrants want to maximize benefits and therefore while studying the effects of wages; one must take into account the cost of living in destination countries (SUNY Levin, Globalization 101, Pull Factors). This paper examines the effect of both unemployment rates and wage rates (in countries of origin and destination countries) on immigration flows from Southern Europe to Germany and Switzerland. 3 2. Literature Review The literature review shows that immigration from the Southern Europe countries to Germany has been steadily increasing since the 1990’s and started to rapidly increase after the 2008 financial crisis. Bertoli et al. (2013) use an econometric approach to determine that declining economic conditions in destination countries account for 11-16 per cent of the immigration flows from Greece and Portugal to Germany. Benjamin and Zimmerman (2013) also verify that there has been a surge in immigration to Germany after 2009, and the immigrants who have arrived after the Eurozone crisis are better educated and well trained. Germany is an attractive economic destination because migrant workers in Germany do not have a hard time finding employment due to the country’s economic stability (Kim, 2011). A prime cause of this immigration flow is the large disparity in employment levels in Western and Southern Europe (Jauer et al., 2014). Bräuninger, Dieter et al.(2011) also examine the effects of difference in wage rates to explain immigration flows. The authors find that after the financial crisis, workers from Greece and Portugal immigrate more in response to expected gain in welfare. Switzerland has been receiving an increasing influx of high skilled and low skilled migrant workers since the 1980’s (Gerfis, Michael and Boris Kaiser, 2013). Favre (2011) uses data from Statistik Schweiz to explain the effect of foreign labor inflows on the Swiss wage structure. He also looks at the history of immigration in Switzerland and how the policy changes in 1990 allowed free movement of labor across the EU, and as a result immigration from the EU increased directly (Favre, 2011). 3. Unemployment in Southern Europe: 4 The Eurozone is a compilation of heterogeneous economic regions in different levels of urbanization. Western and Northern European Countries have had much lower unemployment rates than Southern European Countries since the 1990’s.For example in 1991, Spain had an unemployment rate of 15.5 while in Switzerland only 1.7 percent of the population remained unemployed (The World Bank Databank). The failure of numerous European banks and stock markets was caused by the 2008 global financial crisis, and strained the bonds between EU member states threatening their solidarity. Southern European Countries are much more heavily indebted that their Northern and Western counterparts after the crisis, due to reckless borrowing at low interest rates inside the Eurozone (Lin, Carol YehYun, et a. 2012l) Germany: Germany’s unemployment rate has fluctuated in 1990-2005. 6.4 percent of the population was unemployed and the rate increased and decreased several times before reaching a rate of 11.2 percent in 2005. The rate climbed down after 2005 and has been decreasing ever since. In 2013, Germany reported an unemployment rate of 5.4 percent (The World Bank DataBank). Switzerland:Switzerland had a record low unemployment rate of 0.80 percent in 1990 but the rate steadily increased reaching 4.1 in 1997. The unemployment rate started falling after 1997 and fell to a 2.5 percent in 2001 before rising again. In 2007, the unemployment rate was 3.60 and it has been increasing ever since. In 2013, Switzerland reported an unemployment rate of 4.4 percent. Greece: The Greek economy displayed strong progress in terms of fiscal and monetary reforms in 1990’s which allowed its accession into the European Union (EU) (Lin, Carol Yeh-Yun, et al. 2012l). For example in 1991, Greece had an unemployment rate of 7.7 percent only, the lowest in the last 25 years. Once guaranteed entry however, the economy became sluggish and the government started to borrow heavily. For example in 1993, Greece had an annual GDP growth rate of -0.96 percent (The 5 World Bank DataBank). There were no structural reforms in the economy, and unemployment started to rise. Relief came for the labor market with the preparation of the Olympic Games in 2004, and unemployment rates fell in 2002 and 2003. Greece did maintain an economic growth of 4.27% in 2002-2007, although most of it was financed by borrowing. Unemployment rates declined steadily after 2004, coming to a low at 7.8% in 2008(The World Bank DataBank). The Greek economy remained initially more stable than other Southern European Countries when the financial crisis hit but could not avoid a recession as global confidence, tourism and shipping receipts fell drastically. The service sector made up 78.8% of its national output and with the fall in demand for the service sector, unemployment rates in Greece started to climb steadily (Lin, Carol Yeh-Yun, et a. 2012l). In 2014, Greece reported an unemployment rate of 26.5%. Italy: Italy enjoyed dynamic economic growth in the mid 1990’s and was one of the first 11 countries to become a member of the Euro-zone. However an economic downtown started in the late 90’s and in 2005, Italy had zero economic growth in GDP (Lin, Carol Yeh-Yun, et a. 2012l). Unemployment rates in Italy after 1990’s have fluctuated but started to fall in and 2004 reached a low of 6.1 percent in 2006(The World Data Bank). When the economic crisis hit in 2008, the country suffered from even worse negative economic performance. The sector hit the hardest was the production sector, and specifically mechanical engineering and small companies were affected the most in terms of production, productivity and employment. Large sized companies were also affected by the crisis and so were subcontractors and suppliers. The country reported a negative GDP growth rate of -5%. 380,000 people were unemployed in the fiscal year of 2008-2009, resulting in a dramatic rise in the unemployment rates. The unemployment rate climbed to 7.7% in 2009, and has been increasing ever since. Workers with temporary job contracts were affected the most(Lin, Carol Yeh-Yun, et al.). 6 Portugal:Portugal experienced positive economic growth after joining the European Union in 1990’s. In early 90’s Portugal had relative low levels of unemployment ranging in the 5-6 percent range. The country’s robust economic growth stopped in 2000, and the economy took a downturn in 2001-2008. Portugal has since then been one of the worst economies in the Euro zone with lack of government attention to competition, inflexible labor laws and rising unemployment. Unemployment rate started to climb after 2004, and stood at 9.2 percent in 2007. Due to the poor economic conditions preexisting before the financial crisis, the country was theworst prepared to handle the financial crisis. GDP fell by 2.7% in 2008 to 2009 and unemployment rose to 10.7 percent in 2009. Much like Greece, Portugal has a huge service industry which suffered from the lack of global demand in the recession. Poor labor productivity and insufficient wage moderation also exists in the economy and has given rise to large national account deficits. Spain: Of all the members of the Eurozone, Spain was the country most affected by recession. The unemployment in Spain was much higher than the other Southern European countries when it first joined the EU. For example in 1990 it had an unemployment rate of 15.5 percent (The World Bank Databank). Spain’s unemployment began persistently rising through the 90’s from 15.5 percent in 1991. In 1997 the percentage of the labor force unemployed had reached and 18.4 percent. Labor market conditions improved in early 2000 but in 2007 Spain had already gone into the recession(even before the crisis started) and unemployment rates started rising again. In 2008, before the crisis hit, Spain had an unemployment rate of 11.3 percent that increased to 17.9 in 2009. For the first time in the country’s history, Spain had 4,000,000 million people unemployed and 1.2 million jobs had been lost in 2008-2009. Unemployment benefits, which are generous in Spain, increased 7 dramatically with unemployment. However, a fall in government tax revenue due to a collapse of the real estate market, lead to a decline in the benefits for the unemployed population. 8 4. Migration Flows: The formation of the European Union and free labor movement laws with Switzerland means that residents with legal work permit constantly move around for work. In 2004, nearly 6 percent of Europeans were not citizens of countries in which they reside (Beets and Willekens, 2009). With polarized labor markets in Europe after the financial crash, migration from areas of low to areas of high employment was inevitable. In many of the Southern European countries, young workers were affected the most. Data from 2011 Euro barometer survey indicate that 53% of Europeans aged 1535 wanted to relocated because of lack of employment opportunities in their own country. A disproportionate amount of these 53 percent where Spaniards (68%), Irish(67%), Greeks(64%), and Portuguese(57%). Migrant workers in these countries were also severely affected because most migrant workers tend to work in industries such as construction, manufacturing, hotel and catering, many of which suffered from the economic crisis (Bräuninger, Dieter et. al, 2011). Migration to Germany: Most countries in northwestern Europe, including Germany, became recipients of a large number of immigrants starting from the third quarter of the twentieth century. Net migration in Germany was positive overall in 1950-2014. Between 1950 and 2010, Germany had an average of 181000 net migrants per annum, the highest amongst all European Counties (Zincone et al., 2011). Amongst all the Southern European Countries, Italy had the largest number of citizens moving to Germany in the 1990’s. In 1991, 38,500 Italians and 28,429 Greeks moved to Germany. Portugal and Spain had relatively smaller numbers standing at 11,013 and 4863 respectively. For Greece, the flow of immigrants to Germany decreased through the 90’s and through to early 2000’s. In 2007, only 7892 Greeks moved to Germany (The World Bank DataBank). **Migration Data and Charts are displayed in the Data Section at the end of the paper. 9 Migration increased to Germany by 40 percent from 2009 to 2011, and it was previously stable at 600,000 per year in 2006-2009. Greece, Italy and Spain were high in the list of countries with most migrants to Germany, with Greece having 85,378 migrants, Italy 151272 migrants, and Spain 83, 358 migrants in 2009-2011(Bräuninger, Dieter et al., 2011). Despite Germany’s complicated immigration process, migration from EU-10 countries is slowly increasing and migrants in Germany are not affected by the economic downturn in Europe because of Germany’s low unemployment rate(Kim, 2011). Migration to Switzerland: Policy changes in 1990 allowed free movement of labor across the EU, and as a result immigration from the EU countries to Switzerland increased directly. Switzerland is a particularly interesting country because it attracts poorly educated workers and highly educated workers. But unlike that of other developed countries, where highly educated immigrants end up competing with natives of lower education level, highly educated immigrants in Switzerland obtain the highly paid positions and compete with natives of their education level(Favre, 2011). Compared to Germany though, Switzerland received a smaller number of immigrants from Italy, Greece (The World Bank DataBank). For example in 1991, only 521 Greeks, and 6658 Spaniards moved to Switzerland. 10,825 Italians and 20,176 Portuguese citizens moved to Switzerland in 1991(The World Bank DataBank). Total net immigration has increased in Switzerland since 1997 and all 4 Southern European Countries seem to follow that trend (Gerfin and Kaiser, 2011&The World Bank DataBank). 24.9 percent of the Swiss population was born abroad and 20 percent do not have Swiss citizenship. This is the highest amongst all European countries (Gerfin and Kaiser, 2011). 10 Greece: Greece’s immigration to Germany has been much higher overall than immigration to Switzerland. Net immigration to Germany decreased from 28,429 immigrants a year to 7,892 immigrants in 2007.After the 2008 financial crisis, net immigration started increasing again. Immigration to Switzerland followed the same pattern except the rise in net immigrants came much earlier. Net immigration started to increase around 2001 and has increased consistently since then. Italy: Italy has had a much higher number of immigrants moving to Germany than Switzerland. The flow of migrants to Germany steadily increased after 90’s until 1997. In 1997 39, 456 Italians moved to Germany and this number fell to 18,624 in 2007. Net immigration to Germany has been increased after 2007 and in 2009 22,235. Immigration to Switzerland has always fluctuated and immigration to Switzerland actually decreased in 2008-2009 from 10,025 to 8,668. Portugal: Portugal initially had a higher number of immigrants moving to Switzerland than Germany. In 1990 20,176 Portuguese moved to Switzerland and 11,013 moved to Germany. Net immigration to Germany and Switzerland both fell after 1991 but immigration to Germany experienced a rapid increase in 1994. That is because Portugal and Spain gained full access to the Eurozone after 1993 (Oezcan, 2004). Immigration to Switzerland decreased till the early 2000’s and started increasing again after 2003. In 2008-2009, Portugal experienced an increase in immigration to Germany but a decrease in Immigration to Switzerland. Spain: Spain, like its Iberian neighbor Portugal, had more immigrants to Switzerland than Germany in 1991 but that situation began to change. Immigration to Germany from Spain has been increasing since 1991 whereas immigration to Switzerland decreased from 1991 till 2007 when Spain went into recession. Immigration to both Germany and Spain increased in 2008-2009 during the Eurozone crisis. 11 5. Wage rates and immigration For most of the Southern European Countries such as Spain and Greece, where youth unemployment in very high, minimum wages have a small but significant adverse effect on employment (Nickell, 1997). The literature shows the unemployment has a significant impact on migration, and we will assume that differences in wage rates have some effect on immigration decisions. This paper uses Gross Annual Average Wages as a measure of wage rates. In order to measure expected welfare effects from moving to a new country, the ratio of the annual average wages of the destination country to the annual average wages of the country of origin is analyzed (See Methodology section). The wage rates are measured in 2013 US $ PPP, which means that the data is comparable for all countries and living costs are taken into account. Greece: Germany and Greece do not have wage data for 1990 and wage data for Greece starts after from 1995. Germany/Greece wage ratio is around 1.7 in 1995 and starts to fall from that time and keeps falling till 2007. After 2007, the ratio rises again and the rise is much sharper after the financial crisis. In 2013 the ratio stands at 1.7, which means a resident of Germany on average has an annual wage rate of 1.7X more than a resident of Greece. Switzerland/Greece ratio is higher overall than Germany/Greece ration. In early 1995 the ratio is around 1.98, but starts to decline. After the euro zone crisis, in 2007 the ratio rises again, and in 2013 the ratio stands at 2.12 which means that on average a Swiss resident has an annual wage rate of 2.3X more than a Greek resident. Italy: Germany/Italy wage ratio steadily increased from 1.06 to 1.22 in 2003. After 2003, the ratio steadily decreased but the trend continued stopped the Eurozone crisis. In 2013, Germany/Italy ratio stood at 1.26. Switzerland/Italy wage rate ratio steadily increased from 1.26 in 1990 to 1.56 in 2013. 12 Portugal: Like Greece, Portugal is missing wage data until 1995. In 1995, Germany/Portugal ratio is initially high at 1.9 and starts to decrease until it falls to 1.73 in 2010. After 2009, the ratio increases again and in 2013 it stands at 1.84. Switzerland/Portugal ratio follows the same pattern but the ratio is much higher usually in range of 2. Spain: Germany/Spain ratio increased steadily from 1990 from 1.12 to 1.26 in 2006. After 2006, the ratio started to decreasebut that started to decrease and the increasing trend picked up again in 2006. In 2013, the Germany/Spain wage ratio was 1.25. Switzerland/Spain follows the exact same pattern and like its fellow neighbors the ratio for Switzerland is much higher. 13 6. Methodology and Data In order to investigate the effect of the financial crisis on immigration flows from Southern to Western Europe, I designed a regression analysis where immigration flows depend on the welfare gain expected and the improvements in job prospect by immigration(Dieter et al., 2011). The welfare gain expected is the ratio of Gross Average Monthly wages purchasing power parity, PPP(2013 US $) of destination to country of origin, for example Gross Average Monthly Wage (Switzerland):Gross Average Monthly Wage (Germany). The data is collected from OECD. The data is an average of all wages across the country, and is subject to inequalities and this therefore is not the most effective measure. For example, Italy may have a higher gross average monthly wage because there are more millionaires in Italy than there are in Germany. However, workers who move to Germany may do so as Germany has higher minimum wages for workers in the manufacturing sector. A more effective measure of welfare gain would have been a comparison of median wages, since it is not sensitive to inequalities. An increase in job prospects is captured by the ratio of unemployment rate in the country of origin to the country of destination, for example, unemployment rate (Greece)/unemployment rate (Germany). The unemployment rates are obtained from United Nations Economic Commission for Europe (UNEC) and The World Bank Databank, and cover the time period of 1990-2013. It must be kept in mind that workers take time to make the decision to migrate, and as a result, we introduce a time lag of one year into the regression equation. This means that based on the current year’s job prospects and welfare changes, workers make their migration decision for the next year. I use a one year time lag specifically following the method from the paper by Bräuninger, Dieter et al. 14 The data for immigration flows from country of origin to destination countries was obtained from the United Nations Population division database and EUROSTAT (for Switzerland) and OECD. This data captures total migration flows for example from Greece to Germany in a particular year, and the data is captured in the time period 1990-2013. The immigration data for both countries is obtained only from the United Nations Population Division database till 2009 but after 2009 the rest of the data is taken from EUROSTAT. The data for 1990 immigration flows for both Germany and Switzerland is taken from the OECD. One might argue that instead of using total migration flows, we could have used migration flows of workers only, since we are examining labor immigration. With immigration flows as the dependent variable and time lagged wage ratios and unemployment ratios as the dependent variable, the equation becomes 𝑰𝒎𝒎𝒊𝒈𝒓𝒂𝒕𝒊𝒐𝒏 𝒇𝒍𝒐𝒘𝒔 = 𝒂. 𝒘𝒂𝒈𝒆 𝒓𝒂𝒕𝒊𝒐𝒕−𝟏 + 𝒃. 𝒖𝒏𝒆𝒎𝒑𝒍𝒐𝒚𝒎𝒆𝒏𝒕 𝒓𝒂𝒕𝒊𝒐𝒕−𝟏 The immigration flows are from origin to destination. The wage ratio expresses the ratio of ages of destination to origin, as it captures the ‘expected welfare’ and the unemployment ratio is the ratio of unemployment rates from origin to destination countries and captures the ‘expected job prospects. As in standard regression analysis, the magnitude, polarity and significance of a and b will explain how much of the immigration flows from Southern to Western Europe is due to the expected welfare gains and expected improvements in job prospects. From the literature review and the explanations about the effects of unemployment and wage rates on immigration, we would expect a and b be to be positive. 15 7. Descriptive Statistics: The tables below present the descriptive statistics for the variables used, immigration flows, wage rate ratios and unemployment rate ratios. A) Germany Immigration mean Std. deviation flows(number of people) Greece to Germany 17040.52 7303.921 Italy to Germany 30341.59 9716.09 Portugal to 12325.7 8793.408 Germany Spain to Germany 9465.652 5781.916 Table 1: Descriptive Statistics for Immigration Flows to Germany min max 7892 18293 1182 32660 48309 32177 4863 29000 Ratio of mean Std. deviation Wages(Destination/Origin) Greece to Germany 1.530779 .148391 Italy to Germany 1.1884 .0433515 Portugal to Germany 1.836311 .0594895 Spain to Germany 1.199472 .0469672 Table 2: Descriptive Statistics for Ratio of Wages to Germany Ratio of mean Std. deviation Unemployment(Origin/Destination) Greece to Germany 1.668192 1.353313 Italy to Germany 1.257571 .4699973 Portugal to Germany 1.190219 .7626678 Spain to Germany 2.284189 1.210647 Table 3: Descriptive Statistics for Ratio of Unemployment to Germany 16 min max 1.295956 1.06261 1.73511 1.12376 1.763617 1.26391 1.991391 1.262547 min max .75 .6732673 .6455696 .8214286 5.3 2.54 3.153846 5.019231 B) Switzerland Immigration mean Std. deviation min flows(number of people) Greece to 540.2174 382.99 239 Switzerland Italy to Switzerland 540.2174 382.99 239 Portugal to 11494.3 4744.69 4296 Switzerland Spain to 2958.217 1809.505 1392 Switzerland Table 4: Descriptive Statistics for Immigration Flows to Switzerland Ratio of mean Std. deviation Wages(Destination/Origin) Greece to Switzerland 1.831703 .1473961 Italy to Switzerland 1.41165 .0870668 Portugal to Switzerland 2.20013 .0577564 Spain to Switzerland 1.428572 .0850374 Table 5: Descriptive Statistics for Ratio of Wages to Switzerland 1581 1581 20176 7507 min max 1.621744 1.268697 2.107881 1.303816 2.126652 1.569283 2.323859 1.557432 Ratio of mean Std. deviation Unemployment(Origin/Destination) Greece to Switzerland 3.373475 1.36156 Italy to Switzerland 3.027414 1.864803 Portugal to Switzerland 2.495109 .9490958 Spain to Switzerland 5.208841 3.352199 Table 6: Descriptive Statistics for Ratio of Unemployment to Switzerland 17 max min max 2.135135 1.694445 1.694445 2.090909 6.25 11.125 6 19.375 8. Results: 1) Greece to Germany Greece has a positive uratio coefficient for Germany which means if the ratio of unemployment rates increases by 0.1 in favor of Germany, 643.2 Greeks will move in Germany the following year. The P>ItI is 0.000 which means that this coefficient is significant. Similarly if wage ratio increases by 0.1 in favor of Germany, 1654.2 Greek citizens will immigrate to Germany the following year and since the P>ItI value is 0.001, this coefficient. The regression is split up into pre-crisis and post crisis periods. For data before 2008, the coefficient for the uratio is 2367.80 and that for wratio is 25,085. The uratio is not significant but the wratioshows that if wage ratio had improved by .1 in favor of Germany, 2508.5 Greeks would have immigrated. For post-regression data uratio is positive with a value of 2271, and wratio is also positive with a value of 51995. Although they are both insiginificant, this is expected, as there are only 5 observations. Nonetheless, the data analysis tells us immigration from Greece to Germany is increasing and is dependent of both prospects of better employment and welfare gain. Greek citizens are more sensitive to expected welfare gains when it comes to making a decision to move to Germany. Note: All regression data is displayed in the data section of the paper 18 2) Italy to Germany The coefficient for uratio for Italy to Germany 25056 and is significant which means that if ratio of wages increase by 0.1 in favor of Germany and 2505.6 Italians will move to Germany. The coefficient for wratio is negative but it is not significant. The post and pre-crisis regression equations provide more concrete results than that of Greece. The uratio coefficient for pre-crisis is 32,047 and that for post crisis is 21,848. Both are significant which and the numbers show that after the Eurozone crisis Italians were less likely to migrate to Germany depending on improved job prospects. The flow of migration in respect to job prospects remains positive, but the magnitude is smaller. 3) Portugal to Germany The coefficient for uratio of Portugal is positive but not significant. The coefficient for wratio is 11,4570 which shows than an increase in wratio by 0.1 in favor of Germany would lead to 11457 Portuguese migrating in the following year. Portugal has the higher number of residents moving in response to improvements in welfare. Portugal has similar missing data problems to Greece, but the post and pre-crisis regressions have been analyzed nonetheless. Before the financial crisis, Portugal has a wratiocoefficient of 160748, which is much higher than the wratio for the regressions for the overall time period. After the financial crisis both the coefficients for wratio and uratio are positive but statistically insignificant. Net immigration to Germany from Portugal is positive, and dependent on both wage ratios and unemployment rate ratios between Germany and Portugal. 19 4) Spain to Germany Spain has a positive uratio and wratio coefficient for the overall regression equation and both coefficients are significant. The uratio coefficient for Spain is 6452 and the variable has a mean of 2.2, which means than an increase in unemployment ratio by 0.1 in favor of Germany will lead to 645.2 Spaniards migrating the following year. The coefficient for wratio is 84206, and similarly 8420.6 Spaniards will move to Germany the next year if ratio of wages increases by 0.1 in favor of Germany. Overall, Spaniards are responsive to both improvements in job prospects and welfare gains in Germany but more responsive to welfare gains. Although none of the regression coefficients for wratio are significant for post and pre-crisis data, it is interesting to see the change in coefficients after 2007. However the uratio coefficient is 6556 after the financial crisis and is statistically significant. It is slightly higher than the coefficient for the overall regression equation. Before the financial crisis, uratio and wratio both have negative coefficients and after the financial crisis both uratio and wratio are positive. It would be interesting to examine the change in coefficients if there were more data points. 1) Greece to Switzerland As we can see from the results, Greece has a negative coefficient for wratio which means that if wages increase by 0.1 in favor of Switzerland, immigration to Greece will decrease by 192.1. Greece has a positive uratio overall which means that if unemployment in Greece increased compared to Switzerland, immigration to Switzerland would actually increase. Both the coefficients for the overall years are significant, as t<0.05. Although this does not match the methodical line of economic thinking and results of the previous literature, separate results of regression before and after the Eurozone crash give us very interesting results. 20 Before 2008, uratio for Greece has a positive coefficient which is not significant but w ratio has a negative coefficient which is significant. The wratio coefficient has a value of -901, which is smaller in magnitude compared to the coefficient of the overall regression equation. However, after the recession, u ratio has a positive coefficient of -75 and wratio has a negative coefficient of 3184. The coefficients are not significant, but it is expected because there are not five observations. However it would be very interesting to see what the results would yield if we could obtain quarterly or monthly data to increase the number of observations. 2) Italy to Switzerland The overall regression equation for Italy to Switzerland has positive coefficients for uratio and wratio but only the coefficient for the wratio is positive. The data shows that if the ratio of wages increased by 0.1 in favor of Switzerland, 2302 Italians would move to Switzerland. The post and pre-financial crisis data analysis does not tell us much, since the coefficients are negative. 3) Portugal to Switzerland Portugal to Switzerland has positive coefficients for uratios and wratios however none of the coefficients are significant. Portugal has data problems with missing data but has a higher number of immigrants moving to Switzerland than Germany, so it would be worthwhile to try the data analysis with more observations. 4) Spain to Switzerland Spain to Switzerland has both positive coefficients for uratio and wratio but only uratio is significant. The number tells us that if unemployment ratio changes by 0.1 in favor of Switzerland, 38.7 Spaniards will migrate to Switzerland the following year. 21 Looking at pre and post crisis data, the coefficients for uratio are only statistically significant. However the coefficient for pre-crisis data is 330 and the done for post crisis data is 1630; there is a significant increase. This shows that Spaniards migrate to Switzerland in search of better jobs and the tendency to migrate based on the job prospects has increased since the financial crisis Using an immigration dependent vairable: Immigration from one year may be dependent upon immigration from the previous year. In this case, we use an immigrant lagged time variable and test it out for Spain and Switzerland. The results as shown in the descriptive statistics gives a uratio coefficient which is not significant, but a wratio of 5314. The time lagged variable has a coefficient of 1.03 and is significant which means that for every spanish citizen moving to Switzerland the previous year, a new Spanish citizen will move to Switzerland the next year. This could be due to passing of information, or following immigration trends. We have chosen to use a time variable of one year but it would be interesting to see how time variables of 2 or 3 years would affect out data, and how they would affect the data before and after the crisis. Immigration from Spain to Switzerland was used for this case since it has the maximum number of data point. 22 8. Discussion of data All four southern European countries having positive migration flows to Germany through 19902013, and Greeks and Spaniards are sensitive to both wage rates and unemployment rates in their home countries and Germany. Portuguese citizens are sensitive to expected improved welfare gains and Italians to improved job prospects. Amongst all four countries, Portuguese are the most sensitive to expected welfare gains from immigrating to Germany, and Italians are the most sensitive to improved job prospects. The results for Switzerland are not very clear cut. Spanish citizens are sensitive to both improved job prospects and expected welfare gains from moving to Switzerland. Greeks also respond to both improved job prospects and expected welfare gains, but they respond positively to job prospects and negatively to welfare gains. Italians respond positively only to welfare gains, and the data does not tell us anything about the Portuguese citizens’ decision to migrate based on improved job prospects and welfare gains. Spaniards respond more than the Greeks to improved job prospects in Switzerland, and Italians respond more to welfare gains than Spaniards. Greek citizens respond much more to improved job prospects in Germany than they do to Switzerland. They have opposite responses to expected welfare gains for Germany and Switzerland. Italians show a significant response to welfare gains in Switzerland, than to welfare gains in Germany. Portuguese citizens show high tendencies to migrate in response to expected welfare gains in Germany, but not significant migration in response to improved job prospects or welfare gains in Switzerland. Spaniards respond more in expected welfare gains and improved job prospects in Germany that they do in Switzerland. 23 Our data analysis shows that immigration is generally dependent on expected welfare and job prospects and immigration tends to increase after financial crisis because expected welfare and job prospects increase during that time. Improvements: The data analysis could be improved by several ways, which have already been discussed. Greece and Portugal are missing data points, and this could be making a change to the significance of the coefficients. The data can either be obtained through further research, including from the countries’ individual databases. The number of observations can also be improved using quarterly or monthly data instead of annual data. In order to make this a fair study not subject to income inequalities, we could be using the median wage instead of average wages. As discussed above, average wages are subject to inequalities, are not taken into account in our regression. Median wages, on the other hand, provide a more accurate description of the welfare effect. However one must wonder that when immigrants make a decision to move in search of welfare, what indicators of welfare do they use? It could be wages earned by coworkers in destination countries or it could be average wages. Instead of looking at net migration flows, we could be using flows of workers to capture the proportion of the population who is most likely to migrate in response to expected increase in job prospects and improved welfare. Net migration flows include movement of residents for family reunion purposes, for the purpose of education and reasons other than employment. People who did not originally migrate for employment purposes might join the labor force, but using the flow of labor would still be more accurate than using the net flow of migration. The unemployment data I used from the World Bank is average weighted unemployment rate and does not distinguish between long term and short term unemployment rates. If the model were to be run with quarterly or monthly data, one would have to use short term unemployment rates 24 Conclusion: Our results agree with the literature is that migration from the Southern European to Switzerland and Germany has increased after the financial crisis. For some countries, my data analysis clearly shows that effect is due to improved job prospects and expected welfare. For other cases, the data set is too small to indicate anything. However, many of the authors, whose work I reviewed before running our model ran into the small problem. Generally speaking, migration flows since 1990 have not been stable and have fluctuated according to migration policies and economic conditions. In most cases, residents of Portugal, Greece, Italy and Spain moved to Germany and Switzerland in hope of better jobs and better wages. There are few exceptions, and the model used in this paper is very preliminary could be improved and expanded to provide a more comprehensive idea behind the migration flows from Southern to Western Europe. 25 Data Tables and Charts: 1. Immigration flow Data Country Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Greece Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Migration to Germany(Number of Residents) 26500 28429 23748 18445 19021 20381 18955 16503 16036 17595 17403 16153 14957 12146 10205 8975 8289 7892 8266 8574 2010 12256 2011 23043 2012 32660 2013 32000 Migration to Switzerland(Number of Residents) . 521 489 437 341 264 281 239 249 260 287 293 319 341 351 352 438 614 659 713 768 1092 1581 1536 Table 7: Immigration Data for Greece Country Italy Italy Italy Italy Italy Year Migration to Germany(Number of Residents) 1990 36900 1991 1992 1993 1994 35800 30316 31910 39100 26 Migration to Switzerland(Number of Residents) 883 10825 10065 8764 7953 Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy Italy 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 48309 46249 39456 35576 34934 33235 28787 25011 21634 19550 18349 18293 18624 20087 22235 23894 28070 36896 47000 6259 4465 4314 4366 5197 4541 4683 5995 5820 5859 5622 5689 8540 10025 8668 10226 10040 12861 15942 Table 8: Immigration Data for Italy Country Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Migration to Germany(Number of Residents) 7000 11013 10359 13061 26726 30643 32177 26619 18819 14703 11369 9287 7955 6981 5570 27 Migration to Switzerland(Number of Residents) . 20176 18652 14696 12201 9651 6670 4999 4680 4464 4311 4296 8923 12228 13539 Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal Portugal 2005 2006 2007 2008 2009 2010 2011 2012 2013 5010 5001 5516 5911 6779 12138 12441 15351 17657 13601 12720 11972 14388 14615 6513 8297 11820 14000 Table 9: Immigration Data for Portugal Country Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Spain Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Migration to Germany(Number of Residents) 4400 4863 5210 5586 5855 6911 7571 7442 7497 8253 8753 8652 8460 7650 7613 7147 7093 7241 7778 8965 10657 16168 23345 29000 Table 10: Immigration Data for Spain 28 Migration to Switzerland(Number of Residents) . 6658 5084 3990 3416 2567 1802 1518 1435 1392 1490 1544 1837 1819 1752 1639 1669 2139 2492 2622 3384 4354 5929 7507 Charts The following charts trace migration flows from the 4 Southern European Countries to Germany and Switzerland. The red line indicates the start of the financial crisis. The red line indicates the financial crisis of 2008. Figure 1: Migration from Greece to Germany Figure 2: Migration from Italy to Germany 29 Figure 3: Migration from Portugal to Germany Figure 4: Migration from Spain to Germany 30 Figure 5: Migration from Greece to Switzerland Figure 6: Migration from Italy to Switzerland 31 Figure 7: Migration from Portugal to Switzerland Figure 8: Migration from Spain to Switzerland 32 11. Regression Data Greece to Germany Coefficients uratio wratio 1990-2013 6432.198 (7.30)*** 16542.15 (2.96)** 1990-2007 2367.86 (0.81) 25085.93 (6.75)*** 2008-2013 2271.414 (0.26) 51995.26 (0.53) 1990-2013 25056.01 (5.88)*** -1737.701 (-0.05) 1990-2007 32047.11 (4.29)** 42918.59 (0.88) 2008-2013 21484.72 (0.57) 36753.12 (0.57) 1990-2013 359.0447 (0.21) 114570.1 (6.70)*** 1990-2007 -5996.402 (-1.42) 160748.9 (15.66)** 2008-2013 1566.863 (0.31) 24201.31 (0.41) 1990-2013 6452.792 (9.09)*** 114570.1 (6.70)*** 1990-2007 -1061.867 (-1.00) 160748.9 (15.66) 2008-2013 6456.8 (10.21)* 24201.31 (0.41) 1990-2013 357.7043 (3.59)** 114570.1 (-2.48)** 1990-2007 12.59163 (0.34) 160748.9 (-4.02)** 2008-2013 -75.55179 (-0.19) 24201.31 (0.80)* 1990-2013 1990-2007 2008-2013 Italy to Germany Coefficients uratio wratio Portugal to Germany Coefficients uratio wratio Spain to Germany Coefficients uratio wratio Greece to Switzerland Coefficients uratio wratio Italy to Switzerland Coefficients 33 uratio wratio 713.8489 (1.91)* 23020.49 (2.60)* 401.4021 (1.38) -1976.392 (-0.23)** 3175.577 (0.55) 48662.42 (1.17)* 1990-2013 2691.591 (1.20)* 23020.49 (1.20) 1990-2007 1476.195 (0.18) -1976.392 (1.12) 2008-2013 777.2218 (0.63) 48662.42 (0.95) 1990-2013 387.1907 (4.08)*** 7291.889 (1.81)* 1990-2007 330.0158 (5.88)*** 1744.11 (0.69) 2008-2013 1693.7 (7.62)*** 10358.71 (2.13) 1990-2007 - 2008-2013 - - - Portugal to Switzerland Coefficients uratio wratio Spain to Switzerland Coefficients uratio wratio Spain to Switzerland with time Coefficients uratio wratio Time lagged immigration flow(one year behind) 1990-2013 -31.63 (-0.15) 5314 (1.86)* 1.03 (6.18)*** 34 References: Beets, Gijs, and FransWillekens. 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