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The purpose of this paper is to document the role of diaspora networks in enhancing cross-border flows of goods, capital, and knowledge, eventually contributing to efficient specialization, investment, and productivity growth in the migrants’ home-countries. Particular attention is paid to the role of skilled migrants, and to information imperfections reduction as the main channel for the documented effects.

This paper reviews a growing literature on migration and globalization, focussing on its relevance for developing and emerging economies.

In reviewing the literature on the effects of migration on other dimensions of international economic interactions, this paper shows that migrants contribute to the integration of their country into the world market, which can be particularly important for economic growth in developing countries.

It documents the role of diaspora networks in enhancing cross-border flows of goods, capital, and knowledge, eventually contributing to efficient specialization, investment, and productivity growth in the migrants’ home-countries. Particular attention is paid to the role of skilled migrants, and to information imperfections reduction as the main channel for the documented effects.

Community solidarity with return migrants is commonly observed in the rural areas of developing countries. In this paper, we briefly review the evidence from sociological studies on this issue and suggest a new economic approach to such solidarity. We show that an implicit institutional arrangement, whereby migrants have no obligations (e.g., no obligation to remit) but may nevertheless enjoy equal ownership rights on collective resources upon return, enhances economic efficiency via an optimal regulation of migration flows. We also address enforceability issues since, within each generation, time consistency problems may give rise to opportunistic behavior among non-migrants.

This volume is a collection of papers first presented at a conference held in June 2004 dedicated to the memory of the late Tikva Lecker, hosted by Bar-Ilan University in Ramat Gan, Israel, and co-sponsored by the University of Illinois at Chicago. A warm and lively member of the Department of Economics at Bar Ilan University, Professor Lecker's many interests included topics in labor economics, women and the economy, the economics of Judaism, the economics of migration, and every aspect of the economic experience of immigrants and their descendants.

Policy strategies directed against illegal immigration have largely concentrated on border and domestic enforcement. This paper suggests that host countries could consider a more lenient approach: contributing to the deportation cost of self-reporting illegal immigrants. The increase in illegal immigration that such a reward might bring about is shown to be more than offset by the rise in the number of self-reporting illegal immigrants leaving the rich country, with a concomitant decrease in the number of remaining illegal immigrants. An added advantage of this policy is that the self-reporting immigrants would be predominantly the relatively lower socio-economic group. When adopting this policy, the rich country must choose the appropriate mix of two policy means: funds allocated to strengthening its border and domestic control; and rewards to self-reporting illegal immigrants.

The paper addresses mainly three questions. One, do workers tend to be employed by employers of the same ethnic group; two, what is the structure of the equilibrium wage contract; and three, do more ethnically homogeneous labor markets tend to have different labor contracts than more ethnically diversified ones. The answer to the first question is in the affirmative – in equilibrium all employers offer the same wage contract and workers are hired by employers of the closest ethnic affiliation. In terms of the equilibrium wage contract, its nature depends on the attitude toward risk of both sides of the market. Finally, the answer to the third question is also in the affirmative since the more homogenous the labor market, the more deterministic is the wage.

During the 1990s, the Israeli economy experienced two major events. First, starting in the fall of 1989, a large wave of relatively highly skilled immigrants arrived from the former Soviet Union (CIS) increasing the population and the labor force by considerable magnitude. Second, the hi-tech sector has grown substantially and reached a peak in growth and level in 2000.

This paper provides a descriptive analysis of the integration of immigrants from the CIS in the Israeli labor market and, specifically, in the hi-tech sector. Based on a unique panel data that follows immigrants for up to 12 years in Israel we find a significant positive correlation between immigrants’ participation in Israeli government-provided training programs and the propensity to work as professionals in the hi-tech industry and to work in white-collar occupations in other sectors. However, this correlation diminishes with ‘time since participation’ such that recent participants face a higher probability to work in hi-tech and white-collar jobs than those who participated in training earlier.

A well-documented human tendency is to compare outcomes with others, trying to outperform them. These tendencies vary across cultures and among different individuals in a given society. To understand the implications of such diversity in status considerations on wages, contracts, sorting and output we use a standard principal agent framework in which firms consist of two workers and a principal. We find that, in equilibrium, firms mix workers with different status concerns to enhance ‘cultural trade’. Although workers may have the same productivity, equilibrium will generate a dispersion in (expected) wages, and workers with status concerns will have more high-powered incentives, work more and earn more than workers who do not care about status. Finally, we find that a more diverse workforce can increase the total output of the economy. This increase in output is a result of the higher effort exerted by the status minded workers that offsets the reduction in effort by those who do not care about status.

Numerous studies have concluded that immigration has very small effects on wages or unemployment, even when the immigration flow is very large. Three reasons suggested for this are that immigration: (1) is not supply-push, but may instead be driven by demand-pull factors; (2) is likely to cause some out-migration; and (3) may induce flows of other factors across the economy. Surprisingly, few studies consider another obvious explanation: immigrant workers also consume locally, which means immigration stimulates the local demand for labor. Previous researchers have generally ignored the measurement of immigration's effects on labor demand, perhaps because when immigration, out-migration, and immigrant consumption occur simultaneously in the same labor market, it is very difficult to isolate immigration's effect on labor demand. This paper measures the labor demand-augmenting effects of immigration using a two-sector model of a very special case in which the receiving economy consists of: (a) an export industry employing both immigrants and natives; and (b) a retail industry employing native labor that is driven by local demand. The model can incorporate both supply-push and demand-pull immigration as well as out-migration. The model's important implication is that since immigration is exogenous to the retail sector, an unbiased estimate of the demand effect of immigration can be obtained without having to use instrumental variables estimation or other statistical procedures that may introduce new sources of bias. Fortunately, the economy in our model matches a very convenient test case: Dawson County, Nebraska. Dawson County recently experienced a surge in demand-pull immigration due to the location of a large export-driven meatpacking plant. This exogenous capital shock pulled in many Hispanic immigrant workers, who did not immediately seek work in the retail sector because of social and language barriers. This immigration led to higher retail wages and housing prices, confirming that immigration is capable of exerting significant effects on local labor demand.