The new economics of labor migration (NELM) differs from neoclassical migration theory primarily in which respect?
ANELM focuses on international migration while neoclassical theory applies only to internal migration
BNELM treats migration as a household strategy to diversify income and manage risk, not just an individual response to wage differentials
CNELM argues that migration is irrational while neoclassical theory assumes rationality
DNELM applies only to temporary migration while neoclassical theory explains permanent settlement
The key shift from neoclassical to NELM is the unit of analysis (household vs. individual) and the motivation (risk diversification vs. wage maximization). A household may send one member to work abroad not because wages are highest there but because remittances provide insurance against local crop failure, unemployment, or economic shocks. This explains why migration continues even when wage differentials narrow and why remittance behavior follows patterns inconsistent with individual utility maximization.
Question 2 True / False
According to network theory, migration flows between two countries tend to diminish over time as wage differentials narrow.
TTrue
FFalse
Answer: False
Network theory predicts the opposite: established migrant communities reduce the costs and risks of migration for subsequent movers (by providing information, housing, job contacts, and social support), creating a self-reinforcing process. Migration flows can persist and even intensify long after the original economic incentive has weakened, because the network itself becomes a pull factor. This is why migration corridors often outlast the conditions that created them.
Question 3 Short Answer
Explain the 'migration hump' and why it challenges the assumption that economic development reduces emigration.
Think about your answer, then reveal below.
Model answer: The migration hump describes the empirical finding that emigration initially increases rather than decreases as a country develops economically. Development raises incomes enough to fund migration (the very poor cannot afford to move), disrupts traditional livelihoods (creating displaced workers), and improves information and transportation access. Emigration peaks at middle-income levels and only declines after sustained development raises domestic wages and opportunities enough to make staying more attractive than leaving. This challenges simple push-pull models that predict development should immediately reduce emigration pressure.
The migration hump has important policy implications: development aid intended to reduce emigration from poor countries may initially increase it. Countries like Mexico and Turkey experienced rising emigration during periods of significant economic growth. The pattern suggests a non-linear relationship between development and migration that requires decades to play out.