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Factors constraining migration in the short run following significant migration liberalization

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A while back, I posted in Open Borders Action Group the following question:

What do you think would be the critical factor constraining migration rates in the short run if migration policy were significantly liberalized?

and offered a list of possibilities to begin with. Commenters rated the possibilities and added a few more. I have tried to combine the wisdom offered by different commentators and will list the possibilities in decreasing order of importance as per the combined wisdom. The numbering is not the same as in the original OBAG post, but I parenthetically include the original numbers for comparison.

Note that this post isn’t based on a direct analysis of empirical data. That would take too much time and space. I’m planning to have more posts with detailed discussions of particular cases, such as the Mariel boatlift and German reunification. Note that neither of these fits the template too well, because these involve emigration push factors more than liberalization pull factors. If you have other suggestions or historical instances of sudden influxes of migrants based on migration liberalization or for other reasons, do share them in the comments.

A little more context: there are many different views regarding how many would move under migration liberalization. One view is that receiving countries will be swamped. Another extreme is that migration policy has little effect on migration rates (this is a crude simplication of some economic determinist views). Both views present problems for advocates of open borders: the former suggests that it would overwhelm the world, while the latter suggests that there wouldn’t be sufficient migration to realize the huge potential economic gains from migrating.

Bryan Caplan recently pointed out that Paul Collier’s diaspora dynamics model helps resolve the contradiction in a manner that doesn’t look too bad for open borders: migration rates are slow initially, and pick up gradually. This post considers more closely what factors affect the initial migration flow after significant liberalization.

#1: Jobs (was #4 in the original list)

Economic opportunity is a primary reason for people migrating. That doesn’t necessarily mean they will go to the place with the highest-paying jobs, but they’re highly unlikely to move if they (or their family members) don’t expect to find a job that’s at least somewhat better than what they currently have. One reason why migration has such huge promised benefits is that people can move to jobs where they produce more and earn more, thanks to a place premium.

However, it takes time for new jobs to be created. For instance, factory jobs require the factory to be constructed first. Even for job types with low capital costs (such as janitorial services), natives or existing migrants need to set up the services first before others can confidently expect to find employment.

In addition to the fixed costs and time lag of creating jobs (in anticipation of the larger number of migrants who would fill those jobs), there are also regulatory barriers that prevent people from taking up certain kinds of jobs immediately upon moving. If these barriers were relaxed, people might be able to move more quickly. Else, they may need to first arrange for appropriate training or licensing programs to pass the licensing restrictions needed to practice the trade.

#2: Presence of friends and connections in the target country (diaspora dynamics) (was #8 in the original list)

People rarely want to move if they don’t know anybody where they are going. Paul Collier’s analysis of diaspora dynamics notes that migration between two regions starts as a trickle, and, if initial migrants report positive experiences, then it starts building up. In addition to the informational value, people also have better legal, social, and cultural support structures once a diaspora from their homeland has already settled in the new country.

#3: Bureaucracy (was #7 in the original list)

Even after a government announces significantly more liberal migration, the implementation of the policy on the ground would probably take time. New embassies or consulates would be needed to process the larger numbers of visa applications. Other government departments that screen migrants for criminal or terrorist risk would need to be expanded. The legislative changes would take time to be translated into new administrative procedures. This would add delays ranging from several months to several years, depending on how big the changes are.

#4: Housing (was #1 in the original list)

New migrants need a place to stay. Construction of housing has a significant lag time, ranging from at least a few months to a few years, depending on the location. This relates to the bureaucracy point: much of the delay in housing construction can be attributed to delays with getting permits, though the time cost of physically constructing new houses is also nontrivial.

Housing may not be a big issue if migrants can squeeze into existing housing more. I expect that many potential migrants would be willing to live (at least in the short run, while new housing is still being constructed) in crowded housing conditions in order to benefit from the greater earning power in the new country. However, existing laws against overcrowding might again get in the way. Since these regulations tend to be local, however, it’s possible to imagine that, under more liberal migration policies, some cities that are particularly keen to attract migrants will loosen their regulations to encourage such migration, even if others continue to maintain regulation that forbids overcrowding.

#5: Arranging money for the moves, and closing shop in the home country (was #5 in the original list)

The significance of this factor depends to quite an extent on the population segment for which migration is liberalized. Poor potential migrants would probably need some time to arrange for their moves, because they are cash-constrained. They may need to borrow money from existing lenders. Or, new lending arrangements specifically tied to the liberalized migration policy might emerge. This could take several months. High-skilled migrants may not be cash-constrained, but they may have a harder time closing shop in their home country. Those pursuing educational degrees may wait till their degree is completed. Those in a job may need to give a few months’ notice to their employers. People may need to figure out whether and how to dispose of their current real estate and other assets.

#6: Roads and transit infrastructure (was #6 in the original list)

Transportation infrastructure is a major determinant of where people choose to live now, and it will be a determinant of migration flows. The density of roads as well as other transportation infrastructure (such as railway lines) puts limits on the densities sustainable in a region.

This may not be a big factor if migrants can easily move to relatively underpopulated rural areas. But mass migration is likely to be spurred by large numbers of factory or service jobs in dense urban regions, and these do depend on development of transportation infrastructure. Moreover, existing diasporas from their homeland (such as Chinatowns or Little Italies) are most likely to be found in dense urban regions.

#7: Housing utilities infrastructure: electricity, water, and cooking gas (was #2 in the original list)

If native use levels of housing utilities remained unchanged, and migrants were expected to use them at the same rate as natives, then the infrastructure would need considerable expansion before people could migrate. However, I expect that, at least initially, migrants would use considerably less of the infrastructure than natives do. Further, short-run price increases in infrastructure can discourage use at the margin — there’s considerable scope to cut back on the use of electricity and water that people don’t bother implementing because the cost is too little. Resources such as water and electricity are also used heavily by agriculture and industry, and they can cut back on the use of these with rising prices. Moreover, the costs of electricity are determined by the costs of fuels (petroleum, natural gas, coal). Enough of these are traded in a global market that people moving from one region to another will not increase the relevant demand too much in the short run (though demand would increase over the longer run as these people become more prosperous and assimilate into First World levels of fuel use). Finally, some of the housing utility costs scale with the number of households rather than the number of individuals, so if migrants live in more crowded housing, and/or the higher housing prices encourage natives as well to switch to more crowded housing, the overall increase in the use of utilities is even lower.

#8: Physical transportation of migrants to their new lands (was #3 in the original list)

This is arguably the least important, because the fraction of travel currently devoted to long-term migration is fairly small (1-10%) of international travel. Much international travel involves business trips, people visiting friends and relatives, and vacation trips. If a lot more people seek to permanently migrate, that would raise international travel costs somewhat, and dissuade some people from going on vacation trips or visiting friends and relatives. Some people may teleconference instead of making an international business trip. We don’t need an expansion in the number of flights in the short term, though that will probably happen over the longer term. The time taken for people to get visas and to arrange money for their moves is probably more than the lag time involved with flight booking.

Flights may be too expensive for some potential migrants. It’s also possible that ship-based transportation will be able to take care of some of these migrants. Currently, ships are not used for people traveling long distances, but this is largely because most such people value their time a lot higher than the extra cost of traveling by air. If air travel gets too expensive, or if the people traveling care more about cost than time, then cheap, ship-based travel will emerge. It’ll probably be intermediate in quality (and cost) between the ships used to transport people in the 19th century to Ellis Island and the luxury cruise liners of today.

Weekly OBAG roundup 05 2014

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This is part of a series of weekly posts with the most interesting content from the Open Borders Action Group on Facebook. Do join the group to weigh in on existing discussions or start your own (you might want to read this post before joining).

Blegs with thought-provoking general questions

Discussions of specific historical or current situations

Material to use for advocacy

Event invitations

Helping North Korean refugees: an evaluation

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Roughly speaking, we can estimate the value of rescuing people from a totalitarian regime or otherwise dysfunctional system by considering the difference between the quality of life they’d experience once rescued and the quality of life they’d experience if not rescued. Given how unchanging life is in North Korea, the quality of life they’d experience if not rescued is about the same as the quality of life they were leading prior to being rescued.

North Korea seems a particularly promising place because we have good reason both to believe that people lead low-quality lives there currently, and that they are likely to lead high-quality lives if they are successfully rescued (though there are some important caveats to the latter).

Life in North Korea at present

Estimates put GDP (PPP) per capita in North Korea at around $1800 per year. This is not the lowest in the world, but it’s at the low end; the poorer countries are mainly Haiti, Afghanistan, and some small countries, most of them in Africa. Further, because of the closed and highly restrictive nature of the North Korean economy, prospects for economic growth in North Korea look bleak unless there is some kind of political change.

Potential for North Korean who escape

In general, there are serious questions about the extent to which refugees will be able to adapt to their new enviroments. Although life for them will most likely be better than where they came from, the size of the gap depends on a number of factors. Below, I list some factors to consider:

  • According to official estimates, North Korea has a 99% national literacy rate. This is better than the global literacy rate (estimated at 84%) and dramatically better than literacy rates in other countries with incomes in a similar ballpark. For comparison, Nigeria and India, both large countries that are wealthier per capita than North Korea, have literacy rates 61.3% and 73.8% according to this table.
  • However, the official statistics are hard to interpret, because literacy could be defined in many different ways and statistics are hard to corroborate in a country where there is little scope for outsiders to independently verify claims.
  • Further, it seems that most North Koreans don’t learn any language other than Korean, which makes it difficult for them to immediately settle anywhere other than South Korea.
  • The educational system in North Korea indoctrinates people into worshipping their leaders and often teaches blatant falsehoods to boost national glory and prevent people from being attracted to knowledge that might undermine the regime. Thus, people have to “unlearn” a lot when they move out of North Korea. This might be an argument in favor of rescuing people when they are younger.
  • The anecdotal story of Joseph Kim (video) suggests that many North Koreans are unable to put their best in school because they are constantly looking for food and battling hunger — a concern similar to that in many other countries. Joseph Kim describes himself as having been a F student back in elementary school in North Korea, and he says he didn’t even go to middle school. Upon moving to the United States, Joseph Kim was able to turn around his academic performance. It’s unclear how unusual he is relative to other potential North Korean refugees.
  • Genetically, North Koreans are quite similar, probably indistinguishable, from South Koreans. Thus, to the extent that we consider South Korea’s rapid recent economic growth and technological progress as being linked to genetic potential, this is an argument in favor of North Koreans having huge potential when they leave. Whether this counterbalances the concerns surrounding indoctrination and wasted childhoods is unclear. Note also that at the individual level, higher IQ doesn’t lead to substantially higher earnings or life satisfaction, so this connection is not that strong.
  • There is some weak evidence of high ability for North Koreans, but it is hard to interpret. North Korea, despite having a population of only 25 million, consistently does well at the International Mathematical Olympiad (here are their historical scores). There were some accusations of cheating in 1991 and 2010, but these were not well-substantiated and in any case the consistently good performance over many years is not explained. However, it seems that, since North Korean education stops after grade 10, the IMO team gets intensive separate training (i.e., they study primarily for Olympiads, rather than juggle that with schoolwork). This arguably gives them an advantage over people in other countries for whom excelling in Olympiads is just one of many things they are juggling. There is little evidence of other significant accomplishment, but the indoctrination and the closed nature of the society probably explains that completely. Also note that Communist countries have historically performed well at mathematics. Part of the reason may be that the regime is happy to encourage mathematical excellence, considering mathematics a relatively harmless outlet for intellectual curiosity that would not threaten the regime’s indoctrination attempts.
  • The North Korean regime ruthlessly prevents people from escaping, both by suppressing information and by using physical force. Thus, the set of people who manage to successfully escape are likely to be highly selected. This could be an argument that strengthens the case for rescuing people (since the people rescued are likely to have unique talents that make them likely to both gain and contribute more once they have escaped), but it could also be an argument for diminishing returns from scaling up rescue operations (as rescue becomes accessible to people who are not that well-selected). Note that diminishing returns could still be pretty huge returns in absolute terms — it’s just that extrapolating from the gains to current refugees might lead one to overstate returns.

Escaping and returning

Do those who escape from North Korea regret it? Surprisingly, many do desire to return, and some sneak back in.

It is very, very difficult to escape directly across the border from North Korea to South Korea. The typical route for defectors is to escape to China and from there to other places (Mongolia, South Korea, Thailand). One escape route is to China, then Mongolia (via the Gobi desert), where they are arrested by the Mongolian government and deported to South Korea.

Those who manage to escape to China but aren’t able to escape further have to live underground as illegal immigrants, in constant fear of deportation. Here’s what Wikipedia says about North Korean defectors in China:

In China there are 20,000−30,000 North Korean refugees.[citation needed] There was a continued decline in the number of North Korean refugees in China, with around 11,000 in the country at year’s end,[when?][13][14] mostly in the northeast, making them the largest population outside of North Korea; these are not typically considered to be members of the ethnic Korean community, and the Chinese census does not count them as such. Some North Korean refugees who are unable to obtain transport to South Korea marry ethnic Koreans in China and settle there; they blend into the community but are subject to deportation if discovered by the authorities. Those who have found ‘escape brokers’, try to enter the South Korean consulate in Shenyang. In recent years, the Chinese government has tightened the security and increased the number of police outside the consulate.

Today there are new ways of getting into South Korea. One is to follow the route to the Mongolian border; another is the route to southeast Asian countries such as Thailand, who welcome the North Korean defectors.[15]

According to a source from 2005, “60 to 70% of the defectors [in China] are women, 70 to 80% of whom are victims of human trafficking.”[16] Most of the clients of North Korean women are Chinese citizens of Korean descent, largely elderly bachelors.[17] Violent abuse starts in apartments near the border with China, from where the women are then moved to cities further away to work as sex slaves. Chinese authorities arrest and repatriate these North Korean victims. North Korean authorities keep repatriates in penal labour colonies (and/or execute them) and execute the Chinese-fathered babies “to protect North Korean pure blood” and force abortions on pregnant repatriates who are not executed.[16]

China refuses to grant refugee status to North Korean defectors and considers them illegal economic migrants. The Chinese authorities arrest and deport hundreds of defectors back into North Korea, sometimes in mass immigration sweeps. Chinese citizens caught aiding defectors face fines and imprisonment. In February 2012, Chinese authorities repatriated North Korean defectors being held in Shenyang and five defectors in Changchun from the same location. The case of the 24 detainees, who have been held since early February garnered international attention due to the North’s reported harsh punishment of those who attempted to defect. Beijing repatriates North Korean refugees under a deal made with Pyongyang, its ally. Human rights activists say those repatriated face harsh punishment including torture and imprisonment in labor camps.[18]

North Koreans are escaping the impoverished country every day, across the heavily guarded border to mainland China to avoid persecution and starvation. The escapees might face death, if returned to their homeland. South Korean human rights activists are continuing to stage hunger strikes and appeal to the U.N. Human Rights Council to urge China to stop the deportation of the refugees.[19][20][21]

Human rights organizations have compiled a list of hundreds of North Korean defectors repatriated by China.[22][23] For some of them the fate after repatriation to North Korea is described, ranging from torture, detention or prison camp to execution. The list also includes humanitarian workers, who were assassinated or abducted by North Korean agents for helping refugees.

Thus, simply escaping to China is not much good. It’s a first step, but one that can easily be reversed without complementary steps.

Many people from North Korea currently living in South Korea evince desires to return. Commonly cited reasons include:

  • Many of them are saddled with the debt they had to pay to the people who smuggled them out. Although the South Korean government does give them some money to get started with their new lives (about $3,000 according to a comment in a discussion of LiNK on the Open Borders Action Group) this isn’t enough to repay the debt (about $7000).
  • They miss their families acutely. The situation for North Koreans is considerably harder than for migrants from other countries because of the absence of communication channels with their relatives. Also, unlike migrants from other countries, they cannot easily send remittances to their family. (There do exist informal channels of smuggling in foreign currencies, but these are quite costly because of the clandestine nature of operations).
  • Those who escape as children often have difficulty adjusting to South Korea’s highly competitive educational system. Coming from a place with low educational standards and significant indoctrination, they find it hard to readjust to the intellectual expectations in South Korea. Affirmative action (intended to help them) often places them in universities with higher academic standards than they are prepared for.
  • The ones who escape as adults often lack the necessary skills to get good jobs in the South Korean economy, and they have difficulty affording the high living costs, particularly housing costs.

See here, here, and here for more.

The cost of rescue and resettlement

Obviously, one factor that would go into determining whether rescuing people from North Korea is cost-effective is the cost of rescue and resettlement. I’ve been told that people who pay for smugglers generally pay about $7,000 to get all the way to South Korea (it’s cheaper to get to China alone, but, as noted above, that is often not enough and could even make things worse). Liberty in North Korea claim that they can execute a rescue for $2,500. Their 2012 budget is about a million dollars, of which about $149,000 were spent directly on rescuing 40 people (average about $3,700). The figure of $2,500 may reflect cost reductions since then. If we assume that their entire budget was necessary in order to facilitate the existing rescues, the effective cost per rescue comes at $25,000. It’s unclear how to interpret the figures, because of many hidden costs and questions regarding the scalability of operations. I would expect the cost of rescue to range between $2,500 and $100,000 per person for the next few thousand people to be rescued. At the lower end of the estimate range, it seems that the cost of rescue is very small relative to the other considerations, so that even a slight net of benefits relative to costs makes rescuing people arguably competitive with GiveDirectly. At the higher end (which is probably more realistic), it does start becoming comparable with the net of other costs and benefits, though I still think rescues are potentially cost-competitive with other philanthropic options (but more on this later).

Spending resources on better resettlement might help increase the value of rescues (by reducing the rate at which people regret their decision to migrate), so that might need to be factored into the total cost of rescues but also increase the benefits from rescues.

Other factors

Some other considerations:

  • More rescues mean that the world gets a better understanding of life in North Korea.
  • Existing rescues may facilitate further rescues, and also facilitate political change in North Korea as more people in North Korea get to learn more about the world outside.
  • An increase in rescues could lead to further tightening of the border, specifically the North Korean border with China, further immiserating the population.
  • The South Korean government and society get a sense of the challenges that they might face under an eventual reunification.

Biweekly links roundup 16 2014

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Here’s our Friday link roundup. See here for all link roundups. As usual, linking does not imply endorsement.

Follow us on Twitter for a steady stream of links and discussion.

In-depth analysis and long-run speculation

Migration in the news

Bonus (not directly related to migration): United Kingdom: Saving the curry, Financial Times video, March 21, 2014. Description: In the final part of a video series on the UK’s skills shortage, the FT’s Helen Warrell explores whether government-backed ‘curry colleges’ are helping to produce much-needed chefs of Britain’s favourite dish – the curry.

Nepal and India: an open borders case study

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This blog post builds upon this Open Borders Action Group post and its comments.

Nepal is a small mountainous country, with much of the Himalayas running through it, and is home to some of the world’s tallest peaks, including Mount Everest. It is bounded by China on the north, though the Himalayas form a fairly impenetrable barrier for getting to China by land. it is also bounded by Tibet to the northwest and by India on all other sides. The border between Nepal and India is relatively easy to cross by land (compared with the border with China).

Map of India, Nepal, and other nearby countries
Map showing India and Nepal. Source Himalayan Homestays

According to many indicators, Nepal is somewhat less developed than its southern neighbor India:

  • GDP (PPP) per capita in Nepal is in the $1300-1500 range, relative to India, where it is in the $3800-4000 range. Thus, GDP estimates suggest that Indians are 2-3X as well off as Nepal.
  • Literacy rate in Nepal is 66% versus 74% for India.
  • The population of Nepal, according to the official 2011 census, is a little over 26 million, or about 2% of the Indian population (over 1.2 billion). The CIA World Factbook from July 2011 estimates the population at a little over 29 million.

Nepal-India land borderThe open border between India and Nepal, source Nepal Mountain News
Nepal and India have good diplomatic relations. The aspect that interests us most, obviously, is that the two countries have had open borders throughout their history (since long before Indian independence from the British). In fact, the border is literally open — it’s largely unmanned, people can cross any time, and natives of the two countries are not even required to have a passport to cross by land. Here’s what the description says (same as previous link):

Nepal-India border is unique in the world in the sense that people of both the countries can cross it from any point, despite the existence of border checkposts at several locations. The number of check posts meant for carrying out bilateral trade is 22. However, only at six transit points out of them, the movement was permitted to nationals of third countries, who require entry and exit visa to cross the border. As the whole length of the border except police does not patrol the checkposts or paramilitary or military forces of either country, illegal movement of goods and people is a common feature on both sides of the India-Nepal border.

So, the puzzle: given that India has 2-3X the per capita GDP of Nepal and substantially more economic opportunity, and given that the countries have open borders, why hasn’t there been labor market convergence between the countries? Why hasn’t a larger fraction of the Nepalese population moved to India in search of economic opportunity?

Here are a few other articles on Nepalese migration to India:

Open borders is a political non-issue

Indians aren’t necessarily welcoming of Nepalese as individuals: attitudes to Nepalese range from welcoming to hostile. But the total size of the Nepalese population is small relative to the Indian population (about 2%, and certainly not more than 3%). So far, nothing terrible has happened in India due to Nepalese migration. Even if the entire country of Nepal were to move over a decade to India, it wouldn’t be noticeable to most Indians. For the most part, therefore, Nepalese migration seems a non-issue.

There are a few issues. Smuggling of goods along the border could lead to a tightening of border security, and that might get in the way of peaceful migration. Maoists in Nepal have connections with Maoist-Naxalites in India. This too could lead to tightening of borders for security-related reasons. Overall, however, I don’t expect the open border between the two countries to be closed even in the face of Nepalese migration picking up significantly. This is in sharp contrast with Bangladeshi migration, which has caused a nativist backlash particularly in the state of Assam.

Are the GDP numbers reliable?

The GDP estimates carry a lot of uncertainty. In particular, they can be bad measures of standards of living in cases where:

  • A lot of economic activity goes unreported, or
  • government is a large share of the economy and spends the money on things that people don’t really benefit from.

Both problems exist to some extent in India and Nepal, but not to the same extent as they would in a country such as Somalia (the first problem) or North Korea (the second problem). Further, there’s no reason to believe that the figures are unreliable in a direction that would overstate the disparity between the two countries.

Reasons for economic disparity

Why is India so much richer than Nepal? A number of reasons suggest themselves:

  • Better geography: Nepal is covered with mountains that are unsuitable for many economic pursuits. It’s also landlocked. India is geographically diverse, and has large areas of flat plains suitable for agriculture, industry, and dense urban life. Moreover, India has a long coastline with great sea ports.
  • Larger population: Having a larger population allows for a larger diversity of activity and an economy with a greater level of specialization.
  • Historical advantages: The British developed a number of institutions in India that were bequeathed to the Indian government at the time of Indian independence. Even prior to the British, India, though very poor, had a diversity of historical institutions. These historical advantages gave India more growth potential, even if the country failed to realize that potential until very recently.
  • Economic freedom: Economic freedom in Nepal has been somewhat lower than India. According to the Economic Freedom of the World report, Nepal has had economic freedom in the 5-6.5 from 1980 to now, and even though its absolute level of economic freedom has increased, its ranking has fallen, as the rest of the world liberalized and it didn’t. As of 2011, it ranks 125th out of 152 countries with a rating of 6.19/10. Economic freedom in India started out lower than Nepal in the 1970s and 1980s, but with liberalization, overtook Nepal. In 2011, it ranks 111th out of 152 countries with a rating of 6.34/10. The difference isn’t huge, and arguably within the measurement error, but Heritage Foundation’s Index of Freedom reports a similar small gap in India’s favor. This probably accounts for only a small fraction of the economic difference, though.

How many Nepalese are there in India?

The size of the Nepalese population in India is highly unclear, both due to the fact that migration between the countries is not properly recorded by either, and because of the lack of clarity in definition. Table 3.3 in the Being Nepali Without Nepal chapter estimates that, as of the 1981 Indian census, there were 500,000 Nepal-born people in India, whereas the size of the Nepali community construed more broadly (to include descendants of Nepalese who spoke the Nepali language) may be as large as 2.25 million. Wikipedia claims that there are 4.1 million Nepalese Indians, without citing a source, but the data on the page seems to be taken from the 2003 CIA World Factbook (I cannot find a direct link for the specific claim). If correct, this is a huge increase relative to 1981, and more recent estimates may yield even higher values. The World Bank data for 2010, included in the Migration and Remittances Factbook, states that there are 564,906 Nepalese in India. It’s unclear what to make of these varied figures: the number of Nepal-born in India may be anywhere between 500,000 (~2% of the Nepalese population) to 5 million (~20% of the Nepalese population). The size of the Nepalese diaspora more broadly defined as descendants of Nepalese is probably at least 5 million, though probably not more than 10 million.

Recency of divergence

Indian GDP (PPP) per capita has been modestly higher than Nepal for quite a while, but the difference was fairly small until the Indian economy began liberalizing. As recently as 1992, one data set shows Nepalese GDP (PPP) at $800 per capita and Indian GDP (PPP) as $1200 per capita — hardly a big difference. India’s geographical and historical advantages, and more importantly, its much larger population, have always given it more growth potential, but the potential started getting unleashed only with liberalization measures in the 1990s. This caused the Indian economy to gallop ahead in relative terms, leading to the current situation where Indian GDP (PPP) per capita is $3800-4000 while that in Nepal is $1300-1500.

The recency of divergence might explain why Nepal hasn’t caught up with India and also why there aren’t more Nepalese in India: the Nepalese haven’t yet fully adjusted to the knowledge of India being a more attractive destination for economic opportunity. In other words, although India and Nepal have had open borders since forever, the “open borders with a large income disparity” is a relatively recent phenomenon, about as recent as the addition of poorer member states to the European Union. If Indian economic growth continues, we should expect to see Nepalese migration pick up, and I’d also expect that the gap in GDP (PPP) per capita is unlikely to widen beyond the 3X level.

Paul Collier’s diaspora dynamics model suggests that migration flows at any given point in time are far less than what either polling data on migration or economic models (such as John Kennan’s) predict.

However, if borders have been open for a sufficiently long time, then the fraction of the population with genetic origins in the source country that is in the target country does come close to the high levels suggested by polling data and economic models. Now, Nepal and India have had an open border for quite long, but the recency of divergence suggests that the “open border with huge economic disparity” is a relatively recent phenomenon for the country pair, and the size of the Nepalese diaspora in India at present is not inconsistent with the levels predicted by diaspora dynamics models (I’m just using a crude sense of the numbers and haven’t done any formal quantitative checks).

Prosperity of nearby states

One possible explanation for the wide disparity and low migration rates despite the disparity is that the Indian states near Nepal aren’t that prosperous. Consider this list of gross state domestic products. The five Indian states that share a land border with Nepal are Uttarakhand, Uttar Pradesh, Bihar, West Bengal, and Sikkim. Of these:

  • Bihar, one of India’s worst performing states, has a per capita GSDP pretty similar to Nepal’s (emigration from Bihar to the rest of India is significant, though I haven’t compiled quantitative measures). The state has also historically been linked with violence based on caste and class lines. It’s understandable that this is not an attractive target for Nepalese migrants.
  • Uttar Pradesh, one of India’s largest states, with a population of about 200 million (so only four countries have a higher population) has per capita GSDP about half India’s national per capita GDP. Assuming the same PPP adjustment factor, this would put the per capita GSDP at about $1900-2000, somewhat but not significantly more than Nepal. This is not a very attractive target for Nepalese migrants.
  • West Bengal and Uttarakhand have per capita GSDPs fairly close to the Indian average. These states should at least in principle be attractive targets.
  • Sikkim has a per capita GSDP about twice the Indian average, but it is a very small state, and India’s least populous. The most recent population estimate (based on the 2011 census) is 610,000, about 0.3% the population of Uttar Pradesh. It is the only state in India with an ethnic Nepali majority. The economy runs largely on agriculture. In recent years, tourism has been promoted. Despite being well-to-do, Sikkim may not offer many job opportunities to facilitate large-scale Nepali migration beyond the level that’s already occurred.

(The question of why significant economic disparities between Indian states persist despite internal open borders will be the subject of another blog post).

Apart from going to the immediate bordering states, Nepalese also go to other parts of the country, including the major metropolitan cities such as the capital cities, as well as the north-eastern states. But the lack of economic attractiveness of the states very close by could be part of the reason why Nepalese migration isn’t greater in magnitude.

Lack of information

Until I looked up the data, I wasn’t aware of the huge GDP (PPP) per capita disparity (I had been aware of the level for India, but not for Nepal). And I’m relatively well-informed about economic matters. Is it possible that many Nepalese simply aren’t aware of, or haven’t given active thought to, the prosperity levels in India? The recency of divergence is important here: information may take time to percolate.

Possible reasons for information not having flown fast enough within Nepal:

  • Low population density, making it more difficult for information to flow quickly (the population density is actually not all that low — at about 180/km^2, it is in the mid-range, but Nepal doesn’t have dense population concentrations where information flows really quickly)..
  • Low teledensity (less than 50%) suggesting that information about the outside world and about friends and relatives living abroad may not flow in as quickly and in as much detail as it needs to for people to be inspired to migrate. For comparison, teledensity in India is about 70% and teledensity in First World countries is close to 100%.

Explanations for differing attitudes in India to immigration from Nepal and Bangladesh

The following explanations have been posited for why India has an open border with Nepal, with little political resistance to it, yet a lot of unrest over illegal immigration from Bangladesh, despite Nepal being poorer than Bangladesh.

  • Population: Bangladesh has a population of 150 million, about 5-6X the population of Nepal. So, having open borders with Bangladesh is (considered) less feasible, or at any rate, would be a bigger and more transformative change.
  • Greater cultural similarity propelling more migration: Bangladeshis share close cultural roots with West Bengal (indeed, Bangladesh and West Bengal were both part of the state of Bengal in British India). Thus, there is likely to be much greater migration of Bangladeshis since they may have more confidence they’ll be able to adjust to life in West Bengal.
  • Religion: Bangladesh is an officially Muslim country with a Muslim majority. Although not as hostile to India as Pakistan, it still has some hostility. Nepal is a Hindu majority country with small amounts of Buddhism and Islam — religious demographics very similar to India.
  • Historical accident: Bangladesh and India actually started off somewhat well, because India supported Bangladesh (then East Pakistan) in its struggle for independence against West Pakistan (~1971). But political changes in Bangladesh led to a worsening of relations.

We’ll explore Bangladesh and India more closely in a subsequent post (UPDATE: The post is here).

Nepalese in Bhutan

India also has open borders with a very small country called Bhutan (population ~750,000). Bhutan has a much higher GDP (PPP) per capita, somewhere in the $7000 range, but the economy runs largely on tourism, suggesting that it may not scale well with increased population. A large number of Nepalese have migrated (via India) to Bhutan, and Nepalese form a significant minority in Bhutan. Although richer, Bhutan also has more political oppression, so many Bhutanese (including some of Nepalese origin) have sought refuge in Nepal (see here).

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