WHAT DO MARKETS DO?
Markets are institutions that regulate transactions among individuals. In some markets, goods such as bicycles or cars are exchanged between buyer and seller. A free-enterprise economy uses prices to allocate the scarce goods among the many persons wishing to own them. Only those persons, willing and able to pay the going price, get the goods. Other markets, such as the labor market, guide the allocation of labor among different firms. In these markets transactions involve the exchange of monetary compensation from buyer to seller of the good being purchased.
All markets share two features. They provide the rules of the game in which exchanges are made, and they determine, through the interaction of players in the marketplace, a certain allocation of the scarce resources among competing users. In other words, only a subset of persons will own the limited number of bicycles: and firms and employees will be “married” in a particular sorting of workers to jobs.
There also exists an immigration market, one that allocates persons wishing to leave their current countries of residence among the few countries willing to admit them. Potential migrants, like workers looking for a job, are looking for the best country they can live in. Host countries, like firms looking for specific types of workers, set immigration policies so that they can attract specific types of migrants. Just as the labor market guides the allocation of workers to firms, the immigration market guides the allocation of persons to countries.
The existence of an immigration market implies that countries compete for the physical and human capital of immigrants, that the particular sorting of persons and countries depends on how the offers to potential immigrants differ among the competing countries, and that there will be winners and losers in this competition. Changes in immigration policies alter the flow of immigrants to particular countries.
according to the article « Immigration and the economy » by By George J. Borjas (the journal «THE SENIOR ECONOMIST» )
GEORGE J. BORJAS is Professor of Economics at the University of California at San Diego. He is author of «Friends or Strangers» published by Basic Books