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Abstract

Inequality between world citizens in the mid-19th century was such that at least a half of it could be explained by income differences between workers and capital owners in individual countries. Real income of workers in most countries was similar and low. This was the basis on which Marxism built its universal appeal. More than 150 years later, in the early 21st century, the situation has changed fundamentally: more than 80 per cent of global income differences is due to large gaps in mean incomes between countries, and unskilled workers′ wages in rich and poor countries often differ by a factor of 10 to 1. This is the basis on which a new global political issue of migration has emerged because income differences between countries make individual gains from migration large. The key coming issue will be how to deal with this new challenge while acknowledging that migration is probably the most powerful tool for reducing global poverty and inequality.

Policy Implications

  • • 
    Immigration pressure is intimately related to high income gaps that exist between countries today.
  • • 
    Aid and immigration are complementary tools to deal with global poverty.
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    If recipient countries have trouble dealing with current migration flows, they should realize that the alternative is to help the growth of countries where most migrants come from. Aid is then seen to be also in rich countries’ own interest.
  • • 
    Such policies require a multilateral approach because of free rider problems.