Anyone interested in foreign aid will find this book an easy read. Veterans of the field are likelyto find the book slightly annoying on a number of counts. Bashing Jeff Sachs and dividing theworld into searchers and planners leaves those of us who have studied the field for yearswondering just how seriously to take Mr. Easterly. Still, for students who don't know anythingabout the world of foreign aid, there are lots of colorful examples that bring the topic to life. Youjust need to make sure they hear the other side of the story. And, while it is possible to structure anentire course around The Elusive Quest for Growth, the same cannot be said of The White Man'sBurden. The chapters are too long and the concepts too vague.

References

Gabre-Madin, Eleni, 2003. Famine in Ethiopia: When Markets Don't Work, Op-ed International Herald Tribune. February18th.

Food and Agricultural Organization, 2002. Special Report: FAO/WFP Crop and Food Supply Assessment Mission toEthiopia. December 30th.

Margaret McMillianDepartment of Economics Tufts University Medford, MA 02155, United States

E-mail address: margaret.mcmillian@tufts.edu.

Global Migration and the World Economy: Two Centuries of Policy and Performance,Timothy Hatton, Jeffrey Williamson, The MIT Press (2005)

1. Introduction

Seven years after giving us The Age of Mass Migration—the definitive account of internationalmigration during the “first global century”—Timothy Hatton and JeffreyWilliamson have broughttheir story up to the present in a remarkable new volume. Global Migration and the WorldEconomy shows two master economists at work: applying simple but powerful theory, groundingtheir conclusions in carefully assembled evidence, and explaining everything in crisp compellingprose. This is simply the best book on migration available today. It will bring readers to the frontierof all the important debates on international migration. On finishing the book, it is hard not to beawed by what has been covered: more than two centuries of evidence, impacts on both sending andreceiving countries (not to mention the migrants themselves), and path-breaking analyses of notjust the economics but also the politics of global migration.

The book is chronologically organized in four parts. The story opens with the history of globalmigration before 1913, and then moves through the collapse of global labor flows between thewars, the revival of migration in recent decades, and finally the prospects for even greater flows inthe decades ahead. As the authors note in their concluding chapter, three major themes run throughthese parts: “the forces that drive migration, the economic and social consequences of migration,and the policy responses to migration” (p. 393). In the remainder of this review, I will brieflycomment on each of these themes. As the authors do not shy away from bold conclusions, I will, inthe spirit of being constructive, emphasize a few areas where I draw some different lessons. But

doi:10.1016/j.jinteco.2007.05.002

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notwithstanding these few quibbles, this book will be my go-to reference on internationalmigration for years to come.

2. The forces that drive migration

The book offers the richest available treatment of the supply-side forces that drive internationalmigration. As they look across different time periods and countries, the authors show how threereoccurring factors drive the willingness to migrate. The first factor is the size of the income gapbetween the source country and potential destinations. They emphasize that although fasterrelative growth at home will narrow this gap, it may lead (at first) to more migration as morehouseholds are in a position to afford the often costly moves. This leads to the second factor: thecost of the move itself. In a fascinating early chapter, they show how the combination of gov-ernment subsidies, declining transportation costs, and the shock of the Irish famine set the age ofmass migration in motion. The latter illustrates the power of the network—or friends and family—effect on the costs of migrating; an effect that is today providing powerful impetus for themigrations from North Africa to the European Union and from Latin America to the United States.The third factor is demographic—or what they call the “size of the population at risk.”As countriesgo through a demographic transition, there is a period of time where there is a population bulgefor people in their prime migrating years, which are typically between 15 and 30 years.

In an excellent illustration of their evidence-driven approach, the authors develop aneconometric model of the forces that drove European migration between 1860 and 1913 (seeChapter 4). The results confirm the power of their gaps–costs–demographics framework:migration is positively related to the real wage gap; positively related to the home-country realwage (holding the size of the wage-gap constant); negatively related to transportation costs (asproxied by the negative of a time trend); positively related to the size of the existing migrant stock;and positively related to the rate of natural increase lagged twenty years.

In a haunting modern example, the framework is applied to understand emigration from Sub-Saharan Africa in Chapter 12 (entitled “Where are all the Africans?”). The enormous income gapsbetween the continent and the developed world should underpin a large supply of willing migrants.But other forces hold this supply back.One constraint is simply poverty.Another is the history of tightimmigration restrictions that has kept the friends-and-family effect in check. Looking forward, risingincomes and a bulge in the young adult population should increase the supply-side pressure. But twoAfrican tragedies complicate the forecasts in different ways. On one side, the AIDS epidemic isdevastating the young-adult population and making it harder to break out of the poverty trap. On theother, “civil wars, interethnic violence, and political oppression have driven many Africans to seekrefuge, not only in neighboring countries, but also in the safe havens of the developedworld” (p. 248).

3. The convergence hypothesis

How does mass migration affect incomes in sending and receiving countries? I think it is fair tosay that Hatton and Williamson are the most influential advocates of the convergence hypothesis:that migration tends to raise incomes in the sending country and lower incomes in the receivingcountry, thereby lowering the income gap between them. The essential economic idea behind thehypothesis is simple and powerful—the labor demand curve in both sending and receivingcountries slopes downwards. The essential historical evidence is the substantial income, andespecially real wage, convergence that took place in the Atlantic economy in the second half of theeighteenth century.

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I find the convergence hypothesis less compelling than Hatton and Williamson on boththeoretical and empirical grounds. In terms of theory, the downward sloping labor demand curvedepends on other things being held equal. But other things are not equal over the medium to longrun, a point that they readily recognize. For one thing, changing factor supplies will change theindustry structure (the famous Rybczynski effect), and with it the factor demand curves in aneconomy open to international trade in goods. One implication is that factor prices are insensitiveto changes in factor supplies. Additional forces leading to offsetting effects on labor demand areinduced changes in capital accumulation (a point discussed at length in Chapter 6) and endogenoustechnological change in response to changing relative factor supplies (see, e.g., Acemoglu, 1998).One further drawback of their approach is that the downward sloping labor demand curve is builtinto their models. This means that the wage effects are indirectly assumed rather directly estimatedgiven the changes in labor supplies.

In terms of empirical evidence, the first thing to note is that there are competing explanations forthe observed convergence. In the middle of the eighteenth century, poorer countries were initiallywell behind the technology frontier that had been pushed out by Britain in the first part ofthe century. This created opportunities for catch-up growth in the lagging countries as they movedtowards best-practice technology and organization. The second half of the century was also aperiod of more liberal trade, setting in motion pressures for factor price convergence. We seesimilar convergence today for countries that are successfully integrating into world economy, buthave emigration flows that are typically small in relation to their domestic labor forces.

There is also a good deal of evidence from more recent time periods pointing to much smallermigration-related labor market effects. This evidence is excellently, if rather skeptically reviewed inChapter 14. The most convincing of this work uses quasi natural experiments to identity the wageeffects (see e.g., Card, 1990; Hunt, 1992; Friedberg, 2001). Although there is room for differinginterpretations of this literature, it is worth quoting the conclusion of two of the major contributors ina comprehensive survey: “Despite the popular belief that immigrants have a large adverse impact onthe wages and employment opportunities of the native-born population, the literature on thisquestion does not provide much support for this conclusion,” (Friedberg and Hunt, 1995, p. 42).

To provide one final note of skepticism on the convergence hypothesis, I look into a case studythat provides important evidence for their convergence story: post-famine Ireland. Hatton andWilliamson document striking post-famine convergence towards British wage levels: from 61% ofBritish levels in 1852, to 73% by 1870, and 92% by 1913 (p. 109). It is worth pointing out,however, that the absolute and relative performance of the Irish economy was far from impressiveover most of the following half century. Between 1913 and 1960, Ireland's GDP per capita grew atan average compound rate of just 1.06%, which compares to 1.16% for Britain and 1.64% for theUnited States (calculated from data in Maddison, 1995), so that living standards diverged ratherthan converged. One provocative hypothesis recently advanced by the economic historian MaryDaly to explain this divergence is that emigration from rural Ireland to urban areas in Britain andthe United States significantly delayed Ireland's own urbanization (Daly, 2006). To the extent thaturbanization is an essential element in longer-run processes of industrialization and market-supporting institutional development, mass emigration may have undermined the rather thanfacilitated Ireland's convergence when viewed over a longer time span.

4. Pessimistic about politics

Hatton and Williamson make as convincing a case as I have seen for large global income gainsthat would accompany freer international migration. Where productivity differences across

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countries are primarily due to differences in the productiveness of places rather than of people,freer migration trumps freer trade as a means of raising living standards. As they put it: “Even withunified world prices, trade cannot do as much as migration can, essentially because productivitydifferences are country specific. The gains from migration are largely from shifting people fromplaces where their productivity is low to places where their productivity is high-something thattrade cannot achieve” (p. 372).

With such large gains possible, it is disheartening that the authors are pessimistic aboutthe politics of substantially freer rich-country immigration. This pessimism is based in part on theirbelief that increased immigration would cause distributional and fiscal harm in the host countries.But they stress that the adverse politics does not only hinge on the reality of such harm, but also—and probably more importantly—on the perception of harm amongst rich-country electorates.Looking at the politics of immigration on both sides of the Atlantic today, it is hard to disagree thatsubstantial constituencies believe that increased immigration runs counter to their economic andsocial interests. Moreover, the largely one-way migration flow from poor- to rich-countries meansthat the pro-immigration side lacks the powerful political counterweight that exporters provide inthe trade liberalization debate. Crudely put, there is no loud clamour from the West for betteraccess to the labor markets of the “Rest”.

The political challenge is made all the more daunting by the fact that the lion's share of themigration-related gains go to a group with little or no political voice in the host-countries—themigrants themselves.

But there are some reasons to hope that Hatton andWilliamson are being too pessimistic about thepolitics. The first follows frommy earlier disagreement on the economic effects in the host countries. Ifthe long-run impacts are more beneficial than they allow, there is hope that the more positive messagewill slowly permeate the consciousness of the electorate. The second is motivated by the oddcombination of the disillusionment with traditional forms of development assistance among rich-country voters and their continuing desire among some to help the poor people of the world. Ifmigration yields such large income gains, it could—indeed should—come to be seen as one of themost potent anti-poverty tools available to rich countries. And, provided that relaxed immigrationrestrictions are not just targeted to the “best and the brightest” of poor countries, there is reason to hopethat the resulting reverse flow of remittances will compensate for the loss of talent and drive at home.

A final reason for optimism is inspired by recent creative proposals to put together reformpackages that are designed to overcome the political opposition while taking advantage of theopportunities for large income gains. Lant Pritchett, in particular, has argued for a temporaryworker programwith strong safeguards to ensure that the workers actually do return home. If muchof the concern about increased immigration reflects an unwillingness to accept more permanentmigrations, such creative reforms could make it possible to allow people to benefit from thesubstantial “income arbitrage” opportunities, while minimizing the opposition of those who worryabout the social impacts of more permanent immigrants (Pritchett, 2006; Kapur and McHale,2007).

Whatever the future holds for a more liberal global migration regime, this book makesan invaluable contribution to a more historically grounded and empirically informed de-bate. Scholars—and hopefully policymakers too—will be drawing on its wisdom for years to come.

References

Acemoglu, Daron, 1998. Why do new technologies complement skills? Directed technical change and wage inequality.The Quarterly Journal of Economics 113 (4), 1055–1089.

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Card, David, 1990. The impact of the Mariel Boatlift on the Miami labor market. Industrial and Labor Relations Review43 (2), 245–257.

Daly, Mary, 2006. The Slow Failure: Population Decline and Independent Ireland, 1920–1973. The University ofWisconsin Press, Madison.

Friedberg, Rachel, 2001. The impact of mass migration on the Israeli labor market. The Quarterly Journal of Economics116 (4), 1373–1408.

Friedberg, Rachel, Hunt, Jennifer, 1995. The impact of immigrants on host-country wages, employment and growth. TheJournal of Economic Perspectives 9 (2), 23–44.

Hunt, Jennifer, 1992. The Impact of 1962 repatriates from Algeria on the French labor market. Industrial and LaborRelations Review 45 (3), 556–572.

Kapur, Devesh, McHale, John, 2007. What's wrong with Plan B? International migration as an alternative to developmentassistance. In: Collins, Susan, Graham, Carol (Eds.), Brookings Trade Forum, 2006: Global Labor Markets. BrookingsInstitution Press, Washington, D.C., pp. 137–172.

Maddison, Angus, 1995. Monitoring the World Economy: 1820–1992. The OECD, Paris.Pritchett, Lant, 2006. Let Their People Come: Breaking the Gridlock on Global Labor Mobility. Center for Global

Development, Washington, D.C.

John McHaleQueens School of Business,

Queens University, Kingston, Ontario, Canada K7L 3N6E-mail address: jmchale@business.queensu.ca.

doi:10.1016/j.jinteco.2007.05.001

Emerging Markets and Financial Globalization, Sovereign Bond Spreads in 1870–1913 andToday, Paolo Mauro, Nathan Sussman, Yishay Yafeh. Oxford University Press, (2006).

1. Introduction

The last 30 years have witnessed a variety of crises in both emerging and developed countries.Many have suggested that at the core of these crises are erratic capital markets and have blamed thewave of financial globalization that started in the late 1970s. Not surprisingly, there have been calls forreform of the current international financial architecture and many have even advocated the re-introduction of controls on capital mobility. But are international capital markets the main culprits ofthe frequency and virulence of the financial crises of the 1990s? The new book by Paolo Mauro,Nathan Sussman, and Yishay Yafeh,EmergingMarkets and Financial Globalization, Sovereign BondSpreads in 1870–1913 and Today, provides new insights into this issue by comparing the behavior offinancial markets since 1990 to that of the pre-First World War era of financial globalization.

To examine these two episodes of financial globalization, the authors collected by handfinancial, economic, and political data of the late 19th and early 20th centuries. This historical dataincludes emerging-market sovereign-bond yields published in the Economist's Investors MonthlyManual (IMM), economic and political news from the London Times, and information on debtresolution issues and the actions of organized creditors in the aftermath of defaults from the AnnualReports of the Corporation of Foreign Bondholders. This historical data is then compared to that ofthe 1990s mostly collected from electronic databases and from the Financial Times. All thisinformation is then used to examine what type of institutions and policies help countries reducetheir borrowing costs, to assess the extent of financial contagion, and to finally examine the role of

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