Analyse how changes in the level of globalisation influence migration patterns and evaluate the economic consequences for both sending and receiving countries (Cambridge IGCSE 0455 Section 6).
1. What is Globalisation?
Definition: Increasing integration of world economies through growth in international trade, foreign investment, technology transfer and the movement of people.
Key drivers (syllabus requirement):
Fall in transport and communication costs (e.g., container shipping, internet).
Trade liberalisation – removal of tariffs, quotas and other barriers.
Expansion of multinational corporations (MNCs) and global production networks.
International financial markets and capital flows.
Deregulation and the spread of market‑friendly policies.
Link to migration: Lower transport and communication costs reduce the financial and informational barriers to moving, making migration cheaper and faster.
2. Specialisation & Free Trade
Specialisation: Countries concentrate on producing those goods and services in which they have a comparative advantage (lower opportunity cost) and trade for the rest.
Free trade: The removal of all barriers (tariffs, quotas, licences, subsidies, NTBs) to the exchange of goods, services and factor services.
Advantages of Free Trade & Specialisation
Disadvantages / Risks
Higher overall output – resources are used where they are most productive.
Lower prices for consumers (greater variety, competition).
Stimulates innovation and technology transfer.
Creates export‑oriented jobs that can attract migrants.
Domestic industries that are not competitive may shrink or disappear → push factor for workers.
Increased dependence on world markets makes economies vulnerable to external shocks.
Potential for “race to the bottom” in labour or environmental standards.
Example: The UK specialises in high‑value financial services while importing textiles from Bangladesh; the resulting trade creates skilled‑worker demand in London (pull factor) and pushes low‑skill textile workers in Bangladesh to seek overseas work.
Generates revenue; makes domestic goods relatively cheaper → protects local producers
Raises consumer prices; can provoke retaliation (trade wars); creates dead‑weight loss
Quota – quantitative limit on imports
Protect domestic producers; limit import volume of goods deemed harmful; manage balance of payments
Guarantees a market share for domestic firms
Creates scarcity; leads to higher prices; may encourage smuggling; inefficient licence allocation
Import licence – permission required before importing certain goods
Control strategic or sensitive products; ensure health, safety or environmental standards
Allows government to monitor and regulate imports
Administrative costs; can be used for protectionism; may delay trade
Subsidy – financial assistance to domestic producers
Support infant or declining industries; promote exports; achieve social or environmental goals
Reduces production costs for domestic firms, making them more competitive
Distorts market outcomes; costly for government; may trigger WTO disputes
Non‑tariff barrier (NTB) – standards, regulations, bureaucracy that make imports harder
Protect health, safety, environment; preserve cultural heritage; prevent dumping
Can improve product quality and safety; address legitimate public‑policy concerns
Often disguised protectionism; raises compliance costs; source of trade friction
4. Multinational Corporations (MNCs)
MNCs are firms that own or control production facilities in more than one country.
Aspect
Home Country (headquarters)
Host Country (subsidiary)
Advantages
Access to foreign markets.
Higher profits from low‑cost production.
Economies of scale.
Technology spill‑overs back to the home economy.
Job creation and skill development.
Influx of capital, technology and managerial expertise.
Higher tax receipts.
Integration into global value chains.
Disadvantages
Potential loss of domestic jobs if production is off‑shored.
Profit repatriation reduces domestic investment.
Profit repatriation can limit long‑term capital accumulation.
Risk of crowding out local firms.
Possible exploitation of low‑skill labour.
Evaluation prompt (AO3): When assessing MNCs, consider market‑failure issues such as environmental externalities, labour exploitation and the potential for monopolistic behaviour.
5. Foreign‑Exchange (FX) Basics
Definition: The price of one currency expressed in terms of another (e.g., £1 = $1.30).
Exchange‑rate regimes:
Floating (flexible) rate: Determined by market forces of supply and demand.
Fixed (pegged) rate: Government or central bank sets the rate and intervenes to maintain it.
Determinant of the Exchange Rate
How it Works
Trade flows (exports‑imports)
Higher export earnings increase demand for the home currency → appreciation.
Capital flows (FDI, portfolio investment)
Higher interest rates attract foreign capital → appreciation.
Interest‑rate differentials
Investors move funds to the higher‑rate country, raising its currency value.
Speculative expectations
If markets expect a currency to rise, buying pressure causes appreciation (and vice‑versa).
Government intervention
Central banks buy/sell foreign reserves to influence the rate.
Effects of Appreciation & Depreciation (Migration focus)
Appreciation (home currency stronger)
Exports become more expensive → export‑oriented jobs may fall → push factor for out‑migration.
Imports become cheaper → higher real wages for consumers but increased competition for domestic producers.
Depreciation (home currency weaker)
Exports become cheaper → expansion of export sectors → pull factor for inward migration of needed labour.
Imports become costlier → higher living costs, potentially increasing push factors.
6. Current Account of the Balance of Payments
Definition: The part of the balance of payments that records a country’s transactions in goods, services, primary income (e.g., wages, investment income) and secondary income (e.g., remittances, gifts).
Component
What it Records
Trade in goods
Exports – Imports of physical products.
Trade in services
Exports – Imports of services (tourism, banking, transport).
Strong education and training systems that attract skilled migrants
7.2 Direct Economic Links
Foreign Direct Investment (FDI): New factories, mines or service centres abroad create jobs that attract migrants from both the host and neighbouring countries.
Production relocation: MNCs shift labour‑intensive stages to low‑cost countries; workers from higher‑cost countries may migrate to follow the same supply‑chain jobs or to earn comparable wages.
Transport‑cost reduction: Trade liberalisation lowers freight and air‑fare costs, making physical movement of people cheaper.
7.3 Indirect Economic Links
Exchange‑rate effects: Appreciation can push workers out of export sectors; depreciation can pull workers into expanding export firms.
Fiscal impacts: Lower tariff revenue may force governments to cut public spending, reducing living standards and increasing push factors.
Skill demand: Globalisation raises demand for ICT, engineering and finance skills. Countries that invest in education retain talent; those that do not may suffer brain‑drain.
Environmental & social standards: NTBs such as carbon taxes can shift production to countries with looser standards, influencing migration of workers in affected sectors.
8. Economic Consequences of Migration Linked to Globalisation
8.1 Sending Countries
Remittances: Money sent home increases household income and foreign‑exchange earnings. Formula: Remittance inflow = ∑i=1N Ri, where Ri is the amount sent by migrant i.
Brain‑drain: Loss of skilled workers can lower productivity and slow growth.
Labour‑market relief: Out‑migration eases unemployment pressure, especially in sectors with few local jobs.
Fiscal effects: Reduced tax base if high‑earning migrants leave, but increased tax receipts from remittance‑related activities (e.g., money‑transfer services).
8.2 Receiving Countries
Labour supply: Migrants fill shortages in low‑skill (agriculture, hospitality) and high‑skill (engineering, finance) occupations.
Wage effects: In the short run, a larger low‑skill pool can push down wages for native low‑skill workers; higher overall productivity may offset this pressure in the medium‑term.
Fiscal impact: Migrants pay taxes and contribute to social security; the net fiscal balance depends on the mix of earners vs. users of public services.
Innovation & entrepreneurship: Skilled migrants often start new firms, enhancing dynamism, export capacity and technology diffusion.
9. Evaluating the Impact of Trade Restrictions on Migration
Higher consumer prices from tariffs → reduced real wages → additional push pressure.
Reduced FDI inflows → fewer new jobs for both locals and potential migrants.
Governments may tighten migration controls to protect domestic labour markets.
Long‑run effects (3 + years):
Structural shift toward protected, less‑competitive industries; possible stagnation of productivity.
Persistent low wages can entrench out‑migration as a “structural” feature of the economy.
If protection leads to fiscal deficits, public‑service cuts may further increase push factors.
Conversely, some industries may eventually become competitive enough to export, creating a delayed pull for migrants.
Evaluation tip: Weigh the immediate relief for vulnerable domestic workers against the longer‑term loss of export‑oriented jobs, higher consumer costs and reduced foreign‑investment benefits.
10. Worked Example – Price Elasticity of Demand (PED)
Suppose the price of a mobile phone rises from £200 to £220 (a 10 % increase) and the quantity demanded falls from 5 000 units to 4 750 units (a 5 % decrease).
PED formula: PED = (% change in quantity demanded) ÷ (% change in price)
Interpretation: |PED| < 1 → demand is **inelastic**; a 10 % price rise leads to only a 5 % fall in quantity demanded. In an inelastic market, a tariff that raises price will increase total revenue for the government but may not significantly reduce imports.
11. Suggested Diagram
Flow‑chart: Changes in Globalisation (e.g., trade liberalisation or restriction) → Altered push/pull factors → Migration flow changes → Economic impacts on sending & receiving countries (remittances, labour supply, wage effects, fiscal balance).
12. Key Points to Remember
Globalisation and trade policies are major determinants of migration patterns.
Specialisation & free trade raise overall welfare but can create sector‑specific push factors.
Trade restrictions have clear short‑run labour‑market effects; their long‑run impact depends on whether protected industries become competitive.
MNCs bring jobs, technology and capital, but can also cause profit repatriation and market‑failure concerns.
Exchange‑rate regimes (floating vs. fixed) and movements (appreciation/depreciation) influence export competitiveness, import costs and migration incentives.
The current account records trade, services, primary and secondary income; a deficit often leads to policy responses that affect migration (e.g., exchange‑rate adjustment).
Migration generates both positive effects (remittances, skill fill‑gaps, innovation) and negative effects (brain‑drain, wage pressure); evaluation must balance short‑term labour‑market outcomes with longer‑term development goals.
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