International migration, capital flows and the global economy: a long run view

Historically, periods of increased trade and capital mobility have been also accompanied by more intense labor mobility across national borders. Conversely, in periods of global instability, stagnation, nationalism and more restrictive policies toward migration and capital mobility we observed less action in global factor markets. The first wave of globalization from around 1870 to 1913 was a period in which capital and labor were both free to move internationally. The interwar period with its economic turbulence, political disarray and rising nationalism witnessed both a movement towards reduced intercontinental migration and more chaotic and diminished capital flows. After World War II, the Bretton-Woods system restricted international private capital mobility and national governments gave more priority to the achievement of domestic policy goals. In the early 1970s the Bretton-Woods dollar-gold standard was abandoned and international capital mobility surged. International financial intermediation, however, was of the type of diversification finance" among industrial economies rather than one-way "development finance" observed in the late 19th and early 20th centuries. Since the 1970s international labor markets, particularly for unskilled labor, have remained more regulated than global capital markets, particularly regarding migration from developing countries. The source of global savings and investment balances changed in the 1980s and 1990s as the United States started to run persistent current account deficits and became a net debtor economy. This document analyzes various economic policy regimes and "political-economy epochs" since the 1870s to the early 21st century and their impact on international migration and international capital mobility. We take a long run view and examine to what extent periods of increased international migration have also been accompanied by periods of greater capital mobility and vice-versa. We investigate the patterns and interactions between these two types of international resource transfers and the changing global savings and investment balances in the world economy."