Neoclassical economics offers an analytical framework to understand the motivation processes
that influence someone to migrate. The model is based on rural-to-urban migration in poor
countries; that is, on internal rather than international migration. Neoclassical economics do not
take into account migration mechanisms such as risks or transfers. According to Harris and
Todaro (1970), those factors are not necessary in order to understand the rationality behind
migrating. Key to understanding the migrant behavior is the search for profit in a dual economy.
Indeed, the neoclassical perspective may be summarized in terms of factor prize equalization
across regions, which assumes that economic forces tend towards an equilibrium (i.e. “push-and-
pull” factors between labor supply and demand) (for details, see De Haas 2010; Massey and
Parrado 1994; Stark 1991; Borjas 1989; Harris and Todaro 1970; Todaro 1969).48
Neoclassical theory sees migration as a form of optimal allocation of production factors to the
benefit of both sending and receiving countries. In this perspective of ‘balanced growth’, the re-
allocation of labor from rural, agricultural areas to urban, industrial sectors (within or across
borders), is considered as a prerequisite for economic growth and, hence, as a constituent
component of the entire development process (De Haas 2010; Todaro, 1969:139). In short, De
Haas observes, “the developmental role of migration is entirely realized through factor price
48 Reviewing each study is beyond the scope of this chapter whose aim is to summarize the main theoretical
equalization.” (De Haas 2010: 231). Under this school of thought, migrants are seen as important
agents of change and innovation because of their contribution to economic development (for
details, see De Haas 2010). Migration leads to a North-South transfer of investment capital and
accelerates the exposure of traditional communities to liberal, rational and democratic ideas,
modern knowledge and education. However, as De Haas recalls, neoclassical migration theory
has no place for remittances (Taylor 1999:65, cite in De Haas 2010: 231).
According to this perspective, migrating is largely demand-driven. The overall theoretical
argument is based on factor price equalization with a basic formulation: international migration
occurs because of the spatial differences between supply and demand of labor, mostly between
the rural traditional agricultural sector and the urban modern manufacturing sector.49 The perfect
elasticity between labor supply and capitalist sector fades away and instead merges into a single
economy in which wages are equalized across space (Massey & al. 1993). Countries with a large
supply of labor tend to have a low equilibrium market wage while countries with limited supply
of labor tend to have a high equilibrium market wage. The resulting difference between the two
forms of wages causes workers to move from low-wage countries to high-wage countries (“push-
and-pull”). The consequences of this movement engender a decrease in labor supply and an
increase in wages for capital poor countries while labor supply increases and wages decrease in
capital rich countries. This economic process creates equilibrium at international-level wage
difference, which reflects the costs of international movement. In this model, social attachments
generally operate on the cost side of the equation, both in psychological and monetary terms.
49 This view originates from the classical model (i.e. trade theory), which presumes a perfect market and labor
surplus in the agrarian economies that are being dominated by the modern sector (Lewis 1954). Here the supply of labor to nonfarm jobs is perfectly elastic (Taylor and Wyatt 1996).
While the costs of staying in the origin country are lower, the costs of social attachments at the
destination country raise the costs of return while decreasing the costs of staying.
The neoclassical model understands migrating as a form of investment capital, which brings a
positive net return, usually financially. As a result, migratory flow is the sum of all individual
projects. De Haas summarizes this perspective the following:
From this perspective, the re-allocation of labour from rural, agricultural areas (within and across national boundaries) to urban, industrial sectors is considered as an essential prerequisite for economic growth and, hence, as an integral component of the whole development process (Todaro 1969:139). The free movement of labour—in an unconstrained market environment—is eventually expected to lead to the increasing scarcity of labour, which will then lead to a higher marginal productivity of labour and increasing wage levels in migrant-sending societies. Capital flows are expected to go in exactly the opposite direction as labour migration.
So, in a strictly neoclassical world, the developmental role of migration is entirely realized through this process of factor price equalization. (De Haas 2005: 4)
Though remittances remain invisible, they are the implicit motivating force to migrate since
migrants should use earnings to maximize utility in the host country. Remittances remain absent
from any discourse because migration is treated only a macro-level, that is on distinct labor
market phenomena, such as wage differentials. This conception has largely influenced public
policies and holds a dominant place in international financial institutions, such as the World
Bank and the International Monetary Fund, which tend to see the benefits of migration for
Development theory also known as the “optimists” emerges within the neoclassical model in the
first two decades following the Second World War (De Haas 2010: 231). These optimistic views
expect migrants to play a positive role in development and contribute to the accelerated spatial
diffusion of modernization in developing countries. They see remittances as the main actor in
stimulating economic growth, suggesting that through large-scale capital transfer (e.g., through
loans, aid, and remittances) poor countries would experience rapid economic development and
industrialization (De Haas 2010: 231). As De Haas notes, “Internal and international labor
migration was seen as integral parts of this process contributing to a more optimal spatial
allocation of production factors and, hence, better aggregate outcomes” (De Haas 2010: 232).
This perspective has raised criticisms among scholars who pointed to the severe inequalities,
such as unemployment between countries for which the model does not account. As a result,
several scholars have expanded this model to a ‘micro’ perspective to include unemployment as
a variable in the maximizing equation (Harris and Todaro 1970; Todaro 1969). They focused on
individuals who are rational self-interested and profit maximizing individuals because they
believe that migrating will enable them to maximize their income by moving to another place
(Borjas 1990; Todaro and Matruszko 1987; Todaro 1989, 1969). For example Harris and Todaro
(1970) who saw most migration as taking place from rural to urban areas suggested that the
migration decision-making process is a comparison between the discounted future streams of real
rural income (calculated by migrants themselves) and the discounted future streams of the
income that those migrants expect to earn by migrating to the cities (which is defined as the
urban real income weighed by the probability of employment) (Abreu 2010: 5). Indeed,
migration is not risk-free, for migrants are not always ensured that a job awaits them at
financial investments of moving, traveling costs, time invested, social, cultural and emotional
investment in being in a new country. A careful calculation of pros and cons based on the skills
the individual possesses and its corresponding earnings in terms of wages is therefore measured.
The neoclassical view’s contributions largely focused on the process of economic development
in which migration was understood to be a causal factor of wage differentials. This macro
perspective worked as an economic model to the extent that it simply pointed to the unequal
economic and social conditions between ‘core’ and ‘peripheries’ countries. The focus was
largely concerned with migrant workers, which left out a whole other group of migrants; one that
did not necessarily fit the ‘ethnic poor’ migrant category. As Abreu concludes, “whether in its
‘micro’ or ‘macro’ dimensions, it should be clear that the neoclassical theory of migration is
nothing more nor less than a derivative application of neoclassical economics to the particular
field of migration, with all of its characteristic features and assumptions: methodological
individualism, optimization, rationality, hypothetical-deductivism, equilibrium” (Abreu 2010: 5).