Sunday, August 26, 2012

America and the mass migration in the late 19th century

In secondary school one of my favorite topics in history was the age of the European mass migration. It must have been so wonderful to sit on a huge steamship and cross the ocean to a country, where even a peasant could reach his dreams and where it was so easy to  buy land and start a whole new life. In the late 19th century millions of Europeans made the journey to the New World, and it was possible exactly because of the steamships.
Compared to the early days of transatlantic trade, the travel costs sunk incredibly thanks to the appearance of steamships by the end of the 19th century.  The price of a ticket to the States became cheaper relative to the European wages, but more importantly, the travel time declined from five to less than two weeks and besides, the steamships offered a safer voyage than any sail ship before them. The decline in the travel costs (both money and time) caused another phenomenon, which was that not all the immigrants stayed forever in the US, but more and more European returned to the Old World after some years of migration. This type of movement was very rear before the steamship became the most important vehicle between the two continents. Another important change was that at the end of the 19th century, the bulk of the migrants were unskilled young people, so they had no superfluous knowledge, which on the one hand was useless in the US, and on the other hand took a lot of time and money to acquire in the home country. In other words the new migrants did not invest unnecessarily in their human capital, so it was easier for them to find suitable jobs in the New World.
Graph - Gross intercontitnental emigration from Europe, 1846-1939, annual averages; source: Chiswick & Hatton

If we put on the glasses of economics, the story of the mass migration to America may be more interesting. Looking through the lenses of geographical economics, we can say that the decline in the travel costs (both time and money) is actually a decline in transportation costs, and by the way the lack of knowledge on the side of the new immigrants can be considered as such too. This latter reduction, however, was possible before the time of the steamship, but come to a major role only from the end of the 19th century.
On the first place, the decrease in transport costs meant that the economic competition between America and Europe could increase, which actually happened because the prices started to equalize between the continents. We can also put the steamships and their consequences on the migration in the context of the New Economic Geography. According to this theory there are two possible equilibria for an economy with two regions. Spreading is the one, when there are equal activities in both regions and agglomeration is the other, when all the activities are concentrated in one of the two regions. The most important factor which determines the equilibrium is the transportation cost. In case the transport costs are high, the spreading equilibrium will hold, because it is easier to produce in both regions instead of trading between them. We can say that this was the situation before the steamships: there was some migration, but the travel costs were so high, that even the higher wages of America were not big enough to attract more immigrants and to reach agglomeration. As steamships appeared and became able to cross the ocean, the agglomeration force grew stronger; the number of immigrants to the States soared. The smaller transportation cost meant that the wage differential between the New and the Old world became larger; therefore it was more tempting to travel to the US and work there. However, no total agglomeration could happen, because as the transportation costs declined, the prices started to equalize, which was also true for wages. The equalization of wages weakened the emerging agglomeration forces, which means that although the migration to America was huge at the end of the 19th century, it could not approach the total agglomeration, because at the same time the force for spreading started to work.
All in all, we can claim, that the prediction of the New Economic Geography (that the decline in transport costs leads to agglomeration) was sort of true here, for a short period, but we have to treat this conclusion with suspicion. It is questionable if we can treat North-America and Europe as to regions, because it is highly unlikely that total agglomeration can ever happen in any of them. To find the truth behind the New Economic Geography in the time of the mass migration, we should rather focus on smaller parts of the receiver and sender areas. However, this is a tale for another post.

Fruzsina Mayer


Chiswick, B. R. & Hatton, T. J. (2005.) International Migration and the Integration of Labor Markets. In Globalization in Historic Perspective, edited by M. D. Bordo, A. M. Taylor and J. G. Williamson. 65-12. p. Chicago: University of Chicago Press

O'Rourke, K.H. & Williamson, J.G. (1999.) The Heckscher-Ohlin Model Between 1400 and 2000: When it Explained Factor Price Convergence, Ehen it Did not, and Why. Papers 99/25, College Dublin, Department of Political Economy.


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