 Hi everyone and welcome to this knowledge clip on theories of international migration. And this time I will explain to you neoclassical theory, another classical international migration theory that has been very often used to explain why people move internationally across borders. So neoclassical theory has been first used to explain internal rather than international migration, but it became a very popular theory for explaining international migration as well. Now they have a particular focus and that again is important to keep in mind on economic migration, on labor migration. So this theory cannot really be used immediately to explain why people move when there is a war for example. So it's economic migration and there's a particular focus also on migration from poorer countries to richer countries, so less between countries that are equal in terms of economic development for example or between countries that are still developing. Now the core of the theory is very easy I would say, so we have to distinguish between the macro level and the micro level. And at the macro level the theory indicates that there is differences between countries in terms of capital and in terms of labor. So what does that really mean? It means that as you can see in the picture behind me, so on the one hand there is difference in money so some countries are richer than other countries and you can also see that there is a difference in terms of labor. Some people have many people available, some countries have many individuals available in the labor market or for the labor markets and others have shortages. Think about it in the current context. In Northwest Europe there's a shortage of people in many different areas whereas in North African countries think about Tunisia for example there is a huge unemployment among the younger cohorts so they have a huge pressure on the labor market and these people of course they also want to work somewhere. And so the neoclassical theory indicates that people tend to move from countries with few capital to countries with a lot of capital so from poorer countries towards richer countries because people can earn higher salaries in the countries of destination and they also indicate that people tend to move from countries where there is a surplus of labor so where there is many individuals available that can work towards countries where there is a shortage of laborers. And so that means that in the long term there will be conversion that's at least what the theory predicts which means that wages will go up also in origin areas of course if you send people abroad you will also have the number of vacancies or the number of people that need to enter the labor market that goes down and in the end there will be an economic equilibrium according to the neoclassical theory. But so it explains why people move from poorer countries where generally there's a lot of people that cannot be incorporated in the labor market towards countries where there are shortages and where there is a lot of money available so that people can get a higher salary compared to the country of origin. Now apart from this macro level part of the theory there's also a micro level part of the theory which is very important to grasp to understand fully the dynamics of the theory. So if we look at the micro level then we see that the theory expects that people are making individual rational decisions which means that people always act rationally according to the theory that they always think about their economic situation so their Homo economicus and they have perfect information so they know what they will earn in the country of destination for example so that they can make a cost-benefit analysis and rationally decide for me personally it's better to move abroad to another country where I have a job available and where there are also decent salaries which I for example can use to support my family back in the country of origin. So in a nutshell that is what neoclassical theory is about so remember there is a micro level component there is a micro level component people act rationally and that explains why people move internationally. So thank you for watching this knowledge clip.