section_path: Contemporary labor migration theories/Neoclassical economic theory
section_name: Neoclassical economic theory
paragraph_text: Neoclassical economic theory
  
  This migration theory states that the main reason for labour migration is wage difference between two geographic locations. These wage differences are usually linked to geographic labour demand and supply. It can be said that areas with a shortage of labour but an excess of capital have a high relative wage while areas with a high labour supply and a dearth of capital have a low relative wage. Labour tends to flow from low-wage areas to high-wage areas. Often, with this flow of labour comes changes in the sending and the receiving country. Neoclassical economic theory best describes transnational migration because it is not confined by international immigration laws and similar governmental regulations.