Impact of Migration on Economic and Social Development A Review of Evidence and Emerging Issues
Summary (3 min read)
1. Introduction
- This paper provides a review of the literature on the development impact of migration and remittances on origin countries and on destination countries in the South.
- International migration has development implications for origin and destination countries in the South and in the North.
- Some 215 million people or 3 percent of the world’s population are believed to live outside their countries of birth (United Nations 2009).
- Section 2 provides a discussion of the development implications, first economic and then social impacts, of migration for origin countries.
- 1 1 While some of the topics are new in relation to migration, some have been widely discussed by practitioners in this context.
2. Development implications of migration for the origin countries
- Migration is a decision that impacts the welfare of the household, the home community, and in the end the whole economy in various ways (Azam and Gubert 2006).
- The welfare implications of migration on the origin country are most often, though not always, sizable and positive.
- The main channels through which migration alleviates poverty are increased incomes from remittances, ability to smooth consumption, access to finance for starting a new business, as well as tapping on to the knowledge and resources provided by the international community of the migrant diaspora.
- Besides pure monetary gains, migration and remittances allow for higher investment in health care and education.
- Yet, not all impacts are positive: exploitation of migrants by unscrupulous recruiters or employers is reportedly widespread; separation from family can be stressful for migrants; and large scale immigration can pose serious challenges to a nation’s identity and sovereignty.
2.1 Economic implications for the country of origin
- While migration has economic, social, and cultural implications for the sending and host societies, remittances the migrants send home are perhaps the most tangible and least controversial link between migration and development (Ratha 2007).
- Migration and remittances have both direct and indirect effects on the welfare of the population in the migrant sending countries.
- Evidence from Latin America, Africa, South Asia and other regions suggests that remittances reduce the depth and severity of poverty, as well as indirectly stimulate economic activity (Adams 1991, Lachaud 1999, Fajnzylber & Lopez 2007, Adams 2006b, Gupta et al. 2007, Anyanwu and Erhijakpor 2010, Ajayi et al. 2009).
- Diaspora bonds have several advantages, both for the issuer and for the emigrant who buys the bond: Despite concerns about the detrimental effects of brain drain on health, the shortage of health professionals in Africa is likely to stem from causes entirely unrelated to international migration (Clemens 2007) such as fragmented labor markets and insufficient public financing (Lucas 2006).
2.2 Social impacts on the origin country
- At its best, migration can be a rewarding experience that is made in the interest of the household welfare, but in most cases moving to another country and being separated from one’s immediate family takes place at considerable emotional cost (D’Emilio et al. 2007).
- Especially in poorer households where the whole family cannot afford to emigrate together, they emigrate one member at a time resulting in eroded family structures and relationships.
- Separation from the parents has also long-term consequences in all aspects of the children’s lives.
- The problem expands from pure trafficking into working in slave-like conditions as the international market for labor allows for trading with workers’ contracts leading to abuse of individual migrants.
- 12 For instance, over 50 percent of migrant domestic workers surveyed in Kuwait reported physical (including sexual), psychological and verbal abuse at their work place.
3. Impact of migration on the destination countries in the South
- Unlike commonly believed, around half of the official international migration from the South is to other developing countries rather than wealthier countries in the North (Ratha & Shaw 2007).
- And official statistics likely underreport South-South migration, especially between contiguous countries because of lack of border controls; almost 80 percent of the South-South migration is estimated to take place between countries with contiguous borders.
3.1 Economic implications in the destination country
- Even though the channels transmitting welfare impacts of migration on the destination countries are well known in the literature, there is very limited amount of empirical evidence from the South quantifying the impacts.
- Immigration has also been found to increase the productivity of the receiving economies through the contribution of migrants to innovation (see box 1).
- The fiscal impact of immigration depends on the costs and contributions of the immigrant population to the welfare system of the host country.
- 15 15 For instance, HIV prevalence is observed to rise with migration and the situation is made worse by the fact that in every fifth destination country there are laws, regulations or policies that present obstacles to effective HIV prevention, treatment, care and support for migrants (UNAIDS 2008, 114).
3.2 Social impacts on the destination countries in the South
- Apart from the increased competition at the labor markets, increasing inflows of migrants impose an integration challenge in all areas of social life.
- These instances highlight the importance of strengthening migration and integration policies in developing countries as they host large numbers of immigrants.
- It is generally assumed, that short term and circular migrants make little investment in maintaining the ecological stability of their destination while long-term immigrants have an incentive to invest in 16 Identifying adaptation and resettlement strategies have been called for to deal with the emigration pressure imposed by the climate change (Martin 2010).
- Migration decision is also an integral part of family planning decisions and lead to differences in fertility rates among migrants and non-migrants (Singley & Landale 1998, Fargues 2007) 22 . 24.
- When the size of a refugee population increases over time, which is not uncommon as conflicts escalate, host communities are often overwhelmed and feel that their resources are threatened (Ek & 20 Another theme drawing a lot of discussion but with scant empirical evidence and rigorous analysis is gender and migration.
Selected policy suggestions
- There is a vast literature discussing policy recommendations that nurture the benefits and mitigate the negative effects of migration.
- Statistics on migration and remittances are often of poor quality, especially in developing countries.
- Facilitating migration through safe and legal channels through better monitoring of recruitment processes and bilateral coordination will help to protect the rights of the migrants and fight exploitation and trafficking (UNDP 2009, p. 103).
- In conclusion, migration and remittances can be a valuable complement to broad- based development efforts.
- The ―Swedish for Immigrants‖ course offered for newcomers in Sweden free of charge with specific classes designed for uneducated or illiterate immigrants and highly educated professionals who need specific vocabulary to be able to work in Sweden, respectively, is a good example of such training.
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Cites background from "Impact of Migration on Economic and..."
...Remittances have a positive impact on the credit rating of a country, provide a large and stable source of foreign currency that can curtail investor panic, help deal with balance of payments crisis, and can be used for development projects (Ratha et al., 2011)....
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...…may also serve as a channel for democratic attitudes and behaviors absorbed in host countries to spread in their countries of origin, via visits, migrant returns, and crossborder communication, which can improve accountability (Levitt 1998, PerezArmendariz & Crow 2010, Cordova & Hiskey 2009)....
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...Successful assimilation to the destination country requires the migrants to interact with the new society, while keeping the culture of the origin country alive creates a positive environment for the multicultural identity to form (Guarnizo et al. 2003, Faist & Gerdes 2008)....
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...…of relatively stable remittance flows are likely to be easier to manage than a comparatively abrupt shock due to a natural resource windfall (Ratha 2003, Rajan and 9 On the other hand, temporary migration in order to access medical services (see the case of Hong Kong nationals in Canada…...
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Frequently Asked Questions (15)
Q2. What are some of the ingredients along the way towards a migration policy that benefits both countries?
22fear-based xenophobia and overregulation are some ingredients along the way towards a migration policy that benefits both migrant-sending and receiving countries.
Q3. What can be done to improve migration for development?
The development community can further leverage remittance flows fordevelopment by making them cheaper, safer and more productive for both the sending and the receiving countries.
Q4. Why do migrants end up in the cities of developing countries?
Most internalas well as international migrants end up in the cities of developing countries because of employment opportunities, with many working in the informal sector of business, transport, crafts and services.
Q5. Why are remittances a good source of foreign currency?
Because they are a large and stable source of foreign currency, remittances are likely to curtail investor panic and prevent sudden current account reversals during a crisis (Bugamelli & Paterno 2006, Gupta et al. 2007).
Q6. What are the advantages of diaspora bonds?
For the countries, diaspora bonds represent a stable and cheap source of external finance, especially in times of financial stress.
Q7. Why do remittances tend to rise in times of economic downturns,?
remittances have tended to rise in times of economic downturns, financial crises, and natural disasters because migrants living abroad send more money to help their families back home (World Bank 2006b, Yang 2006, Yang and Choi 2007, Mohapatra et al. 2010).
Q8. What is the role of remittances in the development of countries?
future flows of remittances can be used as collateral by governments and private sector entities in developing countries to raise financing in international capital market (Ketkar and Ratha 2005, 2009).
Q9. How many countries have raised over $35 billion of development financing by issuing diaspora bonds?
In the past, Israel and India have raised over $35 billion of development financing by issuing diaspora bonds (Ketkar and Ratha 2009).
Q10. What is the effect of remittances on economic growth?
In general, studies focusing on the labor supply response of the remittance-recipient households tend to find that remittances lower work efforts and hence reduce long-term growth (Azam & Gubert 2006; Chami et al. 2003).
Q11. What is the effect of migration on wages?
Simulations from a general equilibrium model by van der Mansbrugghe and Roland-Holst (2009) suggest that reducing migration will not necessarily result in higher wages for native workers in receiving countries, since lower levels of migration will also lower the relative return to capital, which in turn will put downward pressure on wages.
Q12. How much did the official estimates of the migration impact on the origin country in 2009?
According to the official estimates, migrants from developing countries sent over $315 billion to their origin countries in 2009, three times the size of official development assistance (Ratha et al. 2010).
Q13. What is the main reason for the abuse of migrants?
The abuse of migrants by the middle men or the recruitment agencies is a problem that is growing in magnitude as the migration flows increase and the phenomenon becomes more commercialized.
Q14. What is the risk of institutional degradation in a migrant country?
The risk of institutional degradation may not, however, be as large for remittances-receiving countriescompared to similar effects in resource rich countries, since remittances are widely dispersed, the bulk of them are allocated in small amounts, and where the money does not go through the government, also the risk of corruption is diminished (World Bank 2006, Birdsall and Subramanian 2004).
Q15. What has led to the expulsion of migrants?
This inability to control migration and to integrate the newcomers has at times led to dramatic actions and great human suffering.