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Impact of Migration on Economic and Social Development A Review of Evidence and Emerging Issues

01 Feb 2011-Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics (Gokhale Institute of Politics and Economics)-Vol. 53, Iss: 3, pp 1-39
TL;DR: A review of the literature on the development impact of migration and remittances on origin countries and on destination countries in the South is provided in this article, where the authors highlight a few policy recommendations calling for better integration of migration in development policies in the south and the North.
Abstract: 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 is an ever-growing phenomenon that has important development implications for both sending and receiving countries. For a sending country, migration and the resulting remittances lead to increased incomes and poverty reduction, and improved health and educational outcomes, and promote economic development. Yet these gains might come at substantial social costs to the migrants and their families. Since many developing countries are also large recipients of international migrants, they face challenges of integration of immigrants, job competition between migrant and native workers, and fiscal costs associated with provision of social services to the migrants. This paper also summarizes incipient discussions on the impacts of migration on climate change, democratic values, demographics, national identity, and security. In conclusion, the paper highlights a few policy recommendations calling for better integration of migration in development policies in the South and the North, improving data collection on migration and remittance flows, leveraging remittances for improving access to finance of recipient households and countries, improving recruitment mechanisms, and facilitating international labor mobility through safe and legal channels.

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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P R W P
5558
Impact of Migration on Economic
and Social Development
A Review of Evidence and Emerging Issues
Dilip Ratha
Sanket Mohapatra
Elina Scheja
e World Bank
Development Prospects Group
Migration and Remittances Unit
&
Poverty Reduction and Economic Management Network
February 2011
WPS5558
Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized

Produced by the Research Support Team
Abstract
e Policy Research Working Paper Series disseminates the ndings of work in progress to encourage the exchange of ideas about development
issues. An objective of the series is to get the ndings out quickly, even if the presentations are less than fully polished. e papers carry the
names of the authors and should be cited accordingly. e ndings, interpretations, and conclusions expressed in this paper are entirely those
of the authors. ey do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and
its aliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
P R W P5558
is 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 is an ever-growing
phenomenon that has important development
implications for both sending and receiving countries.
For a sending country, migration and the resulting
remittances lead to increased incomes and poverty
reduction, and improved health and educational
outcomes, and promote economic development.
Yet these gains might come at substantial social
costs to the migrants and their families. Since
many developing countries are also large recipients
of international migrants, they face challenges of
integration of immigrants, job competition between
is paper is a joint product of the Migration and Remittances Unit of the Development Prospects Group, Development
Economics Vice Presidency; and Poverty Reduction and Economic Management Network. It is part of a larger eort by
the World Bank to provide open access to its research and make a contribution to development policy discussions around
the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. e authors can be
contacted at dratha@worldbank.org, smohapatra2@worldbank.org, and escheja@worldbank.org.
migrant and native workers, and scal costs associated
with provision of social services to the migrants. is
paper also summarizes incipient discussions on the
impacts of migration on climate change, democratic
values, demographics, national identity, and security.
In conclusion, the paper highlights a few policy
recommendations calling for better integration of
migration in development policies in the South and
the North, improving data collection on migration and
remittance ows, leveraging remittances for improving
access to nance of recipient households and countries,
improving recruitment mechanisms, and facilitating
international labor mobility through safe and legal
channels.

Impact of Migration on Economic and Social
Development: A Review of Evidence and Emerging
Issues
Dilip Ratha, Sanket Mohapatra and Elina Scheja*
Keywords: International migration, Remittances; Development; Social welfare, Poverty
reduction, Fiscal impacts, Integration, Climate change
______________________________________________________________________________
* This papera product of the joint Migration and Remittances Unit of the Development Prospects Group,
Development Economics Vice Presidency (DEC) and Poverty Reduction and Economic Management
Network (PREM)was a background paper for Roundtable 3 on Migration and Development: Tools and
Evidence for Policy and Institutional Coherence of the Civil Society Days of the Global Forum on
Migration and Development 2010 held on November 8-11, 2010, at Puerto Vallarta, Mexico. We would
like to thank Hans Timmer for extensive discussions and William Shaw for helpful comments on an earlier
draft. Comments are welcome, and may be sent to dratha@worldbank.org. The findings, interpretations and
conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the
view of the World Bank.

2
Impact of Migration on Economic and Social Development: A
Review of Evidence and Emerging Issues
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).
While the focus in the literature has been on South-North migration, the number of
migrants between developing countries is estimated to be as large as the number of
migrants moving from South to North (Ratha & Shaw 2007). Thus, the development
implications of migration and the need to manage in-migration are as relevant to the
South as they are to the North. Although violent conflict, political persecution, and
trafficking are important causes for international mobility, more than 9 out of 10
international migrants move for economic reasons. By and large, migration has positive
economic impacts on the migrant household, the sending country as well as the receiving
country.
The paper is organized as follows. Section 2 provides a discussion of the
development implications, first economic and then social impacts, of migration for origin
countries. Section 3 discusses the available evidence on the impact of migration on
destination countries in the South. Section 4 concludes with a brief discussion of selected
emerging migration issues such as environment and climate change, fertility and
demographic patterns, democratic processes, and national security, and some policy
recommendations for enhancing the impact of migration on economic and social
development.
1
1
While some of the topics are new in relation to migration, some have been widely discussed by
practitioners in this context. However, the academic literature is still largely underdeveloped in these areas
making them ’emerging topics’ in relation to available migration research.

3
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). 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). The true size of remittances including unrecorded flows through formal and
informal channels is likely to be even higher. While remittances to developing countries
declined modestly in 2009 because of the global financial crisis, these flows have
remained resilient compared to private capital flows, and have become even more
important as a source of external financing in many developing countries.
Migration and remittances have both direct and indirect effects on the welfare of
the population in the migrant sending countries.
2
A cross-country study of 71 developing
countries found that a 10 percent increase in per capita official international remittances
will lead to 3.5 percent decline in the share of people living in poverty (Adams & Page
2
See World Bank (2005), UNDP (2009), Skeldon (2002), Kothari (2002), and De Haas (2005).

Citations
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TL;DR: The drivers and outcomes of, and barriers to, 27 recent cases of managed retreat—involving the resettlement of approximately 1.3 million people—are evaluated.
Abstract: Managed retreat is a potentially important climate change adaptation option, providing an alternative to structural protection or accommodation measures to manage natural hazard risk. However, its application faces challenges given the projected scale of climate-induced displacement and the difficulties of resettlement. We evaluate the drivers, barriers and outcomes of 27 recent cases of managed retreat that have resettled approximately 1.3 million people. A conceptual model based on two key factors—who benefits from retreat and who initiates it—organizes the diverse set of cases into four quadrants. Different sociopolitical dimensions emerge as particularly influential in each quadrant. The model establishes a foundation for understanding and anticipating case-specific complexities. It can be used to unpack the landscape of managed retreat and evaluate its potential future applications. Managed retreat is a potentially important climate change adaptation option. In this article the drivers and outcomes of, and barriers to, 27 recent cases of managed retreat—involving the resettlement of approximately 1.3 million people—are evaluated.

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TL;DR: In this article, the effects of remittances on growth of GDP per capita using annual panel data for 24 Asia and Pacific countries were analyzed and the results generally confirm that remittance flows have been beneficial to economic growth.

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References
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Richard H. Adams1, John Page1
TL;DR: In this paper, the authors examined the impact of international migration and remittances on poverty in the developing world and found that a 10% increase in the share of international migrants in a country's population will lead to a 2.1% decline in the percentage of people living on less than $1.00 per person per day.

1,402 citations

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Peggy Levitt1
TL;DR: This article specifies how the ideas, behaviors, identities, and social capital that flow from receiving- to sending- country communities are remolded in receiving countries, the mechanisms by which they are sent back to sending communities, and the role they play in transforming sending-country social and political life.
Abstract: Many studies highlight the macro-level dissemination of global culture and institutions. This article focuses on social remittances--a local-level migration-driven form of cultural diffusion. Social remittances are the ideas behaviors identities and social capital that flow from receiving- to sending-country communities. The role that these resources play in promoting immigrant entrepreneurship community and family formation and political integration is widely acknowledged. This article specifies how these same ideas and practices are remolded in receiving countries the mechanisms by which they are sent back to sending communities and the role they play in transforming sending-country social and political life. The data concern migrants from the Dominican Republic to the Boston area of the United States. (EXCERPT)

1,300 citations


"Impact of Migration on Economic and..." refers background in this paper

  • ...…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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Abstract: Immigration is a hot and emotional topic at the current time. This excellent book contributes some reason and knowledge to the debate. The authors give clarity by presenting an historical context to Mexican immigration. They base their analysis and policy recommendations on a solid database, using data from the Mexican Migration Project. Yet, all this is done in a very readable style making the book accessible not only to academicians but also to policy makers and the general public. The empirical descriptions and analysis are based on data from the Mexican Migration Project (MMP), a large binational data set that has been collecting detailed information on documented and undocumented Mexicans since 1980. The authors argue that the one constant in U.S. border policy throughout the twentieth century is the hypocrisy of arranging to import Mexicans while pretending not to, seeking ways of “accepting Mexicans as workers while limiting their claims as human beings.” At the same time “the benefits of Mexico-U.S. migration have historically exceeded the costs for all concerned” (p. 105). The book is written like a repair manual, treating the immigration issue as a “complicated piece of socio-economic machinery” and argues that understanding it allows one to intervene appropriately to influence outcomes and improve results (p. 2). The introductory chapter is “Ghost in the Machine: Interventions in the Mexico-U.S. Immigration System,” followed by a chapter that gives a brief outline of immigration theory: “Principles of Operation.” The third chapter, “System Assembly” gives an overview of the history of Mexican immigration to the U.S. from the “Era of Enganche” from 1900 to 1929 when Mexicans were recruited; to the depression era of deportations and diminished inflow; to the Bracero era of 1942 to 1964. They call 1965 to 1985 the “Era of Undocumented Mexicans” in which the Border Patrol would catch some undocumented, giving an illusion of controlling the border, but simply return them to the Mexican side of the border where they could try again. The authors argue that this system worked as de facto guest worker program. Mexicans would come to work, send

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"Impact of Migration on Economic and..." refers background in this paper

  • ...Evidence from the US-Mexico border suggests that increasing the number of border control agents increases smuggler’s fees, but is unlikely to curtail the number of migrants as intended (Hanson et al. 1999, Durand and Massey 2002, Martin 2004, Passel and Suro 2005)....

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TL;DR: The authors showed that migrants' habitual transnational political engagement is not as extensive, socially unbounded, "deterritorialized, and liberatory" as previously argued, and that the potential of transnationalism for transforming power asymmetries within and across countries has yet to be determined.
Abstract: This article presents evidence of the scale, relative intensity, and social determinants of immigrants’ transnational political engagement. It demonstrates that a stable and significant transnational field of political action connecting immigrants with their polities of origin does indeed exist. The results help temper celebratory images of the extent and effects of transnational engagement provided by some scholars. The article shows that migrants’ habitual transnational political engagement is far from being as extensive, socially unbounded, “deterritorialized,” and liberatory as previously argued. Transnational political action, then, is regularly undertaken by a small minority, is socially bounded across national borders, occurs in quite specific territorial jurisdictions, and appears to reproduce preexisting power asymmetries. The potential of transnationalism for transforming such asymmetries within and across countries has yet to be determined.

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"Impact of Migration on Economic and..." refers background in this paper

  • ...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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Dilip Ratha1
TL;DR: The Global Development Finance flagship report of the World Bank as discussed by the authors highlighted that remittances provide a lifeline to many poor countries: they are larger than official development aid, they are counter-cyclical to the recipient country's economic cycle, and they can be leveraged for complementing development efforts.
Abstract: This is the original article, published in 2003 as a chapter in the Global Development Finance flagship report of the World Bank, that brought workers' remittances to the attention of the global development community. It highlighted that remittances provide a lifeline to many poor countries: they are larger than official development aid, they are counter-cyclical to the recipient country's economic cycle, and they can be leveraged for complementing development efforts.

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"Impact of Migration on Economic and..." refers background in this paper

  • ...…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)
Q1. What contributions have the authors mentioned in the paper "Impact of migration on economic and social development a review of evidence and emerging issues" ?

A review of the literature on the development impact of migration and remittances on origin countries and on destination countries in the South can be found in this paper. 

22fear-based xenophobia and overregulation are some ingredients along the way towards a migration policy that benefits both migrant-sending and receiving countries. 

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. 

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. 

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). 

For the countries, diaspora bonds represent a stable and cheap source of external finance, especially in times of financial stress. 

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). 

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). 

In the past, Israel and India have raised over $35 billion of development financing by issuing diaspora bonds (Ketkar and Ratha 2009). 

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). 

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. 

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). 

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. 

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). 

This inability to control migration and to integrate the newcomers has at times led to dramatic actions and great human suffering. 

Trending Questions (2)
What are the socio-economic implications of migration and remittances?

The paper states that migration and remittances can lead to increased incomes, poverty reduction, improved health and education outcomes, and promote economic development in sending countries. However, there may be social costs to migrants and their families. The paper also mentions challenges faced by receiving countries, such as integration of immigrants, job competition, and fiscal costs.

What is the impact of migration on the origin country or place??

The impact of migration on the origin country includes increased incomes, poverty reduction, improved health and education outcomes, and promotion of economic development.