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

TLDR: 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.

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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
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Abstract
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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 paper—a 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).

Frequently asked questions

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. 

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.