Leveraging Migration and Remittances for Development Dilip Ratha Migration and Remittances Unit World Bank and Migrating out of Poverty Research Consortium University of Sussex Federal Reserve Bank of Atlanta Research Conference on Remittances and Immigration November 5, 2010
Outline A. Stylized facts B. Development impact of international ti migration C. Policy implications
A. Stylized Facts 1. Only 3% of world population are international ti migrants; 97% are not 2. Economic migrants account for 93% of global migrant stock. Economic migration is set to increase in future
In future, migration pressures will increase dramatically Projected Change in Labor Force, 2005 50 (millions), ages 15-39 Sub-Saharan Africa 328 Middle-East & N. Africa 44 Other sending regions 198 All developing regions 570 EU & other Europe -67 North America -9 China -85 East Asia and Pacific -32 E Europe & C Asia -23 Sub-total for these and other receiving regions -216 Source: Shaping the Future : A Long-Term Perspective of People and Job Mobility for the Middle East and North Africa (World Bank 2008)
A. Stylized Facts 1. Only 3% of world population are international ti migrants; 97% are not 2. Economic migrants account for 93% of global migrant stock. Economic migration is set to increase in future 3. South-South migration is larger than South-North migration
South-South migration is larger than migration from developing countries to high-income OECD countries Destination of migrants from the South Highincome non- OECD 14% South 44% High- income OECD 42% Source: Migration and Remittances Factbook 2011
20% Migrants' share of sending country population 15% 10% 5% 0% 1 21 41 61 Sending country ranked by GDP per capita Data source: Ratha and Shaw (2007) 81 101 121 61 41 141 21 1 81 101 121 Receiving country ranked by GDP per capita
B. Development impact of international migration 1 Mi ti b fit ll ti th i t th 1. Migration benefits all parties the migrants, the destination country, and the origin country.
Migration boosts welfare for most households Global income gains of $356 billion (0.6%) 180 150 120 90 60 30 0-30 -60-90 Change in real income in 2025, $ billion 139 143 Natives, highincome countries -88 Old migrants, high-inc. countries. Source: Global Economic Prospects 2006 Residents, developing countries 162 New migrants
Migration benefits all parties Global income gains of $356 billion from a 3% (14 million) increase in labor force of high-income countries (GEP 2006) Global income gains of $675 billion (Anderson and Winters, 2008) A conservative estimate of the welfare gain to a moderately skilled worker moving to the US is PPP$10,000 per worker, per year (Clemens, Montenegro and Pritchett, 2008) Dixon and Rimmer (2009) estimate that the difference between the long-run welfare effects for U.S. households of a tighter border policy and a liberalized guest worker program with an optimal visa charge is about $260 billion a year.
B. Development impact of international migration 1. Migration benefits all parties the migrants, the destination country, and the origin country. 2. Benefits to countries of origin are mostly through remittances.
Remittance flows to developing countries remained resilient during the crisis 600 $ billions 500 400 FDI 300 200 100 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e Recorded Remittances ODA Private debt & port. equity
Remittances will be resilient w r to downturns in host countries Remittances are sent by the stock (cumulated flows) of migrants Remittances are a small part of migrants incomes that can be cushioned against income shocks by migrants Duration of migration may increase in response to tighter border controls Safe haven factor or home-bias -- returnees will take back accumulated savings Sectoral shifts and fiscal stimulus packages may help some migrants
However, Anti-immigrant sentiment is rising in major migrant-destination countries ti
B. Development impact of international migration 1. Migration benefits all parties the migrants, the destination country, and the origin country. 2. Benefits to countries of origin are mostly through remittances. 3. Emigration of skilled people may be a problem in small countries
Brain drain is a small country problem, if at all Share of developing country population p (%) 80% 75% 60% 40% 20% 0% 19% 3% 3% < 10% 10%-20% 20%-30% > 30% High-skilled emigration rate Source: Docquier and Marfouk (2004)
B. Development impact of international migration 1. Migration benefits all parties the migrants, the destination country, and the origin country. 2. Benefits to countries of origin are mostly through remittances. 3. Emigration of skilled people may be a problem in small countries 4. Diasporas also provide business contact, trade network, technology, and capital to the origin country.
Diaspora bonds can be used to tap the wealth of the diaspora, often with patriotic discount 15 Percent 13 US Treasury 10-year 11 9 7 5 3 1 Israel DCI bond 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 Israel and India have raised over $35 billion via diaspora bonds
Outline A. Some stylized facts B. Development impact of international ti migration C. Policy implications
C. Policy implications 1. The international ti remittances agenda
1. Monitoring, analysis, projection 3. Financial access for households International Remittances Agenda 4. Capital market access for institutions 2. Retail payment systems
International remittances Agenda 1. Improve monitoring, analysis, projection (MAPping) 2. Improve retail payment systems: Reduce remittance costs Improve competition in remittance industry Share networks - avoid exclusivity contracts Avoid overregulation of remittance industry Introduce new technology 3. Leverage remittances for financial access for households 4. Leverage remittances for improving access to capital markets for institutions/countries
International remittances Agenda 1. US Wall Street Reform Bill 2. US BRIDGE initiativeiti
C. Policy implications 1. The international remittances agenda 2. Know your migrants/diaspora 3. Help potential migrants acquire globally marketable skills 4. Point-based systems can produce adverse effects on developing countries 5. But ethical recruitment policies may be ineffective, and unethical 6. Improve transparency in recruitment of migrants 7. Border control policies should be revisited
Do border controls stop migration?
Increase in border control seems to have little (perverse?) effect on illegal migrant stock 4.0% 3.8% 36% 3.6% 34% 3.4% Share of US population p Illegal migrant stock Thousands 20 17 14 3.2% Border patrol agents, Southern border (right scale) 3.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 11 8 Source: Passel and Cohn (2010), Department of Homeland Security
Employment opportunities in the US appear to be a dominant pull factor for immigration Share of population p 4.2% Percent 10 40% 4.0% Illegal migrant stock 3.8% 8 3.6% 3.4% US unemployment rate (right scale) 6 32% 3.2% 3.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 4 Source: Passel and Cohn (2010), Department of Homeland Security
Tighter border controls increase coyote fees US$ 3,200 2,800 2,400 2,000 1,600 1,200 Coyote fees 800 400 Border patrol agents, Southern border (right scale) Thousands 24 20 16 12 8 4 0 1984 1989 1994 1999 2004 2009 0 Source: DHS, MMP
Apprehensions in the US-Mexico border have not declined significantly even though US border controls have increased 20 2.0 Millions Thousands 24 16 1.6 1.2 0.8 Apprehensions 20 16 12 8 0.4 Border patrol agents (right scale) 0.0 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 Source: DHS, CBP 4 0
Migration rises and then falls as border controls increase (the Migration Curve) Apprehensions along US-Mexico border (millions) 1.9 1.5 1.1 0.7 0.3 0 5 10 15 20 0 5 10 15 20 Border patrol agents (thousands)
Migrant stock today = Existing migrant stock Return migration + New migration Or M t = M t-1 -R t + M t
Return migration and border controls
Duration of Mexican migration has increased return rate has declined as controls have been tightened at the US-Mexico border Thousands 16 months 11 12 8 4 0 Border Patrol agents Migration duration (right scale) 10 9 8 7 6 198 198 198 199 199 199 199 199 200 200 200 200 4 6 8 0 2 4 6 8 0 2 4 6 Source: DHS, MMP
New migration and border controls Willingness to migrate is a function of developmental gaps Ability to migrate is a function of border controls Border controls increase the segmentation of labor g markets and increase developmental gaps
Border controls also affect income differences Income difference C 0 Border control Maximum
Break-up of the Soviet Union saw a divergence in income levels of FSU countries 0.9 Coefficient of variation of GDP per capita (2000 US$) 0.8 0.7 0.6 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Source: DECPG
Creation of borders in South Asia led to divergence of income levels GDP per worker (2000 US$), thousands 8 6 Pakistan 4 India 2 Bangladesh Creation of Bangladesh 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Source: Penn World Tables 6.2. India and Pakistan were partitioned in 1947.
Accession of Portugal to EU in 1986 allowed it to catch up with France s income level l Portugal GDP as % of France GDP 70% 66% 60% 60% 56% 50% 40% 1981-8585 1986-19901990 1991-19951995 Source: Penn World Table 6.2
Income gaps narrowed between East and West Germany after unification East Germany as % of West German value 80 60 Nominal wages Real GDP per worker 40 1970 1975 1980 1985 1990 1995 2000 2005 Source: Penn World Tables 5.6 and Burda (2008)
New EU accession countries also saw their income levels converge Coefficient of variation, GDP per capita (constant 2000 $) 0.6 0.5 0.4 1996 1998 2000 2002 2004 2006 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic, and Slovenia joined the EU in 2004. Source: WDI
Migration Curve Migration 0 Border control Maximum
Migration Curve Migration C 0 Border control Maximum
Migration rises and then falls as border controls increase Apprehensions along US-Mexico border (millions) 1.9 1.5 1.1 0.7 0.3 0 5 10 15 20 0 5 10 15 20 Border patrol agents (thousands)
Migration Curve On the left of the curve, shifting from border controls to development aid could be very effective C On which Migration side of this curve are Mexico-US and Bangladesh-India corridors? What is a border? Does it have to be the same for international trade, foreign investment, economic nationality, political sovereignty, cultural identity? 0 Border control Maximum
C. Policy implications 1. The international remittances agenda 2. Know your migrants/diaspora 3. Help potential migrants acquire globally marketable skills 4. Ethical recruitment t policies i may be ineffective, and unethical 5. Improve transparency in recruitment of migrants 6. Border control policies should be revisited 7. Migration is not a substitute for employment creation at home