l i mi ti d r ittleveraging migration and remittances for ... · global income gains of $356...
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L i Mi ti d R ittLeveraging Migration and Remittances for Developmentp
Dilip RathaMigration and Remittances UnitWorld BankWorld Bankand“Migrating out of Poverty” Research ConsortiumUniversity of SussexUniversity of Sussex
Federal Reserve Bank of AtlantaResearch Conference on Remittances and ImmigrationNovember 5, 2010
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OutlineOutline
A St li d f tA. Stylized facts
B D l t i t f i t ti lB. Development impact of international migration
C. Policy implications
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A. Stylized FactsA. Stylized Facts
1 O l 3% f ld l ti i t ti l1. Only 3% of world population are international migrants; 97% are not
2. Economic migrants account for 93% of global migrant stock. Economic migration is set tomigrant stock. Economic migration is set to increase in future
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In future, migration pressures will increase dramaticallyincrease dramaticallyProjected Change in Labor Force, 2005–50 (millions), ages 15-39
Sub-Saharan Africa 328Middle-East & N. Africa 44Other sending regions 198All developing regions 570g
EU & other Europe -67North America -9China -85East Asia and Pacific -32E Europe & C Asia -23E Europe & C Asia 23Sub-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)
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A. Stylized FactsA. Stylized Facts
1 O l 3% f ld l ti i t ti l1. Only 3% of world population are international migrants; 97% are not
2. Economic migrants account for 93% of global migrant stock. Economic migration is set tomigrant stock. Economic migration is set to increase in future
3. South-South migration is larger than South-North migration
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South-South migration is larger than migration from developing countries to high-income p g gOECD countries
Destination of migrants from the South
High-
S th
income non-OECD14%
South44%
High-incomeincome OECD42%
Source: Migration and Remittances Factbook 2011
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Migrants' share of
20%
gsending country
population
10%
15%
5%
121
41
61
0%
81
101
121 6181
101121Sending country
ranked by GDP per capita
141
121
41capita
Receiving country ranked by
GDP per capitaData source: Ratha and Shaw (2007)
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B Development impact of international migrationB. Development impact of international migration
1 Mi ti b fit ll ti th i t th1. Migration benefits all parties – the migrants, the destination country, and the origin country.
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Migration boosts welfare for most householdsMigration boosts welfare for most households
Global income gains of $356 billion (0 6%)
150180
Global income gains of $356 billion (0.6%)
Change in real income in 2025, $ billion
139 143 16290120150
139 143
03060
-88
90-60-30
0
-90Natives, high-
income countriesOld migrants,
high-inc.countries
Residents,developingcountries
New migrants
countries countries.
Source: Global Economic Prospects 2006
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Migration benefits all partiesMigration benefits all parties
Global income gains of $356 billion from a 3% (14 million) g $ % ( )increase in labor force of high-income countries (GEP 2006)
Global income gains of $675 billion (Anderson and Winters 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)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 yearoptimal visa charge is about $260 billion a year.
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B Development impact of international migrationB. Development impact of international migration
1 Mi ti b fit ll ti th i t th1. Migration benefits all parties – the migrants, the destination country, and the origin country.
2. Benefits to countries of origin are mostly through remittances.remittances.
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Remittance flows to developing countries remained
600 $ billions
resilient during the crisis
500
300
400 FDI
RecordedRemittances
200
Remittances
100Private debt & port. equity
ODA
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
e
port. equity
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Remittances will be resilient w r to downturns in host countriesdownturns in host countries
Remittances are sent by the stock (cumulated flows) of 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 savingsback accumulated savings
Sectoral shifts – and fiscal stimulus packages – may help some migrantssome migrants
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However Anti-immigrant sentiment isHowever, Anti-immigrant sentiment is rising in major migrant-destination
t icountries
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B. Development impact of international migrationp p g
1. Migration benefits all parties – the migrants, the destination country, and the origin country.
2 Benefits to countries of origin are mostly through2. Benefits to countries of origin are mostly through remittances.
3. Emigration of skilled people may be a problem in small countries
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Brain drain is a small country problem if at allBrain drain is a small country problem, if at all
Share of developing country population (%)
75%80%
p g y p p ( )
60%
19%
40%
19%
3% 3%%
20%
0%< 10% 10%-20% 20%-30% > 30%
High-skilled emigration rateg g
Source: Docquier and Marfouk (2004)
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B. Development impact of international migrationp p g
1. Migration benefits all parties – the migrants, the destination country, and the origin country.
2 Benefits to countries of origin are mostly through2. 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.
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Diaspora bonds can be used to tap the wealth
15 Percent
of the diaspora, often with “patriotic” discount15 Percent
11
13 US Treasury 10-year
11
13
9
11
9
11
5
7
5
7
1
3Israel DCI bond1
3
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
I l d I di h i d $35 billi
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
Israel and India have raised over $35 billion via diaspora bonds
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OutlineOutline
A S t li d f tA. Some stylized facts
B D l t i t f i t ti lB. Development impact of international migration
C. Policy implications
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C Policy implicationsC. Policy implications
1 Th i t ti l itt d1. The international remittances agenda
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1 Monitoring1. Monitoring, analysis, projection
International 3. Financial access for
4. Capital market access
RemittancesAgenda
access for households
market access for institutions
g
2. Retail payment systemssystems
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International remittances Agenda1. Improve monitoring, analysis, projection (MAPping)
2 I t il t t2. Improve retail payment systems:
Reduce remittance costs
Improve competition in remittance industry
Share networks - avoid exclusivity contractsShare networks avoid exclusivity contracts
Avoid overregulation of remittance industry
I t d t h l Introduce new technology
3. Leverage remittances for financial access for households
4. Leverage remittances for improving access to capital markets for institutions/countries
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International remittances Agenda1. US Wall Street Reform Bill
2 US BRIDGE i iti ti2. US BRIDGE initiative
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C. Policy implications
1. The international remittances agenda
2. Know your migrants/diaspora
3 Help potential migrants acquire globally marketable3. Help potential migrants acquire globally marketable skills
4 P i t b d t d d ff t4. 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 revisited7. Border control policies should be revisited
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Do border controls stop migration?
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Increase in border control seems to have little (perverse?) effect on illegal migrant stock
ThousandsShare of US population
(perverse?) effect on illegal migrant stock
204.0%
p p
173 6%
3.8%Illegal migrant stock
143 4%
3.6%
113.2%
3.4%
Border patrol agents,
83.0%
Southern border (right scale)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Passel and Cohn (2010), Department of Homeland Security
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Employment opportunities in the US appear to be a dominant pull factor for immigration
PercentShare of population
be a dominant pull factor for immigration
10
4 0%
4.2%p p
Illegal migrant stock
83.8%
4.0%
3.6%
6
3 2%
3.4% US unemployment rate (right scale)
43.0%
3.2%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Passel and Cohn (2010), Department of Homeland Security
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Tighter border controls increase coyote fees
ThousandsUS$
Tighter border controls increase coyote fees
20
24
2,800
3,200$
162,000
2,400
12
1 200
1,600
C t f
4
8800
1,200 Coyote fees
Border patrol agents, Southern border
0
4
0
400
1984 1989 1994 1999 2004 2009
(right scale)
1984 1989 1994 1999 2004 2009
Source: DHS, MMP
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Apprehensions in the US-Mexico border have not declined significantly even though US
242 0Millions Thousands
not declined significantly even though US border controls have increased
20
24
1 6
2.0
Apprehensions
161.2
1.6
12
0.8
1.2
4
8
0.4B d t l t
0
4
0.0
Border patrol agents(right scale)
1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
Source: DHS, CBP
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Migration rises and then falls as border controls increase (the Migration Curve)
Apprehensions along US-Mexico border (millions)
increase (the Migration Curve)
1.9Apprehensions along US Mexico border (millions)
1.5
1.1
0.7
0.30 5 10 15 200 5 10 15 20
Border patrol agents (thousands)
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Mi t t k t dMigrant stock today
= Existing migrant stock Existing migrant stock
– Return migration
+ New migration
OrOrMt = Mt-1 - Rt + ∆Mt
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Return migration and border controlsReturn migration and border controls
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Duration of Mexican migration has increased –return rate has declined – as controls have
Th d
return rate has declined as controls have been tightened at the US-Mexico border
1116Thousands months
1012
Border Patrol agents
8
98
7
8
4Migration duration
60
4 6 8 0 2 4 6 8 0 2 4 6
Migration duration (right scale)
198
198
198
199
199
199
199
199
200
200
200
200
Source: DHS, MMP
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New migration and border controls
Willingness to migrate is a function of developmental
g
gaps
Ability to migrate is a function of border controls Ability to migrate is a function of border controls
Border controls increase the segmentation of labor gmarkets and increase developmental gaps
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Border controls also affect income differencesBorder controls also affect income differences
CIncome difference
Maximum0Border controlBorder control
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Break-up of the Soviet Union saw a divergence in income levels of FSU countries
Coefficient of variation of GDP per capita (2000 US$)
divergence in income levels of FSU countries
0.9
0.8
0.7
0.61987 1989 1991 1993 1995 1997 1999 2001 2003 2005 20071987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Source: DECPG
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Creation of borders in South Asia led to divergence of income levels
GDP per worker (2000 US$), thousands
divergence of income levels
8
Pakistan6
Pakistan
4India
2Bangladesh
0Creation of Bangladesh
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
Source: Penn World Tables 6.2. India and Pakistan were partitioned in 1947.
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Accession of Portugal to EU in 1986 allowed it t t h ith F ’ i l lto catch up with France’s income level
Portugal GDP as % of France GDP
66%
70%
60%60%
56%
50%
40%1981 85 1986 1990 1991 19951981-85 1986-1990 1991-1995
Source: Penn World Table 6.2
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Income gaps narrowed between East and West
80East Germany as % of West German value
g pGermany after unification
80
60Nominal wages
Real GDP per worker
401970 1975 1980 1985 1990 1995 2000 20051970 1975 1980 1985 1990 1995 2000 2005
Source: Penn World Tables 5.6 and Burda (2008)
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New EU accession countries also saw their income levels converge
Coefficient of variation, GDP per capita (constant 2000 $)
income levels converge
0.6
0.5
0.41996 1998 2000 2002 2004 20061996 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
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Migration CurveMigration Curve
Migrationg
Maximum0 Border control
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Migration CurveMigration Curve
MigrationC
g
Maximum0 Border control
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Migration rises and then falls as border controls increase
Apprehensions along US-Mexico border (millions)
increase
1.9Apprehensions along US Mexico border (millions)
1.5
1.1
0.7
0.30 5 10 15 200 5 10 15 20
Border patrol agents (thousands)
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Migration CurveMigration CurveOn the left of the curve, shifting from border controls to development aid could be very effective
MigrationC
controls to development aid could be very effective
On which side of this curve are Mexico-US and gBangladesh-India corridors?
What is a border? Does it have to be the same for international trade, foreign investment, economic , g ,nationality, political sovereignty, cultural identity?
Maximum0 Border control
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C. Policy implications
1. The international remittances agenda
2. Know your migrants/diaspora
3 Help potential migrants acquire globally marketable3. Help potential migrants acquire globally marketable skills
4 Ethi l it t li i b i ff ti d4. Ethical recruitment policies may be ineffective, and unethical –
5. Improve transparency in recruitment of migrants
6 Border control policies should be revisited6. Border control policies should be revisited
7. Migration is not a substitute for employment creation at homecreation at home