MIGRATION REMITTANCES AND DEVELOPMENT:
A Review of Global Evidence
John Page and Sonia Plaza
The World Bank
August 18, 2005
Paper presented at the Plenary Session of the African Economic Research Consortium, May 29, 2005. The views and interpretations are those of the authors and do not necessarily reflect those of the World Bank, its Executive Directors or the countries they represent.
Worldwide migration pressures are expected to rise with growing demographic and economic differences between developed and developing countries. About three percent of the world’s population – more than the combined populations of Nigeria and South Africa – has moved from their countries of origin to live and work elsewhere. The increase in migration since the 1990s, and the growing importance of remittances as a source of development financing is pressuring policy makers to consider how best to make use of these human and financial flows.
A sizeable amount of research has been conducted on the topic of migration over the last few years. Early studies on immigration policy assumed that migrants leave their countries, settle in a new country, start integrating in their new society, and abandon their ties with their country of origin. Today, however, globalization makes it possible for immigrants to remain connected with their native countries while residing abroad, thus diminishing their loss of identity and separation from their countries of origin.
This paper reviews evidence on how migrants contribute to the economic development of their countries of origin. In addition to describing the state of knowledge regarding flows of people and migrant remittances worldwide, it focuses on the current literature dealing with the development impact of transfers of money, knowledge, and skills by migrants back to their home countries. The paper also examines the complex question of the impact of highly skilled migration on labor sending countries.
There is a continuing debate over what role migration should play in the mix of policies available in order to promote economic development. Although mechanisms for liberalizing goods, services and capital markets are in place, the international mobility of labor still faces stringent restrictions. The paper, therefore, reviews proposed mechanisms to strengthen the governance of international migration, including policy options to make migration management bilateral, regional, or global. It also considers the relationship between international trade and development policies and migration policies.
The paper is organized in six sections besides this introduction. Section 2 discusses global and regional trends in migration. Section 3 presents the latest trends and issues in international remittances. Section 4 discusses the impact of migration on growth and poverty reduction in labor sending countries. Section 5 highlights some elements of the current policy debate on migration and remittances, and Section 6 concludes.
2. Migration: Scale, Structure, and Regional Trends
Voluntary international migration is not a new phenomenon. The 19th and early 20th century saw mass movements of people from Europe to North America and Australasia. Today, however, many migrants flow from developing to developed countries for a variety of economic, political and personal reasons. These late 20th and 21st century migration flows from the South to the North have been fueled by:
Reduced transport and communications costs, making it easier for people to move back and forth, and making people more aware of opportunities in other countries.
Economic and political instability in a number of countries located in Central and Eastern Europe and in Africa, and,
Strong economic conditions in developed countries and a widening income gap between developed and developing countries.
Patterns of Global Migration
Despite the importance of international migration, we have surprisingly little systematic evidence about its scale, structure and regional distribution. The UN World Economic Survey, 2004 reviews global trends in the stock of international migrants by major region for the period 1960-2000. These estimates are based on census data for 210 countries. The data for 156 of them relate to the number of foreign-born persons. For a further 54, the data available refer to the number of foreigners.
The number of international migrants in the world rose from 76 million in 1960 to 82 million in 1970, and then more than doubled to 174.9 million in 2000. (Table 2.1) According to the OECD, however, migration may have stabilized – at least temporarily -- in 2004, due to security concerns after September 11 and the SARS scare in Asia. In all likelihood, the UN data seriously under-estimate the actual number of international migrants produced by any given labor-exporting country, because they do not include the large number of illegal migrants working in the United States and OECD Europe.
Where do migrants go?
International migration to industrial countries increased continuously between 1970 and 2000, and the share of migrants in industrial countries’ populations almost doubled over the thirty year period. (Table 2.2). By contrast, migration to developing countries declined from 1990 to 2000, and with rapid population growth, the share of migrants in developing countries’ population (excluding the former Soviet Union) fell (Figure 2.1).1
Geographic proximity continues to be a significant determinant of migration patterns, as evidenced by the large flows between Mexico and the United States, North Africa and Southern Europe, Eastern European countries and Western Europe and among Middle Eastern countries. Cultural, historical and colonial ties, and the networks built up over many years, also prompt large movements, for example from a number of Sub-Saharan African countries to the former colonial countries, France, the UK, Belgium and Portugal. Cape Verde and Angola together account for 20 percent of the foreign population in Portugal. (OECD 2005). But there also have been important changes in the geographical composition of migrant flows. More Asians are today seeking work in other Asian countries, and more Latin Americans are turning to Europe for work opportunities (Wickramasekera 2002; OECD 2005; IOM 2005).