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February 15, 2022

Who benefits when migrants return to developing countries?

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Whether return migration is beneficial to the home country depends on many factors. In theory, return migration can be beneficial if migrants are able to accumulate overseas savings abroad to use on their return home for consumption and investment, and/or if migrants invest in learning and accumulating new skills that would enable them to become more productive and earn higher wages when they return. In addition, whether the home country can utilize those skills and savings of returnees is critical in determining whether the benefits of return migration materialize. 

Return migration is more frequent than recognized. Many migration experiences are not permanent. Between 20% and 50% of migrants leave the host country within five years of arrival, either to return home or to move to a third country, and the majority of those return rather than move onward. Yet there is no systematic data collection or statistics on return migration, making it difficult to quantify its overall impact. Also, it might be surprising that many migrants only plan to stay overseas for a fixed period of time, in particular if migration is from low- to high-income countries. However, many people prefer to live and work where they are born and where their families and friends reside. Hence, planned return is more common than unplanned or involuntary return that results from an unsuccessful migration experience.

In many low-income countries, lack of decent jobs and the inability to borrow to start a business drive some individuals to emigrate temporarily so that they can accumulate capital to set up businesses when they return. This provides an important channel through which returnees contribute to investment, entrepreneurship, and job creation. Also, young people might decide to move abroad to learn a skill or to get a higher degree. Thus, returnees can be a source of economic growth for the home country if their overseas experiences help them to acquire new knowledge and skills that make them more productive, for example student migrants. Moreover, return migrants can get exposed to different cultures, norms, and ideas which they then transfer to the home country, and which might be of benefit when this leads to more accountability or better institutions, for examples. Hence, return migration can also aid in knowledge transfer.

At the same time, migrants’ experiences overseas shape how successfully they can accumulate savings and develop. The characteristics of migrants, and the nature of migrants’ work overseas, are likely to affect the success or failure of the migration experience.

Whether home countries benefit from returnees depends on having the right policies that encourage investment and labor market reintegration of returnees. For example, returnees may be unable to reintegrate into the home labor market, or be discouraged from investing and using their savings in setting up businesses in the home country due to red tape and bureaucracy or a lack of property rights. Who benefits from return migration depends on the migrant, the host country, and more importantly the home country. 

© Jackline Wahba

Read Jackline Wahba's full article, "Who benefits from return migration to developing countries?"

Jackline Wahba is professor of economics at the University of Southampton and a Research Fellow of IZA.

Please note: We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.