Despite returnees being a potential resource,
not all developing countries benefit from their return
Return migration can have multiple benefits. It
allows migrants who have accumulated savings abroad to ease credit
constraints at home and set up a business. Also, emigrants from developing
countries who have invested in their human capital may earn higher wages
when they return. However, whether the home country benefits from return
migrants depends on the migrant’s success in accumulating savings and human
capital and on the home country’s ability to make use of returnees’ skills
and investment. To benefit from returnees, home countries need policies that
encourage returnees’ investment and labor market reintegration.
Immigrants’ retirement decisions can greatly
affect health care and social protection costs
As migration rates increase across the world,
the choice of whether to retire in the host or home country is becoming a
key decision for up to 15% of the world’s population, and this proportion is
growing rapidly. Large waves of immigrants who re-settled in the second half
of the 20th century are now beginning to retire. Although immigrants’
location choice at retirement is an area that has barely been studied, this
decision has crucial implications for health care and social protection
expenditures, both in host and origin countries.
Proactive policies result in a better labor
Do migration policies affect whether immigrants
contribute more to public finances than they receive as transfer payments?
Yes. But simply accumulating the annual fiscal transfers to and fiscal
contributions by migrants is not sufficient to identify the policy impact
and the potential need for reform. What is also required is measuring the
present value of taxes contributed and transfers received by individuals
over their lifespans. Results underscore the need for, and the economic
benefits of, active migration and integration strategies.
Welfare benefits are not a key determinant of
Contrary to the welfare magnet hypothesis,
empirical evidence suggests that immigration decisions are not made on the
basis of the relative generosity of the receiving nation’s social benefits.
Even when immigrants are found to use welfare more intensively than natives,
the gap is mostly attributable to differences in social and demographic
characteristics between immigrants and non-immigrants rather than to
immigration status per se. Moreover, evidence in some countries suggests
that immigrants exhibit less welfare dependency than natives, despite facing
a higher risk of poverty.
A common language facilitates communication and
economic efficiency, but linguistic diversity has economic and cultural
In today’s globalized world, people are
increasingly mobile and often need to communicate across different
languages. Learning a new language is an investment in human capital.
Migrants must learn the language of their destination country, but even
non-migrants must often learn other languages if their work involves
communicating with foreigners. Economic studies have shown that fluency in a
dominant language is important to economic success and increases economic
efficiency. However, maintaining linguistic diversity also has value since
language is also an expression of people’s culture.
Data on rapid, unexpected refugee flows can credibly
identify the impact of migration on native workers’ labor market outcomes
Estimating the causal effect of immigration on the labor
market outcomes of native workers has been a major concern in the literature. Because
immigrants decide whether and where to migrate, immigrant populations generally consist
of individuals with characteristics that differ from those of a randomly selected
sample. One solution is to focus on events such as civil wars and natural catastrophes
that generate rapid and unexpected flows of refugees into a country unrelated to their
personal characteristics, location, and employment preferences. These “natural
experiments” yield estimates that find small negative effects on native workers’
employment but not on wages.
Immigrants are good for trade
International trade and migration are two
important dimensions of globalization. Although governments have been very
willing to open their borders to trade, they have not been so liberal in
their immigration policies. It has been suggested, however, that a causal
positive link might exist between immigration and trade. Could governments
further increase international trade by also opening their doors to
immigrants? If they could, does it matter what type of immigrants are
encouraged? And is there a saturation level of immigrants after which this
positive impact disappears?
Remittances have the potential to lift up
Remittances have risen spectacularly in recent
decades, capturing the attention of researchers and policymakers and
spurring debate on their pros and cons. Remittances can improve the
well-being of family members left behind and boost the economies of
receiving countries. They can also create a culture of dependency in the
receiving country, lowering labor force participation, promoting conspicuous
consumption, and slowing economic growth. A better understanding of their
impacts is needed in order to formulate specific policy measures that will
enable developing economies to get the greatest benefit from these monetary
Migrants can have positive political effects on their home
The number of immigrants from developing countries living
in richer, more developed countries has increased substantially during the last decades.
At the same time, the quality of institutions in developing countries has also improved.
The data thus suggest a close positive correlation between average emigration rates and
institutional quality. Recent empirical literature investigates whether international
migration can be an important factor for institutional development. Overall, the
findings indicate that emigration to institutionally developed countries induces a
positive effect on home-country institutions.
The brain drain produces many more losers than
winners in developing countries
The proportion of foreign-born people in rich
countries has tripled since 1960, and the emigration of high-skilled people
from poor countries has accelerated. Many countries intensify their efforts
to attract and retain foreign students, which increases the risk of brain
drain in the sending countries. In poor countries, this transfer can change
the skill structure of the labor force, cause labor shortages, and affect
fiscal policy, but it can also generate remittances and other benefits from
expatriates and returnees. Overall, it can be a boon or a curse for
developing countries, depending on the country’s characteristics and policy