Economic Implications of Remittances and Migration

The report has two goals. The first is to explore the gains and losses from international migration from the perspective of developing countries, with special attention to the money that migrants send home. The second goal is to consider policy initiatives that could improve the developmental impact of migration, again with particular attention to remittances. The report focuses on policies to improve the developmental impact of remittances. It documents the high level of transactions costs facing migrants sending small remittances to their families, and it outlines the regulatory issues and market imperfections that keep costs high. Fewer barriers to remittance flows and greater competition among remittance service providers could substantially reduce costs and boost remittance flows to developing countries. The report shows how sound domestic policies and an investment- friendly climate can significantly increase the contribution of remittances and migration to improved living conditions back home. Our focus (for economic purposes) is on international migration from developing countries to high-income countries. Despite their importance, internal migration, migration among developing countries, and the political and social impacts of migration are beyond the scope of this work.

Chapter 1 reviews recent developments in and prospects for the global economy and their implications for developing countries.

Chapter 2 uses a model-based simulation to evaluate the potential global welfare gains and distributional impact from a hypothetical increase of 3 percent in high-income countries’ labor force caused by migration from developing countries.

Chapter 3 surveys the economic literature on the benefits and costs of migration for migrants and their countries of origin, focusing on economically motivated migration from developing to high-income countries. The chapter then turns to remittances, the main theme of the report.

Chapter 4 investigates the size of remittance flows to developing countries, the use of formal and informal channels, the role of government policies in improving the development impact of remittances, and, for certain countries, their macroeconomic impact.

Chapter 5 addresses the impact of remittances at the household level, in particular their role in reducing poverty, smoothing consumption, providing working capital for small-scale enterprises, and increasing household expenditures in areas considered to have a high social value.

Chapter 6 investigates policy measures that could lower the cost of remittance transactions for poor households and measures to strengthen the financial infrastructure supporting remittances.

Title
Economic Implications of Remittances and Migration
Published
World Bank, 2006
Citation
"Economic Implications of Remittances and Migration," Global Economic Prospect, 2006.