Development implications of migration and remittances

1. Economic Implications of Remittances and MigrationDilip RathaWorld BankGlobal Issues Seminar Series October 11, 2006

2. Development implications of migration and remittances • Migration and remittances continue to increase • South-South migration may be as large as South-North migration • Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances • There is considerable scope for reducing remittance costs faced by poor migrants

3. Development implications of migration and remittances • Migration and remittances continue to increase • South-South migration may be as large as South-North migration • Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances • There is considerable scope for reducing remittance costs faced by poor migrants

4. International migration has increased Stock of migrants as share of destination countries’ population (%) Source: UN

5. Remittances are large, have continued to increase Private debt and portfolio equity FDI Recorded remittances ODA

6. Top recipients of remittances - 2004 $ billion % of GDP

7. Top sources of remittances, 2004 $ billion % of GDP

8. Development implications of migration and remittances • Migration and remittances continue to increase • South-South migration may be as large as South-North migration • Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances • There is considerable scope for reducing remittance costs faced by poor migrants

9. Migration to the South has been significant Source: United Nations

10. Global migrant stocks (millions) Source: World Bank staff calculations based on migration data from University of Sussex, United Nations, and World Bank

11. Destinations of migrants from the South

12. Top migration corridors include several South-South corridors (excluding the FSU) Source: University of Sussex and World Bank

13. Former Soviet Union corridors are among the largest South-South corridors

14. South-South remittances were likely between $19 to $53 billion in 2005 Source: World Bank Staff estimates

15. Development implications of migration and remittances • Migration and remittances continue to increase • South-South migration may be as large as South-North migration • Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances • There is considerable scope for reducing remittance costs faced by poor migrants

16. Remittances reduce poverty • Evidence from a few household surveys shows that remittances reduce poverty • Cross-country evidence shows that a 10% increase in per capita remittances leads to a 3.5% decline in the share of poor people • Remittances also finance education and health expenditures, and ease credit constraints on small businesses

17. Remittances tend to rise following crisis, natural disaster, or conflictRemittances as % of private consumption

18. Remittances improve countries’ access to capital Present value of external debt as % of exports of goods, services, and remittances

19. Downside • Large remittance flows may lead to currency appreciation and adverse effects on exports • Remittances may create dependency • Remittance channels may be misused for money laundering and financing of terror

20. Development implications of migration and remittances • Migration and remittances continue to increase • South-South migration may be as large as South-North migration • Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances • There is considerable scope for reducing remittance costs faced by poor migrants

21. Remittance fees are high, and regressive Fee and foreign exchange commission as % of principal Weighted average of fees of four largest money transfer operators in the U.S.-Mexico corridor

22. South-South remittance costs tend to be higher than North-South costs

23. Policy priorities • Governments can provide information and regulate intermediaries to reduce risks, costs of migration • High remittance costs faced by poor migrants can be reduced by increasing access to banking and strengthening competition in the remittance industry • Governments should not tax remittances or direct the allocation of expenditures financed by remittances

24. Policy priorities • Governments can provide information and regulate intermediaries to reduce risks, costs of migration • High remittance costs faced by poor migrants can be reduced by increasing access to banking and strengthening competition in the remittance industry • Governments should not tax remittances or direct the allocation of expenditures financed by remittances

25. Policy priorities • Governments can provide information and regulate intermediaries to reduce risks, costs of migration • High remittance costs faced by poor migrants can be reduced by increasing access to banking and strengthening competition in the remittance industry • Governments should not tax remittances or direct the allocation of expenditures financed by remittances

26. Future work • Improving bilateral migration data • Understanding impacts (on incomes, inequality, health, gender, and migrant rights) • Better management of migration • Reducing remittance costs