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e effect of migration on the countries of origin Tobias Stöhr | November 6, 2014 KIEL INSTITUTE FOR THE WORLD ECONOMY IW – Institut ür Weltwirtscha Research Area Poverty Reduction, Equity, And Development www.ifw-kiel.de hp://www.ifw-kiel.de/forschung/armutsminderung-und-entwicklung Overview KIEL INSTITUTE FOR THE WORLD ECONOMY Why emigration and its effects maer for everyone Detailed: Two main channels affecting countries of origin Absence of migrants Remiances Note: Focus on labor migration. Many lessons apply also to e.g. refugees. Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 2/20 Why should we care about immigration? KIEL INSTITUTE FOR THE WORLD ECONOMY In the host country: immigration affects labor supply considerable spillovers on non-migrants (wages, taxes, public goods) great potential to cause fears in the population Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 3/20 Why should we care about emigration? KIEL INSTITUTE FOR THE WORLD ECONOMY Figure: Estimated ’place premium’ of moving to US (Clemens et al, 2011.) Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 4/20 Why should immigration not be the only focus? KIEL INSTITUTE FOR THE WORLD ECONOMY Efficiency of world production Productivity of identical workers differs hugely Removing all barriers to labor mobility is estimated to increase world GDP by 67-122 percent (several estimates) For comparison: removing all barriers to merchandise trade: 0.3-4.1 percent Source: Clemens, 2011, JEconPersp Why then, wouldn’t much more people migrate? Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 5/20 Self-selection into migration KIEL INSTITUTE FOR THE WORLD ECONOMY All effects of migration ultimately depend on self-selection. Migration is a high stakes investment decision Two decisions: selection and sorting Income differential Individual migration cost monetary (e.g. flights, financing) psychological (e.g. leaving loved ones, discrimination) institutional (e.g. legal barriers) If legal migration too costly, illegal migration can be aractive substitute. Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 6/20 Channel 1 e Absence of Migrants Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 7/20 Labor force KIEL INSTITUTE FOR THE WORLD ECONOMY Workers’ emigration causes output decrease in the short run. If migrants’ MPL low effect will be marginal. Hence, who leaves maers (→ selection) Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 8/20 Loss of human capital KIEL INSTITUTE FOR THE WORLD ECONOMY Brain drain or brain gain (Docquier & Rapoport, 2012) Short-term loss of skilled workers Can the incentive of migration raise the aractiveness of education sufficiently? Many countries have seen brain gain in medium run (e.g. Batista et al., 2012) Funding problem for esp. tertiary education Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 9/20 Social security systems KIEL INSTITUTE FOR THE WORLD ECONOMY Oen weak social security system in country of origin. Difficult to establish if net contributers leave. Brain drain can pose a problem Example: health workers from Sub-Saharan African countries Vulnerable: those depending informal social security networks Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 10/20 Social effects KIEL INSTITUTE FOR THE WORLD ECONOMY Loss of caregivers for children or elderly can be problematic (Antman 2012) ese incentives hold back marginal migrants (Stöhr, 2014) Negative effects of absence of migrants, can be overcompensated by remiances (e.g. Böhme et al, 2014) Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 11/20 Channel 2 Remiances Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 12/20 Remittance to GDP ratios for top-15 countries worldwide, 2013 Country Nepal Moldova Haiti Armenia Honduras El Salvador Kosovo Jamaica Georgia Jordan Guyana Bosnia and Herzegovina Guatemala Philippines Nicaragua KIEL INSTITUTE FOR THE WORLD ECONOMY Percent 28.8 24.9 21.1 21.0 16.9 16.4 16.1 15.0 12.1 10.8 10.7 10.6 10.0 9.8 9.6 Source: World Development Indicators (2014) Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 13/20 e effects of remittances: Growth KIEL INSTITUTE FOR THE WORLD ECONOMY Macroeconomic growth had to find empirically (Clemens & McKenzie, 2014) Dutch disease risk (e.g. Acosta et al. 2009); oen difficult to sterilize some investment stimulation, oen by easing capital constraints of self-employed (Woodruff & Zenteno, 2007; Yang, 2008) labor supply decrease in theory, empirically mixed (e.g. self-employed put in more hours: Yang, 2008) Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 14/20 e effects of remittances: Poverty reduction KIEL INSTITUTE FOR THE WORLD ECONOMY Some income effects consumption of essentials investment in housing and durables reduction in child labor investment in education Note: For the poor spending remiances on consumption is human capital investment (health → productivity, health → education). Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 15/20 e effects of remittances: State coffers KIEL INSTITUTE FOR THE WORLD ECONOMY Social security contributions, income taxes (lile known, should mirror some effects in host countries) Consumption taxes Tariffs on imports Less need for poverty reduction measures Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 16/20 Value ange KIEL INSTITUTE FOR THE WORLD ECONOMY Migration can affect cultural diffusion Political remiances can induce political change: corruption (Batista & Vincente 2011) democracy (Spilimbergo 2009) political preferences (Mahmoud et al. 2013) voter turnout (Pérez-Armendáriz & Crow 2010; Chauvet & Mercier 2013) Social remiances can affect factors such as emancipation of women, but it’s complicated. (e.g. Parrado & Flippen 2005) Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 17/20 Summary KIEL INSTITUTE FOR THE WORLD ECONOMY Various dimensions affected by the migration decision. Both positive and negative short term effects mostly positive long-run effects. Very stylized welfare effects: Winners: Migrants Mixed: Non-migrants in countries of origin and host countries Losers: No clear ones Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 18/20 Who is affected the most? KIEL INSTITUTE FOR THE WORLD ECONOMY e consequences of migration on the countries of origin are greater the larger the wage differentials between origin and destination is. are more positive if migration is legal. Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 19/20 ank you for your aention. Tobias Stöhr Kiel Institute for the World Economy tobias.stoehr [at] ifw-kiel.de Tobias Stöhr e effect of migration on the countries of origin November 6, 2014 20/20
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