What about the flow of well-educated people from less developed countries to richer countries? The author puts forth the view that—sometimes at least—it alleviates social and economic stresses in some of the “losing” countries.
This Selected Issues paper analyzes the surprising strength of remittances in Bangladesh and other countries in South Asia and the Philippines in 2009. The empirical analysis suggests that the continued strong growth of remittances in these countries is related to the resilience of non-oil GDP growth in the GCC countries and the surge in the GCC countries’ hiring of migrant workers from South Asia during 2006–08. The remittances-to-GDP ratio in South Asia and the Philippines are likely to remain robust in the near term.
Mr. Samir Jahjah, Mr. Ralph Chami, and Connel Fullenkamp
The role of remittances in development and economic growth is not well understood. This is partly because the literatures on the causes and effects of remittances remain separate. We develop a framework that links the motivation for remittances with their effect on economic activity. Because remittances take place under asymmetric information and economic uncertainty, there exists a significant moral hazard problem. The implication is that remittances have a negative effect on economic growth. We test this prediction using panel methods on a large sample of countries. The results indicate that remittances do have a negative effect on economic growth, which indicates that the moral hazard problem in remittances is severe.
The flow of workers' remittances to Pakistan has more than quadrupled in the last eight years and it shows no sign of slowing down, despite the economic downturn in the Gulf Cooperation Council (GCC) and other important host countries for Pakistani workers. This paper analyses the forces that have driven remittance flows to Pakistan in recent years. The main conclusions are: (i) the growth in the inflow of workers' remittances to Pakistan is in large part due to an increase in worker migration; (ii) higher skill levels of migrating workers have helped to boost remittances; (iii) other imporant determinants of remittances to Pakistan are agriculture output and the relative yield on investments in the host and home countries.