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© 2021 International Monetary Fund
WP/21/88
IMF Working Paper
Institute for Capacity Development
The Impact of International Migration on Inclusive Growth: A Review1
Prepared by Zsoka Koczan, Giovanni Peri, Magali Pinat, and Dmitriy Rozhkov
Authorized for distribution by Valerie Cerra
March 2021
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Abstract
International migration is an important channel of material improvement for individuals and their offspring. The movement of people across country borders, especially from less developed to richer countries, has a substantial impact in several dimensions. First, it affects the migrants themselves by allowing them to achieve higher income as a result of their higher productivity in the destination country. It also increases the expected income for their offspring. Second, it affects the destination country through the impact on labor markets, productivity, innovation, demographic structure, fiscal balance, and criminality. Third, it can have a significant impact on the countries of origin. It may lead to loss of human capital, but it also creates a flow of remittances and increases international connections in the form of trade, FDI, and technological transfers. This paper surveys our understanding of how migration affects growth and inequality through the impact on migrants themselves as well as on the destination and origin countries.
JEL Classification Numbers: F22, O15, F63, J61
Keywords: International Migration, Inequality, Economic growth
Authors’ E-Mail Addresses: KoczanZ@ebrd.com; GPeri@ucdavis.edu; MPinat@imf.org; DRozhkov@imf.org
Contents
Abstract
I. Introduction
II. Consequences of migration for migrants
III. Impact of migration on destination countries
A. Impact on the Labor Market
The substitution/complementarity effect
The productivity and demand effect
B. Impact on Public Finance
Short-term fiscal impact
Long-term fiscal impact
C. Impact on the incidence of crime
D. Adopting reasonable immigration policies and fostering integration
Reaping the benefits of immigration
Minimizing the impact on native workers
Paying special attention to refugees
IV. Impact of migration on origin countries
A. Impact on the labor market in origin countries
B. The role of remittances
C. Impact through trade and investment
D. Costs of emigration associated with the brain drain
E. Country Case: Kyrgyz Republic
F. Country Case: Mexico
G. Policies that can help the origin countries to maximize the benefits and minimize the costs of emigration
V. Conclusion
References
Figures
Figure 1. Migration Flows between 2010 and 2020
Figure 2. Relative Poverty Rates in the OECD Countries, 2015
Figure 3. Top 20 destination economies by number of international migrants and refugees and by share of the population, 2018
Figure 4. Share of emigrants moving intra-regionally, by world region, 2000 and 2017
Figure 5. Remittances and Income Inequality
Figure 6. Crisis Effects
Diagrams
Diagram 1. Wage effect of migration
Diagram 2. The net fiscal impact of immigrants