Abstract
This Selected Issues paper analyzes macroeconomic fluctuations in the Eastern Caribbean Currency Union (ECCU). The paper describes data, along with the estimation technique used to ensure stationarity of the data. The empirical regularities of macroeconomic fluctuations in the ECCU are described, examining the relationship between a set of macroeconomic time series and domestic output, for each of the six IMF members of the ECCU. The paper also explores the determinants of macroeconomic volatility in the ECCU.
VI. Emigration and Brain-Drain: Evidence from the Caribbean1
A. Introduction
1. While a vast theoretical and empirical literature considers the impact of immigration on destination countries, little work has been done on emigration and its impact on source countries.2 This is surprising because the shares of the labor force leaving many individual source countries are considerably higher than the proportionate changes in the labor force of many receiving countries due to immigration. In several source countries, the reduction in the labor force due to emigration to the United States is in the range of 7–27 percent. To cite a few examples, the labor forces in Mexico, El Salvador, and Jamaica have been reduced by more than 10 percent due to emigration to the United States between 1970–2000. Similar rates were observed in Turkey and Algeria, where the labor force has emigrated to Western Europe. In comparison, immigrants constitute about 12 percent of the U.S. labor force (Davis and Weinstein, 2002). Immigration is considered to be a very important issue for the United States, and has attracted a great deal of attention in the literature.
2. The Caribbean region has the highest emigration rates in the world. Docquier and Marfouq (2004) have documented the shares of the labor force in several source countries that have emigrants to the OECD. About 12 percent of the labor force in the Caribbean region has migrated to the OECD—much higher than Central America, which ranks second at 7 percent. In terms of the absolute number of migrants, India and China, for example, are much greater, but their labor force is so large that migrants constitute a very small proportion of their labor force.
3. The aggregate emigration rates, however, understate the loss of the educated population. The literature on immigration to the United States suggests that immigration has increased, by the greatest proportion, the supply of workers with 0–8 years of schooling (Borjas et al., 1997). However, there is a sharp contrast when migration is examined from the perspective of source countries. For most source countries and especially for the Caribbean, the percentage reduction in the labor force is much larger in the higher-schooling categories. A majority of Caribbean countries have lost more than 50 percent of the labor force in the tertiary education segment, and more than 30 percent in the secondary education segment (with 9–12 years of schooling). For example, the tertiary educated labor force (with more than 12 years of schooling) in Jamaica and Guyana has been reduced by 89 percent and 83 percent respectively, due to emigration to the OECD. Haiti has the lowest aggregate emigration rate (10 percent) in the region, but the tertiary educated labor force has been reduced by 82 percent due to emigration to the OECD. In fact, almost all the Caribbean nations are among the top 20 countries in the world with the highest tertiary-educated migration rates (Docquier and Marfouq, 2004).
4. The simple labor demand-supply framework suggests that changes in domestic labor supply and wages due to emigration lead to a net welfare reduction (termed an “emigration loss”) for the producers and workers who have stayed behind (Figure VI.1). The concept is analogous to the idea of immigration surplus that exists in the migration literature (Borjas, 1995). The concept was first given by MacDougall (1960) in the context of capital flows. The magnitude of migration rates from the Caribbean suggests that there can be potentially large impacts of migration on local labor markets and on the welfare of those who remain behind in Caribbean countries.
Labor Demand-Supply Model: Welfare Impact of Emigration
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Labor Demand-Supply Model: Welfare Impact of Emigration
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Labor Demand-Supply Model: Welfare Impact of Emigration
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
5. There are several other costs of high-skilled emigration. Highly-skilled workers in any country often confer externalities to other high- and low-skilled workers by affecting their productivity through transfer of know-how and also through better monitoring and motivation. If high-skilled workers confer a positive externality, then the loss due to their migration will be higher than the simple emigration loss. The augmented emigration loss—the emigration loss that takes into account the positive externality from the high-skilled labor force—is estimated in this chapter. Another important consideration in assessing the costs of migration is the subsidies that finance the education of migrants. Governments in countries such as Barbados, Jamaica and Trinidad and Tobago spend much more per capita on tertiary education than they do on primary and secondary education.
6. At the same time, emigration confers many benefits on source countries. One of the most important measurable “benefits” to the source countries are transfers from abroad or remittances. Most Caribbean countries rank among the top thirty countries in the world with the highest remittances as a percent of GDP. The Caribbean region is the world’s largest recipient of remittances, as a share of GDP. Remittances constituted about 13 percent of the region’s GDP in 2002.
7. The main result in the chapter is that the total losses due to skilled migration (which includes the “emigration loss”, externality effects and government expenditure on educating the migrants) outweigh the recorded remittances for almost all the Caribbean countries. The calculations in the chapter are, however, not sufficient to conclude one way or the other about the overall impact of emigration. Migration has many other costs and benefits, such as the promotion of trade and investment networks, the measurement of which is beyond the scope of this chapter.
8. There are broadly three strands of literature that are related to this chapter and only one of these has looked at the Caribbean region. The first strand of literature consists of papers on immigration that quantify the welfare effects of immigration into the United States (Borjas, 1995; Davis and Weinstein, 2002). This chapter uses techniques similar to Borjas’ (1995) study of immigration. In addition to the techniques used in the previous literature, this chapter also includes the cost of education subsidies to the source countries in calculating the losses. The second strand of literature consists of recent papers that quantify the impact of emigration on source countries. These papers look at the impact on large source countries such as Mexico and India (Chiquiar and Hanson, 2002; Desai et al., forthcoming; Mishra, 2004). One of the important regions that has not been included in these papers is the Caribbean. As argued above, the potential impacts of emigration are likely to be large for the Caribbean countries. The third set of papers focus on migration from the Caribbean. The Caribbean countries have historically experienced large-scale emigration. There are some papers that look at the history of Caribbean migration (Carlson, 1994; Duay, 1994), while others also document the flow of remittances and discuss the potential impact (Wood and McCoy, 1985; Samuel, 2004; and Connell and Conway, 2000).
9. This chapter is the first to quantify the welfare impact of skilled emigration on any source country, taking into account the external effects and the costs of education subsidies. This chapter differs from the existing literature on Caribbean migration by bringing all three strands in the literature together using very detailed datasets. This chapter uses a detailed dataset compiled by Docquier and Marfouq (2004) on emigration rates, which they construct using census data from a number of OECD countries. Since the United States is a major destination for Caribbean migrants, the emigration rate to the United States is also estimated separately in the chapter, using data from the U.S. Census. Also, none of the existing papers on Caribbean migration have looked at the composition of emigration rates by skill level.
10. The rest of the chapter is organized as follows. Section B presents the theoretical framework for the welfare calculations, Section C discusses the data and the evidence on emigration from the Caribbean, and Section D presents the results from the welfare calculations. Section E concludes and provides policy implications. The Appendix discusses the details of the welfare calculations and the measurement of emigration rates.
B. Theory
11. The quantitative estimates of the gains and losses resulting from emigration must rest on prior conceptualization of these gains and losses. There are several costs and benefits of migration that accrue to both the recipient as well as source countries.
Losses due to emigration: A simple labor-demand framework
12. The simple economic model of labor demand and supply suggests that emigration leads to a net reduction in the welfare of those who have stayed behind. The labor demand-supply model is an important starting point to quantify the welfare implications, and has been used in the literature in the context of immigration and capital flows (MacDougall, 1960; Borjas, 1995). The aim here is to quantify the welfare loss due to movement of labor, everything else remaining unchanged.3 Welfare is measured by GDP accruing to those who have stayed behind in the source country. Consider a single numeraire good whose production function is given as:
where K is the fixed factor assumed to be internationally immobile, L is the labor employed in production and Q is the gross domestic product. Figure VI.1 shows the simple model of labor demand and supply. The initial equilibrium wage is w0. A large emigration flow of a magnitude M of workers reduces the labor force from (N+M) to N. The wage rate as a result increases from w0 to 1 w1. The workers who have stayed behind gain an area equal to w0w1ab (rectangle region A), owners of the fixed factors in the economy lose an area equal to w0w1ac (rectangle region A+ triangle region B) and the country as a whole loses the triangle abc (region B). The triangle abc (region B) can be termed the “emigration loss”.
Measurement of external effects
13. Even if the triangle emigration losses are of second order, the overall emigration loss can be substantial if emigration leads to a decline in the productivity of those who have stayed behind. Qualified doctors, engineers, researchers are not only more productive themselves, but are also expected to make other workers in the economy more productive. External effects have been considered important in the immigration literature. Borjas (1995) calculates the “immigration surplus” in the presence of external effects. Borjas finds that the immigration surplus increases substantially in the presence of external effects. However, unlike Borjas (1995) which looks at overall immigration rate, this chapter focuses on external effects due to high-skilled emigration. The welfare impact of the emigration of skilled labor is analyzed, assuming that only skilled labor moves. If skilled labor is complementary to other factors, then the production function can be expressed as:
where q is the representative firm’s output, ls and lu are the skilled and unskilled labor employed by the representative firm, LS is the aggregate stock of skilled labor employed in the economy, and γ is the percentage change in marginal product of skilled and unskilled labor due to a one percent change in the aggregate stock of skilled labor. As skilled migrants leave the economy, the marginal product of both skilled and unskilled labor decreases. With this production function that accounts for external effects, emigration reduces the supply of employed by the representative firm, labor but also shifts the marginal product of labor curve inwards. The emigration loss is larger than that without incorporating external effects.
14. Figure VI.2 shows the emigration loss in the presence of external effects. Emigration of skilled labor reduces its supply from S to S’. The marginal product of skilled labor also shifts from MPLs to MPL’s. The “emigration loss” is given by area ABCD plus triangle DEF. The area ABCD has been added to the emigration loss from the external effects of labor employment. Emigration of skilled labor would also lead to a decline in productivity of unskilled labor (which is not shown in the figure).
Labor Demand-Supply Model: Welfare Impact of Emigration With External Effects
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Labor Demand-Supply Model: Welfare Impact of Emigration With External Effects
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Labor Demand-Supply Model: Welfare Impact of Emigration With External Effects
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
15. The magnitude of the emigration loss depends on the assumption about the elasticities. The formulas used for the welfare calculations are described in the Appendix. The calculations have been made under varying assumptions on the elasticities.
Education cost of the skilled migrants
16. An important cost that emigration imposes on source countries (and estimates of which have largely been ignored in the literature) is the public expenditure on the education of migrants. This cost is particularly high for the tertiary educated migrants in countries such as Barbados, Jamaica, and Trinidad and Tobago (UNESCO, 2004).
17. The subsidy on education is generally rationalized as reflecting the gap between private and social costs of education—that is, educated citizens confer external benefits in the economy. As emigrants do not stay in the economy, the entire subsidy on their education could be treated as a social cost. The public expenditure on education of migrants is a loss to the source country, since there is an opportunity cost to this expenditure in terms of expenditure foregone or higher than necessary tax rates. There are many other costs of emigration which have not been considered in this chapter. For example, emigration can result in a fiscal loss from the forgone tax revenue that would have accrued if the migrants had stayed behind (Desai et al., forthcoming). In order to place the estimated losses due to emigration in perspective, the next subsection discusses the different benefits from emigration to source countries and compares the calculated losses to a quantifiable benefit from migration—that is, remittances.
Benefits of emigration
18. The most immediate benefit from emigration is the flow of remittances or transfers by migrants to the country of origin. Latin America and the Caribbean region is the biggest recipient of remittances, and also has the fastest growth in its receipts. In 2003, remittance flows exceeded combined flows of foreign direct investment (FDI) and official development assistance (ODA) to the region (Terry, 2004).
19. Several other channels through which emigration can benefit source countries have been identified in the literature. There are possible network effects of migration. Rauch and Trindade (2002) have estimated large impacts of the networks in trade and FDI in a cross-section of countries.4 In the long run, benefits from emigration can occur also from its favorable effect on human capital formation. Emigration, if it is biased towards the high skilled, can raise their relative wages and returns to higher education, and induce human capital formation. A positive probability of emigration to a high-wage country can also raise the expected returns from human capital accumulation and thus induce skill formation (Beine et al., 2003).
C. Data and Evidence
Magnitude of emigration from the Caribbean
20. Migration has been described as “embedded in the Caribbean psyche” and is a fact of life in the region (Reyes and Stubbs, 2004). Every year a large number of Caribbean nationals emigrate to other countries for work, education or for other reasons. About 12 percent of the labor force from the Caribbean region has migrated to the OECD over the period 1970-2000. As Figure VI.3 shows, the Caribbean region has the highest rates of migration into the OECD. The second highest source of emigrants is Central America which has lost about 7 percent of its labor force due to emigration to the OECD. The figures for individual Caribbean countries are even more striking. The average of 12 percent for the Caribbean as a whole is largely due to the low migration rates of five countries—Haiti, Dominican Republic, Bahamas, Belize, and St. Lucia. As Figure VI.4 shows, the majority of the other Caribbean countries have lost more than a quarter of their labor force due to emigration to the OECD.5
Percent of Labor Force that has Migrated to the OECD:
Caribbean vs. the Rest of the World, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).Percent of Labor Force that has Migrated to the OECD:
Caribbean vs. the Rest of the World, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).Percent of Labor Force that has Migrated to the OECD:
Caribbean vs. the Rest of the World, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).
Percent of Labor Force that has Migrated from the Caribbean Countries to the OECD, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).Percent of Labor Force that has Migrated from the Caribbean Countries to the OECD, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).Percent of Labor Force that has Migrated from the Caribbean Countries to the OECD, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).21. The most important destination for migrants from the Caribbean is the United States. Figure VI.5 shows the fraction of the total number of migrants whose destination is the United States. The fraction ranges from about 60 to 90 percent. More than 80 percent of the migrants from The Bahamas, Dominican Republic, and Haiti reside in the United States. Geographical proximity (i.e., low migration cost), higher wage differentials (relative to other destinations), and immigration laws in the United States are the most likely reasons for such a bias. The Immigration and Nationality Act 1965 in the U.S. changed the basis of entry into the United States from country quotas to family-based reunification. This led to a drastic change in the composition of migrants from developed to developing countries.
Percent of Total Number of Migrants from the Caribbean Countries whose Destination is the United States, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: U.S. Census (2000); and Docquier and Marfouq (2004).Percent of Total Number of Migrants from the Caribbean Countries whose Destination is the United States, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: U.S. Census (2000); and Docquier and Marfouq (2004).Percent of Total Number of Migrants from the Caribbean Countries whose Destination is the United States, 1970–2000
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: U.S. Census (2000); and Docquier and Marfouq (2004).22. The migration rates by level of schooling are even more striking—more than 60 percent of the tertiary-educated labor force has migrated from the Caribbean to the OECD. Table VI.1 shows the breakdown of emigrants from the Caribbean by their skill (education groups). The figures in the secondary and tertiary schooling categories are striking. Suriname, Guyana, Jamaica, and Haiti have the highest tertiary emigration rates in the region, followed by Trinidad, St. Kitts and Nevis, and Antigua and Barbuda. In fact, as Figure VI.6 shows, most Caribbean countries rank in the top 20 in the world in terms of skilled emigration rates (skilled are defined as those with 12 or more years of schooling). Table VI.2 shows the emigration rates to the U.S., by skill categories. The figures are close to the overall emigration rates in Table VI.1.
Top 20 Countries in the World with the Highest Emigration Rates, 1970–2000
(Percent of Educated Labor Force that has Migrated to the OECD)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).Note: Educated labor force is defined as having 12 or more years of completed schooling.Top 20 Countries in the World with the Highest Emigration Rates, 1970–2000
(Percent of Educated Labor Force that has Migrated to the OECD)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).Note: Educated labor force is defined as having 12 or more years of completed schooling.Top 20 Countries in the World with the Highest Emigration Rates, 1970–2000
(Percent of Educated Labor Force that has Migrated to the OECD)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: Docquier and Marfouq (2004).Note: Educated labor force is defined as having 12 or more years of completed schooling.Percent of Labor Force That Has Migrated to the OECD, 1970-2000
(By Level of Schooling)
Percent of Labor Force That Has Migrated to the OECD, 1970-2000
(By Level of Schooling)
| Primary | Secondary | Tertiary | |
|---|---|---|---|
| Antigua and Barbuda | 6 | 36 | 71 |
| Bahamas, The | 2 | 12 | 36 |
| Barbados | 10 | 24 | 61 |
| Belize | 6 | 49 | 51 |
| Dominica | 8 | 61 | 59 |
| Dominican Republic | 6 | 31 | 22 |
| Grenada | 10 | 70 | 67 |
| Guyana | 14 | 34 | 86 |
| Haiti | 3 | 28 | 82 |
| Jamaica | 8 | 30 | 83 |
| St. Kitts and Nevis | 10 | 37 | 72 |
| St. Lucia | 3 | 32 | 36 |
| St. Vincent and the Grenadines | 6 | 53 | 57 |
| Suriname | 18 | 44 | 90 |
| Trinidad and Tobago | 6 | 21 | 78 |
| Average | 8 | 37 | 63 |
Percent of Labor Force That Has Migrated to the OECD, 1970-2000
(By Level of Schooling)
| Primary | Secondary | Tertiary | |
|---|---|---|---|
| Antigua and Barbuda | 6 | 36 | 71 |
| Bahamas, The | 2 | 12 | 36 |
| Barbados | 10 | 24 | 61 |
| Belize | 6 | 49 | 51 |
| Dominica | 8 | 61 | 59 |
| Dominican Republic | 6 | 31 | 22 |
| Grenada | 10 | 70 | 67 |
| Guyana | 14 | 34 | 86 |
| Haiti | 3 | 28 | 82 |
| Jamaica | 8 | 30 | 83 |
| St. Kitts and Nevis | 10 | 37 | 72 |
| St. Lucia | 3 | 32 | 36 |
| St. Vincent and the Grenadines | 6 | 53 | 57 |
| Suriname | 18 | 44 | 90 |
| Trinidad and Tobago | 6 | 21 | 78 |
| Average | 8 | 37 | 63 |
Percent of Labor Force That Has Migrated to the United States, 1970-2000
(By Level of Schooling)
Percent of Labor Force That Has Migrated to the United States, 1970-2000
(By Level of Schooling)
| Primary | Secondary | Tertiary | |
|---|---|---|---|
| Antigua and Barbuda | 5 | 29 | 63 |
| Bahamas, The | 2 | 10 | 36 |
| Barbados | 4 | 20 | 46 |
| Belize | 3 | 58 | 51 |
| Dominica | 6 | 53 | 47 |
| Dominican Republic | 4 | 27 | 18 |
| Grenada | 5 | 60 | 55 |
| Guyana | 6 | 30 | 77 |
| Haiti | 2 | 26 | 78 |
| Jamaica | 4 | 27 | 76 |
| St. Kitts and Nevis | 7 | 29 | 63 |
| St. Lucia | 2 | 33 | 25 |
| St. Vincent and the Grenadines | 3 | 50 | 42 |
| Trinidad and Tobago | 3 | 17 | 68 |
Percent of Labor Force That Has Migrated to the United States, 1970-2000
(By Level of Schooling)
| Primary | Secondary | Tertiary | |
|---|---|---|---|
| Antigua and Barbuda | 5 | 29 | 63 |
| Bahamas, The | 2 | 10 | 36 |
| Barbados | 4 | 20 | 46 |
| Belize | 3 | 58 | 51 |
| Dominica | 6 | 53 | 47 |
| Dominican Republic | 4 | 27 | 18 |
| Grenada | 5 | 60 | 55 |
| Guyana | 6 | 30 | 77 |
| Haiti | 2 | 26 | 78 |
| Jamaica | 4 | 27 | 76 |
| St. Kitts and Nevis | 7 | 29 | 63 |
| St. Lucia | 2 | 33 | 25 |
| St. Vincent and the Grenadines | 3 | 50 | 42 |
| Trinidad and Tobago | 3 | 17 | 68 |
Remittances
23. Worker remittances are becoming increasingly important as a source of external funding for many developing countries. Worker remittances are defined as the value of monetary transfers sent to the source countries from workers who have been abroad for more than one year. These are recorded under “current transfers” in the current account of the IMF’s Balance of Payments statistics. The Caribbean region is the largest recipient of worker remittances in proportion to its GDP (Figure VI.7). The next biggest recipient is South Asia, followed by Middle East and North Africa.
Worker Remittances, 2002
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.Worker Remittances, 2002
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.Worker Remittances, 2002
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.24. A broader measure of remittances includes worker remittances, compensation of employees and migrant transfers. This measure has been used in the literature previously (Ratha, 2003; Kapur, 2004). Compensation of employees is defined as the gross earnings of foreigners residing abroad for less than 12 months, including the value of in-kind benefits such as housing and payroll taxes. Migrant transfers are defined as the net worth of migrants who move from one country to another. For example, the value of IBM stock owned by a migrant who moves from France to Germany gets transferred in international accounting from France to Germany. Compensation of employees are recorded under the “income” sub category of the current account, and migrant transfers are recorded under “capital transfers” in the capital account of the IMF’s Balance of Payments. It is important to note that both the simple worker remittances or the more comprehensive definition of remittances do not include transfers through informal channels such as those carried by hand or by friends or family, or in-kind remittances of jewelry and consumer goods. There are also commercial transfers known as hawala that are unrecorded in the estimated remittances.
25. Remittance flows are the largest source of external funding for the region (Figure VI.8a). In 2002, total remittances (defined as the sum of worker remittances, compensation of employees and migrant transfers) constituted about 13 percent of the region’s GDP. In comparison, foreign direct investment (FDI) was 6 percent and official development flows (ODA) were only 1 percent of GDP.
Remittances, FDI, and ODA to the Caribbean, 1990–2002
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; World Bank, WDI; OECD; and country authorities.Remittances, FDI, and ODA to the Caribbean, 1990–2002
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; World Bank, WDI; OECD; and country authorities.Remittances, FDI, and ODA to the Caribbean, 1990–2002
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; World Bank, WDI; OECD; and country authorities.26. Remittance flows have been rising, while both FDI and ODA have declined. Between 1990 and 2002, ODA declined from 4 percent to 1 percent of GDP. Over recent years, FDI has also declined from 9 percent in 1999 to about 6 percent in 2002. In contrast, remittances increased from 3 percent to 13 percent of GDP during the same time period. As shown in Figure VI.8b, many Caribbean nations are among the top thirty nations in the world in terms of the remittances received as a proportion of their GDP. Figure VI.9 shows the remittances for the Caribbean countries averaged over 1980–2002. Grenada is the largest recipient in the region, followed by Haiti, Dominica, Jamaica, and St. Vincent and the Grenadines. Migrant transfers to Grenada constitute about half of total remittances.
Total Remittances, Top 30 Countries in the World, 2002 Worker Remittances, Compensation of Employees, Migrant Transfers
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.Total Remittances, Top 30 Countries in the World, 2002 Worker Remittances, Compensation of Employees, Migrant Transfers
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.Total Remittances, Top 30 Countries in the World, 2002 Worker Remittances, Compensation of Employees, Migrant Transfers
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.
Total Remittances, Average 1980–2002 Worker Remittances, Compensation of Employees, Migrant Transfers
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.Total Remittances, Average 1980–2002 Worker Remittances, Compensation of Employees, Migrant Transfers
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.Total Remittances, Average 1980–2002 Worker Remittances, Compensation of Employees, Migrant Transfers
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Sources: IMF Balance of Payments Statistics; and country authorities.Public expenditure on education
27. Governments in developing countries, including the Caribbean, cover a major portion of the cost of education of their citizens in the form of education subsidies. Table VI.3 shows the estimates of government expenditure on education per student by schooling categories for countries in the Caribbean for which data is available. The figures are averages over the period 1999–2002, and are taken from UNESCO (2004). For Barbados, Jamaica, and Trinidad and Tobago, expenditure on tertiary education is much larger relative to expenditure on primary and secondary education. The total public expenditure on education is defined as the sum of the expenditure on education and education administration made by local, regional and central governments. It includes:
Government Expenditure on Education, Average 1998-2002
(Per student, as a percent of GDP per capita)
Government Expenditure on Education, Average 1998-2002
(Per student, as a percent of GDP per capita)
| Primary | Secondary | Tertiary | |
|---|---|---|---|
| Barbados | 17 | 26 | 62 |
| Belize | 17 | 19 | |
| Dominica | 21 | 35 | |
| Dominican Republic | 7 | 5 | |
| Guyana | 1 | 2 | |
| Jamaica | 16 | 24 | 76 |
| St. Kitts and Nevis | 9 | 9 | |
| St. Lucia | 13 | 2 | |
| St. Vincent and the Grenadines | 28 | 28 | |
| Trinidad and Tobago | 14 | 15 | 69 |
Government Expenditure on Education, Average 1998-2002
(Per student, as a percent of GDP per capita)
| Primary | Secondary | Tertiary | |
|---|---|---|---|
| Barbados | 17 | 26 | 62 |
| Belize | 17 | 19 | |
| Dominica | 21 | 35 | |
| Dominican Republic | 7 | 5 | |
| Guyana | 1 | 2 | |
| Jamaica | 16 | 24 | 76 |
| St. Kitts and Nevis | 9 | 9 | |
| St. Lucia | 13 | 2 | |
| St. Vincent and the Grenadines | 28 | 28 | |
| Trinidad and Tobago | 14 | 15 | 69 |
(i) current expenditure on education—expenditure for goods and services consumed within the current year, e.g., staff salaries, pensions and benefits; contracted or purchased services; other resources including books and teaching materials; welfare services and other current expenditure such as subsidies to students and households, furniture and minor equipment, minor repairs, fuel, telecommunication, travel, insurance and rents.
(ii) capital expenditure on education—expenditure for assets that last longer than one year. It includes expenditure for construction, renovation and major repairs of buildings and the purchase of heavy equipment or vehicles.
The expenditure per student on primary and secondary education for those Caribbean countries with missing data is approximated by the data from another country in the Latin America and Caribbean region, that is closest in per capita income. However, the expenditure on tertiary education for countries with missing data is assumed to be zero since the countries with missing data might not be spending significantly on tertiary education. The data on expenditure per student is multiplied by the total number of migrants recorded in the OECD censuses.
28. The estimated government expenditure on the education of individuals who eventually left the Caribbean countries (largely to the U.S., between 1965 and 2000) varies across countries but is higher in the larger countries. Figure VI.10 shows that the estimated government expenditure on education of the emigrants is the highest for Barbados, Jamaica, and Trinidad and Tobago, reflecting primarily the heavy public investment on the tertiary education of migrants in these countries.
Estimated Government Expenditure on Education of Migrants
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: United Nations Education, Scientific, and Cultural Organization, (UNESCO).Estimated Government Expenditure on Education of Migrants
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: United Nations Education, Scientific, and Cultural Organization, (UNESCO).Estimated Government Expenditure on Education of Migrants
(In percent of GDP)
Citation: IMF Staff Country Reports 2005, 305; 10.5089/9781451811681.002.A006
Source: United Nations Education, Scientific, and Cultural Organization, (UNESCO).D. Results
Emigration loss
29. The calculation of the emigration loss as a percent of GDP requires estimates for: (i) elasticity of factor price for labor; (ii) labor’s share in national income; and (iii) the emigration rate. The share of labor in national income is assumed to be 70 percent, following Borjas (1995) and Hall and Jones (1999). Mishra (2004) in a study of Mexico estimates the impact of emigration on Mexican wages—the paper finds that a 10 percent reduction in the size of the labor force due to emigration to the U.S. increases Mexican wages by 4 percent. Also, the vast empirical evidence on labor demand, surveyed by Hamermesh (1993), suggests that the elasticity of factor price of labor is of the order of -0.3 (that is, a 10 percent reduction in the size of the labor force increases wages by 3 percent). The two elasticity assumptions of 0.3 and 0.4 used in this chapter follow from Hamermesh (1993) and Mishra (2004), respectively.
30. The emigration loss predicted by the labor demand-supply model is small. Table VI.4 shows the estimates of emigration loss to individual Caribbean countries as a percent of the GDP. In order to put these numbers into perspective, Column 3 shows the figures for remittances to the Caribbean as a fraction of countries’ GDP. Since elasticities and the share of labor in GDP are assumed to be the same for all countries, the differences in emigration losses comes only from differences in the emigration rates across countries. Even under the assumption of high elasticity, except for Suriname and Trinidad and Tobago, official remittances outweigh emigration loss in all countries. Also, since the wage differentials between the Caribbean and the OECD countries are large, the emigration loss would be easily outweighed by the gains of the migrants themselves. Emigration loss is however, an aggregate measure. It is a net effect of a gain to the workers who stay behind and a loss to the owners of other factors that are assumed to be internationally immobile (capital). In other words, emigration involves a redistribution of the reduced aggregate income in favor of the workers. Appendix Table VI.2 shows that this redistributive impact of emigration is significant in magnitude. On average, the gain to the workers who have stayed behind is 5 percent of GDP, and the loss to the owners of other factors is about 6 percent of GDP. Even for Trinidad and Tobago, where the emigration losses are relatively small (in relation to remittances), there is a sizeable redistribution in favor of the workers.
Emigration Loss and Remittances
Emigration Loss and Remittances
| Emigration Loss e=0.3 | Emigration Loss e=0.4 | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|
| Antigua and Barbuda | 1.4 | 1.9 | 3.0 |
| Bahamas, The | 0.2 | 0.2 | n.a. |
| Barbados | 0.8 | 1.1 | 2.3 |
| Belize | 0.4 | 0.5 | 4.7 |
| Dominica | 1.1 | 1.4 | 8.4 |
| Dominican Republic | 0.2 | 0.2 | 5.3 |
| Grenada | 1.7 | 2.3 | 11.0 |
| Guyana | 1.2 | 1.7 | 1.9 |
| Haiti | 0.1 | 0.1 | 10.1 |
| Jamaica | 0.9 | 1.2 | 7.4 |
| St. Kitts and Nevis | 1.6 | 2.1 | 6.9 |
| St. Lucia | 0.2 | 0.3 | 4.0 |
| St. Vincent and the Grenadines | 0.8 | 1.1 | 7.2 |
| Suriname | 2.0 | 2.6 | 0.5 |
| Trinidad and Tobago | 0.6 | 0.8 | 0.3 |
| Average | 0.9 | 1.2 | 5.2 |
Emigration Loss and Remittances
| Emigration Loss e=0.3 | Emigration Loss e=0.4 | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|
| Antigua and Barbuda | 1.4 | 1.9 | 3.0 |
| Bahamas, The | 0.2 | 0.2 | n.a. |
| Barbados | 0.8 | 1.1 | 2.3 |
| Belize | 0.4 | 0.5 | 4.7 |
| Dominica | 1.1 | 1.4 | 8.4 |
| Dominican Republic | 0.2 | 0.2 | 5.3 |
| Grenada | 1.7 | 2.3 | 11.0 |
| Guyana | 1.2 | 1.7 | 1.9 |
| Haiti | 0.1 | 0.1 | 10.1 |
| Jamaica | 0.9 | 1.2 | 7.4 |
| St. Kitts and Nevis | 1.6 | 2.1 | 6.9 |
| St. Lucia | 0.2 | 0.3 | 4.0 |
| St. Vincent and the Grenadines | 0.8 | 1.1 | 7.2 |
| Suriname | 2.0 | 2.6 | 0.5 |
| Trinidad and Tobago | 0.6 | 0.8 | 0.3 |
| Average | 0.9 | 1.2 | 5.2 |
Losses due to high-skill migration
31. The emigration loss due to emigration of skilled labor ceteris paribus is significant. One of the most significant characteristics of migration from the Caribbean region, apart from the very high rates of migration, is the loss of the educated population. The estimates in Table VI.5 show that the emigration loss as a fraction of GDP due to emigration of high skilled (everything else remaining unchanged) is much larger. The aggregate emigration rate combines the emigration rates of the high- as well as the low-skilled. As lower-skill groups have smaller emigration rates, their inclusion results in a smaller measure of emigration rate. If instead, only the high-skilled workers are considered, the emigration rates are higher. Consequently the emigration loss is also larger. Still, remittances outweigh or equal the emigration loss due to high-skilled migration for all the countries (except Guyana, Suriname, and Trinidad and Tobago).6
Emigration Loss Due to High-Skilled Migration
Emigration Loss Due to High-Skilled Migration
| Emigration Loss e=0.3 | Emigration Loss e=0.4 | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|
| Antigua and Barbuda | 2.3 | 3.0 | 3.0 |
| Bahamas, The | 0.6 | 0.8 | n.a. |
| Barbados | 1.7 | 2.3 | 2.3 |
| Belize | 1.2 | 1.6 | 4.7 |
| Dominica | 1.6 | 2.1 | 8.4 |
| Dominican Republic | 0.2 | 0.3 | 5.3 |
| Grenada | 2.0 | 2.7 | 11.0 |
| Guyana | 3.3 | 4.4 | 1.9 |
| Haiti | 3.0 | 4.0 | 10.1 |
| Jamaica | 3.1 | 4.1 | 7.4 |
| St. Kitts and Nevis | 2.3 | 3.1 | 6.9 |
| St. Lucia | 0.6 | 0.8 | 4.0 |
| St. Vincent and the Grenadines | 1.5 | 1.9 | 7.2 |
| Suriname | 3.6 | 4.8 | 0.5 |
| Trinidad and Tobago | 2.8 | 3.7 | 0.3 |
| Average | 2.0 | 2.6 | 5.2 |
Emigration Loss Due to High-Skilled Migration
| Emigration Loss e=0.3 | Emigration Loss e=0.4 | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|
| Antigua and Barbuda | 2.3 | 3.0 | 3.0 |
| Bahamas, The | 0.6 | 0.8 | n.a. |
| Barbados | 1.7 | 2.3 | 2.3 |
| Belize | 1.2 | 1.6 | 4.7 |
| Dominica | 1.6 | 2.1 | 8.4 |
| Dominican Republic | 0.2 | 0.3 | 5.3 |
| Grenada | 2.0 | 2.7 | 11.0 |
| Guyana | 3.3 | 4.4 | 1.9 |
| Haiti | 3.0 | 4.0 | 10.1 |
| Jamaica | 3.1 | 4.1 | 7.4 |
| St. Kitts and Nevis | 2.3 | 3.1 | 6.9 |
| St. Lucia | 0.6 | 0.8 | 4.0 |
| St. Vincent and the Grenadines | 1.5 | 1.9 | 7.2 |
| Suriname | 3.6 | 4.8 | 0.5 |
| Trinidad and Tobago | 2.8 | 3.7 | 0.3 |
| Average | 2.0 | 2.6 | 5.2 |
32. The loss due to skilled emigration is amplified if emigrants confer a positive externality on non-emigrants. Two values for the elasticity of the marginal product with respect to aggregate stock of skilled labor (gamma) are assumed, 0.05 and 0.1, respectively (Borjas, 1995, also uses identical values). Appendix Table VI.3 shows the estimates of emigration loss due to high-skilled migration in the presence of external effects. For high values of the elasticities, in the presence of external effects, emigration loss outweighs remittances for many Caribbean countries—Antigua and Barbuda, Barbados, Belize, Guyana, Jamaica, St. Kitts and Nevis, Suriname, and Trinidad and Tobago. The magnitude of the emigration losses are much higher than the estimates of immigration surplus in the presence of external effects in Borjas (1995), which range between 0.3–0.7 percent of GDP. The reason for the larger effect is that the emigration rates from the Caribbean are greater relative to the immigration rate into the United States.
33. The total losses due to high-skilled emigration are significant and outweigh remittances for most countries. Table VI.6 shows the total losses due to skilled emigration. The total losses comprise: (i) emigration loss from the simple labor demand supply framework; (ii) external effects (that is, the impact on productivity of those who have stayed behind); and (iii) government expenditure on the education of migrants. The results shown in Table VI.6 are under the assumption of high elasticities. The first observation from Table VI.6 is that the total losses due to high-skill emigration are indeed significant for most countries. The losses range from 2 percent of GDP in Dominican Republic to 20 percent of GDP in Jamaica. Second, the losses outweigh the official recorded remittances for almost all the countries (except Dominican Republic, Haiti, Grenada and St. Lucia). For Grenada and St. Lucia, the total losses are almost equal to remittances. Even under assumption of low elasticities (not shown), the losses outweigh remittances for most countries.
Total Losses Due to High-Skill Emigration vs Remittances
Total Losses Due to High-Skill Emigration vs Remittances
| Estimated Education Expenditure (As a percent of GDP) | Emigration Loss (As a Percent of GDP) (gamma=0.1, e=0.4) | Emigration Loss + Estimated Education Expenditure | Remittances (As a Percent of GDP) Average 1980-2002 | |
|---|---|---|---|---|
| Antigua and Barbuda | 6.1 | 7.1 | 13.2 | 3.0 |
| Bahamas, The | 1.2 | 3.3 | 4.4 | n.a. |
| Barbados | 12.5 | 6.0 | 18.5 | 2.3 |
| Belize | 2.0 | 4.8 | 6.8 | 4.7 |
| Dominica | 5.8 | 5.7 | 11.5 | 8.4 |
| Dominican Republic | 0.2 | 1.8 | 2.1 | 5.3 |
| Grenada | 4.4 | 6.6 | 11.0 | 11.0 |
| Guyana | 0.4 | 9.1 | 9.5 | 1.9 |
| Haiti | 0.5 | 8.5 | 9.0 | 10.1 |
| Jamaica | 11.8 | 8.6 | 20.4 | 7.4 |
| St. Kitts and Nevis | 2.5 | 7.2 | 9.7 | 6.9 |
| St. Lucia | 0.6 | 3.2 | 3.8 | 4.0 |
| St. Vincent and the Grenadines | 5.2 | 5.5 | 10.7 | 7.2 |
| Suriname | 3.0 | 4.8 | 7.8 | 0.5 |
| Trinidad and Tobago | 8.7 | 8.1 | 16.8 | 0.3 |
| Average | 4.3 | 6.0 | 10.3 | 5.2 |
Total Losses Due to High-Skill Emigration vs Remittances
| Estimated Education Expenditure (As a percent of GDP) | Emigration Loss (As a Percent of GDP) (gamma=0.1, e=0.4) | Emigration Loss + Estimated Education Expenditure | Remittances (As a Percent of GDP) Average 1980-2002 | |
|---|---|---|---|---|
| Antigua and Barbuda | 6.1 | 7.1 | 13.2 | 3.0 |
| Bahamas, The | 1.2 | 3.3 | 4.4 | n.a. |
| Barbados | 12.5 | 6.0 | 18.5 | 2.3 |
| Belize | 2.0 | 4.8 | 6.8 | 4.7 |
| Dominica | 5.8 | 5.7 | 11.5 | 8.4 |
| Dominican Republic | 0.2 | 1.8 | 2.1 | 5.3 |
| Grenada | 4.4 | 6.6 | 11.0 | 11.0 |
| Guyana | 0.4 | 9.1 | 9.5 | 1.9 |
| Haiti | 0.5 | 8.5 | 9.0 | 10.1 |
| Jamaica | 11.8 | 8.6 | 20.4 | 7.4 |
| St. Kitts and Nevis | 2.5 | 7.2 | 9.7 | 6.9 |
| St. Lucia | 0.6 | 3.2 | 3.8 | 4.0 |
| St. Vincent and the Grenadines | 5.2 | 5.5 | 10.7 | 7.2 |
| Suriname | 3.0 | 4.8 | 7.8 | 0.5 |
| Trinidad and Tobago | 8.7 | 8.1 | 16.8 | 0.3 |
| Average | 4.3 | 6.0 | 10.3 | 5.2 |
34. The results from the welfare calculations are similar when we consider only emigration to the United States. Since an overwhelming majority of Caribbean migrants come to the U.S., it is instructive to look at the magnitude of emigration loss from migration to the main destination country.7 Appendix Table VI.4 shows the total losses due to emigration to the United States under the assumption of high elasticities. The results in Annex Table VI.4 are similar to the cases when the emigration rates to the OECD are considered (Table VI.6). For high values of elasticities, total losses due to high-skilled emigration outweigh or equal remittances for most countries (except Dominican Republic, Grenada and Haiti). Appendix Table VI.5 shows the corresponding losses due to emigration to the U.S., when the migrants are restricted to have migrated at an age of 16 or more years. Even if we restrict the sample and use adjusted emigration rates, there are still many countries in the Caribbean where the losses equal to or larger than the remittances (these countries are Antigua and Barbuda, Belize, Barbados, Guyana, Jamaica, and Trinidad and Tobago).
E. Conclusion and Policy Implications
35. For most countries in the Caribbean, the total losses due to skilled migration outweigh remittances. The losses estimated in this chapter include the emigration loss predicted by the labor-demand supply framework, augmented with external effects, and government expenditure on educating the migrants. The caveat remains there are many other possible costs and benefits, the measurement of which is beyond the scope of the chapter.
36. There are two possible approaches countries could take with regard to migration: (i) minimize losses by trying to retain the high skilled; and/or (ii) seek to increase the benefits of emigration by adopting a “Diaspora Approach”. The latter uses the diaspora to build networks for trade, tourism, and investment promotion; harness its knowledge, skills and assets; and, attract higher and more efficient forms of remittances.
37. Even if countries incur a net loss due to emigration, a border tax might not be the most reasonable policy response. Appealing to the pioneering work of Bhagwati in the 1970s and 80s on policy responses to emigration, there could be an argument for border tax on migrants (similar to a Tobin tax). The tax was proposed by Bhagwati (1976), with the prior that developing countries lose due to migration. It is in principle also an extension of the idea of progressive income taxation—the improvement in the wellbeing of migrants is taxed for the benefit of those left behind.
38. The main reasons for the border tax not being reasonable are the problems in implementing such a tax. Taxes can also have distortionary effects. Since the absolute number of migrants from the Caribbean countries is not very large, the per capita tax rate would have to be very large to raise a sizeable revenue.
39. Retaining the high-skilled without the possibility of taxes would be facilitated by reorienting education. The high rates of emigration from the region are due not only to the “pull factor” i.e., higher wages abroad, but also the limited opportunities for highly, but similarly, educated people in the same small geographical areas (i.e., the push factor). One approach to creating the right incentives is to re-orient the higher education system towards providing skills in demand within the region, in particular the services sector, which dominates these economies. Such reorientation could include, for example, the establishment of hotel management institutes, or specialized banking and finance institutes. It is particularly important for the Caribbean governments to consider the possibilities for re-orienting education, as a major portion of the cost of education of their citizens is covered by education subsidies. Governments might reap higher returns by investing in education infrastructure that leads to more retention of the high-skilled.
40. Since international experience has been that it is difficult to prevent emigration, the real policy challenge is how Caribbean countries can maximize their benefits from the population living and working overseas. Remittances should be the most immediate focus, as they can affect growth through investment, both physical and human. Evidence from micro-level studies suggests that remittances lead to greater human and physical capital investment (Cox et al., 2003 study of El Salvador; Hanson and Woodruff, 2001 and Woodruff and Zenteno, 2001 studies of Mexico; Lucas, 1987 study of Africa).
APPENDIX
I. Calculation of Emigration Loss
Following Borjas (1995), the estimated welfare loss to the source countries as a percent of GDP can be expressed as:
where e is the magnitude of elasticity of factor price of labor (i.e., the percentage change in wage resulting from a 1 percent change in the size of the labor force), m is the fraction of the labor force that has migrated, and s is the share of labor in GDP.
In the above analysis, the benefits of employment of labor are assumed to be private. However, it is possible that employment especially of high-skilled labor (doctors, academics, researchers) confers a positive externality. Analytically, this is captured by assuming that the emigration of high-skilled workers affects the productivity of those who have stayed behind.
Emigration loss due to skilled migration
First, the loss due to emigration of skilled labor is calculated, and then augmented to include external effects.
The magnitude of the loss (as a fraction of GDP) without incorporating external effects can be expressed as:
The magnitude of the loss (as a fraction of GDP) including external effects is given as:
where ss and su are the skilled and unskilled labor shares of national income respectively, ee is the magnitude of elasticity of factor price of skilled labor i.e. percentage change in wage of skilled labor resulting from a 1 percent change in the size of the labor force, ms is the fraction of skilled labor force that emigrates. The second and third terms denote the external effects on skilled and unskilled labor respectively. The expression in equation (7) is similar to Borjas’ (1995) study of immigration.
II. Measurement of Emigration Rates
It is difficult to quantify the magnitude of emigration because source countries, in general, do not record information on those who leave. Emigration is measured by obtaining information on the migrants from the censuses in recipient countries (see for example, Mishra, 2004; Docquier and Marfouq, 2004; and Carrington and Detragiache, 1998).
Two sources of data have been used in this chapter: (i) emigration rates to the OECD from Docquier and Marfouq (2004) who estimate the aggregate migration rates for a number of source countries in the world; (ii) emigration rates to the U.S., using the data on migrants from the U.S. Census. Emigrants to most OECD countries are defined by their country of birth. For example, an emigrant from source country j residing in the U.S., is defined as a person whom the U.S. Census counts as being born in country j. The migrants include naturalized citizens, temporary and permanent residents as well as unauthorized migrants. Migrants to the U.S., also include asylum seekers who sought refuge from political turmoil, oppression and totalitarian governments (e.g., in the case of Haiti).92 The only exceptions are Germany, Greece, Italy, Japan and Korea, where an emigrant is defined by citizenship.
About 95 percent of the Caribbean migrants enumerated in the 2000 U.S. Census arrived between 1965–2000. Detailed information on the year of immigration is not available for migrants to the other OECD countries. However, since the United States is the major destination for migrants from the Caribbean, one can argue that the biggest proportion of migrants to the OECD migrated between 1965 and 2000.
The emigration rate to the OECD is defined as the fraction of labor force having migrated to OECD countries. It is expressed as:
where
Emigration Rate from country j in schooling category S is defined as
where
Where did the migrant receive schooling?
The migration rates by schooling do not take into account where the migrant received their schooling. The estimates of emigration rates by schooling are based on the assumption that the migrants recorded in the OECD censuses received their schooling in the Caribbean. Alternatively, for those who obtained their schooling in the OECD, the counterfactual assumption is that had they stayed behind, they would have received the same level of schooling. For the migrants who got their schooling in the destination countries, it is not clear that their emigration constitutes shocks to schooling groups in the Caribbean.
The censuses in the recipient countries do not record information on where the migrants received their schooling. Hence, given the data, it is not possible to conclude the direction of the bias. However, we can try to adjust for this bias in case of the migrants to the United States. There is strong evidence in the case of migrants from developing countries like Mexico that those who migrate in the late teens or later are much less likely to obtain their schooling in the United States (Grogger and Trejo, 2002; Gonzalez, 2002; Chiquiar and Hanson, 2002; Clark and Jaeger, 2002). The U.S. Census provides information for the foreign-born on the years spent in the United States. Using this information, it is possible to calculate their age at migration. Restricting the sample of migrants to those who emigrated at an age of 16 years or more, it is less likely that these migrants would have received their schooling in the United States. Chiquiar and Hanson (2002), Mishra (2004) use a similar strategy to adjust for the bias. The adjusted emigration rates are shown in Appendix Table VI.1.
The magnitude of the adjusted emigration rates in the secondary and tertiary schooling decreases in absolute terms (as compared to Table VI.2) but is still much larger in relation to the primary schooling category. In both cases (adjusted and unadjusted), Guyana, Jamaica, and Haiti have the highest tertiary emigration rates in the region followed by Trinidad and Tobago, Antigua and Barbuda, and St. Kitts and Nevis. The highly-educated labor force has been reduced by close to or greater than half in these countries, even after adjustment. The estimates of the emigration rates in the secondary and tertiary schooling categories presented in Appendix Table VI.1 are likely to be underestimates because: (i) many of the migrants who migrated at less than 16 years could have received part or all of their education in the Caribbean; or (ii) for those who got their schooling in the U.S., the possible counterfactual is that they could have received the same or possibly more years of schooling, had they not migrated.
Percent of Labor Force that has Migrated to the United States, 2000
(Restricting age at immigration to 16 or more years)
Percent of Labor Force that has Migrated to the United States, 2000
(Restricting age at immigration to 16 or more years)
| Country | Primary | Secondary | Tertiary |
|---|---|---|---|
| Antigua and Barbuda | 5 | 30 | 60 |
| Bahamas, The | 3 | 11 | 33 |
| Barbados | 5 | 20 | 43 |
| Belize | 4 | 59 | 49 |
| Dominica | 6 | 55 | 42 |
| Dominican Republic | 5 | 29 | 16 |
| Grenada | 5 | 61 | 53 |
| Guyana | 6 | 32 | 75 |
| Haiti | 2 | 26 | 74 |
| Jamaica | 4 | 28 | 74 |
| St. Kitts and Nevis | 7 | 29 | 60 |
| St. Lucia | 2 | 33 | 21 |
| St. Vincent and the Grenadines | 3 | 51 | 38 |
| Trinidad and Tobago | 3 | 18 | 65 |
| Average | 4 | 34 | 50 |
Percent of Labor Force that has Migrated to the United States, 2000
(Restricting age at immigration to 16 or more years)
| Country | Primary | Secondary | Tertiary |
|---|---|---|---|
| Antigua and Barbuda | 5 | 30 | 60 |
| Bahamas, The | 3 | 11 | 33 |
| Barbados | 5 | 20 | 43 |
| Belize | 4 | 59 | 49 |
| Dominica | 6 | 55 | 42 |
| Dominican Republic | 5 | 29 | 16 |
| Grenada | 5 | 61 | 53 |
| Guyana | 6 | 32 | 75 |
| Haiti | 2 | 26 | 74 |
| Jamaica | 4 | 28 | 74 |
| St. Kitts and Nevis | 7 | 29 | 60 |
| St. Lucia | 2 | 33 | 21 |
| St. Vincent and the Grenadines | 3 | 51 | 38 |
| Trinidad and Tobago | 3 | 18 | 65 |
| Average | 4 | 34 | 50 |
Distributional Impact and Remittances
Distributional Impact and Remittances
| Gain to Workers e=0.3 | Gain to Workers e=0.4 | Loss to Other Factors e=0.3 | Loss to Other Factors e=0.4 | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|---|---|
| Antigua and Barbuda | 4.9 | 6.5 | 6.3 | 8.4 | 3.0 |
| Bahamas, The | 2.2 | 3.0 | 2.4 | 3.2 | n.a. |
| Barbados | 4.2 | 5.6 | 5.0 | 6.7 | 2.3 |
| Belize | 2.0 | 2.6 | 2.1 | 2.8 | 4.7 |
| Dominica | 4.6 | 6.1 | 5.7 | 7.5 | 8.4 |
| Dominican Republic | 2.3 | 3.1 | 2.5 | 3.3 | 5.3 |
| Grenada | 5.0 | 6.7 | 6.7 | 9.0 | 11.0 |
| Guyana | 1.1 | 1.5 | 6.0 | 8.0 | 1.9 |
| Haiti | 1.9 | 2.6 | 2.0 | 2.7 | 10.1 |
| Jamaica | 4.3 | 5.8 | 5.2 | 6.9 | 7.4 |
| St. Kitts and Nevis | 5.0 | 6.6 | 6.5 | 8.7 | 6.9 |
| St. Lucia | 2.5 | 3.4 | 2.7 | 3.6 | 4.0 |
| St. Vincent and the Grenadines | 4.2 | 5.6 | 5.1 | 6.7 | 7.2 |
| Suriname | 5.2 | 6.9 | 7.1 | 9.5 | 0.5 |
| Trinidad and Tobago | 3.8 | 5.1 | 4.4 | 5.8 | 0.3 |
| Average | 3.5 | 4.7 | 4.6 | 6.2 | 5.2 |
Distributional Impact and Remittances
| Gain to Workers e=0.3 | Gain to Workers e=0.4 | Loss to Other Factors e=0.3 | Loss to Other Factors e=0.4 | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|---|---|
| Antigua and Barbuda | 4.9 | 6.5 | 6.3 | 8.4 | 3.0 |
| Bahamas, The | 2.2 | 3.0 | 2.4 | 3.2 | n.a. |
| Barbados | 4.2 | 5.6 | 5.0 | 6.7 | 2.3 |
| Belize | 2.0 | 2.6 | 2.1 | 2.8 | 4.7 |
| Dominica | 4.6 | 6.1 | 5.7 | 7.5 | 8.4 |
| Dominican Republic | 2.3 | 3.1 | 2.5 | 3.3 | 5.3 |
| Grenada | 5.0 | 6.7 | 6.7 | 9.0 | 11.0 |
| Guyana | 1.1 | 1.5 | 6.0 | 8.0 | 1.9 |
| Haiti | 1.9 | 2.6 | 2.0 | 2.7 | 10.1 |
| Jamaica | 4.3 | 5.8 | 5.2 | 6.9 | 7.4 |
| St. Kitts and Nevis | 5.0 | 6.6 | 6.5 | 8.7 | 6.9 |
| St. Lucia | 2.5 | 3.4 | 2.7 | 3.6 | 4.0 |
| St. Vincent and the Grenadines | 4.2 | 5.6 | 5.1 | 6.7 | 7.2 |
| Suriname | 5.2 | 6.9 | 7.1 | 9.5 | 0.5 |
| Trinidad and Tobago | 3.8 | 5.1 | 4.4 | 5.8 | 0.3 |
| Average | 3.5 | 4.7 | 4.6 | 6.2 | 5.2 |
Emigration Loss with External Effects Due to High-Skilled Migration
Emigration Loss with External Effects Due to High-Skilled Migration
| Low Elasticities Gamma = 0.05, e = 0.3 | High Elasticities Gamma=.l, e=0.4 | Remittances (As a Percent of GDP) Average 1980-2002 | |
|---|---|---|---|
| Antigua and Barbuda | 4.2 | 7.1 | 3.0 |
| Bahamas, The | 1.8 | 3.3 | n.a. |
| Barbados | 3.5 | 6 | 2.3 |
| Belize | 2.7 | 4.8 | 4.7 |
| Dominica | 3.3 | 5.7 | 8.4 |
| Dominican Republic | 0.9 | 1.8 | 5.3 |
| Grenada | 3.9 | 6.6 | 11.0 |
| Guyana | 5.5 | 9.1 | 1.9 |
| Haiti | 5.1 | 8.5 | 10.1 |
| Jamaica | 5.2 | 8.6 | 7.4 |
| St. Kitts and Nevis | 4.3 | 7.2 | 6.9 |
| St. Lucia | 1.7 | 3.2 | 4.0 |
| St. Vincent and the Grenadines | 3.1 | 5.5 | 7.2 |
| Suriname | 5.9 | 9.6 | 0.5 |
| Trinidad and Tobago | 4.8 | 8.1 | 0.3 |
| Average | 3.7 | 6.3 | 5.2 |
Emigration Loss with External Effects Due to High-Skilled Migration
| Low Elasticities Gamma = 0.05, e = 0.3 | High Elasticities Gamma=.l, e=0.4 | Remittances (As a Percent of GDP) Average 1980-2002 | |
|---|---|---|---|
| Antigua and Barbuda | 4.2 | 7.1 | 3.0 |
| Bahamas, The | 1.8 | 3.3 | n.a. |
| Barbados | 3.5 | 6 | 2.3 |
| Belize | 2.7 | 4.8 | 4.7 |
| Dominica | 3.3 | 5.7 | 8.4 |
| Dominican Republic | 0.9 | 1.8 | 5.3 |
| Grenada | 3.9 | 6.6 | 11.0 |
| Guyana | 5.5 | 9.1 | 1.9 |
| Haiti | 5.1 | 8.5 | 10.1 |
| Jamaica | 5.2 | 8.6 | 7.4 |
| St. Kitts and Nevis | 4.3 | 7.2 | 6.9 |
| St. Lucia | 1.7 | 3.2 | 4.0 |
| St. Vincent and the Grenadines | 3.1 | 5.5 | 7.2 |
| Suriname | 5.9 | 9.6 | 0.5 |
| Trinidad and Tobago | 4.8 | 8.1 | 0.3 |
| Average | 3.7 | 6.3 | 5.2 |
Total Losses Due to High-Skill Emigration to the United States vs Remittances
Total Losses Due to High-Skill Emigration to the United States vs Remittances
| Estimated Education Expenditure (As a percent of GDP) | Emigration Loss (As a percent of GDP) (gamma=0.1, e=0.4) | Emigration Loss + Estimated Education Expenditure | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|---|
| Antigua and Barbuda | 4.7 | 6.5 | 11.2 | 3.0 |
| Bahamas, The | 1.5 | 3.8 | 5.3 | n.a. |
| Barbados | 7.4 | 4.5 | 8.9 | 2.3 |
| Belize | 2.2 | 5.1 | 8.2 | 4.7 |
| Dominica | 4.2 | 4.8 | 8.4 | 8.4 |
| Dominican Republic | 0.2 | 1.7 | 1.9 | 5.3 |
| Grenada | 3.1 | 5.6 | 9.6 | 11.0 |
| Guyana | 0.2 | 8.2 | 12.5 | 1.9 |
| Haiti | 0.4 | 8.3 | 9 | 10.1 |
| Jamaica | 9.1 | 8.1 | 14.1 | 7.4 |
| St. Kitts and Nevis | 1.9 | 6.5 | 13.5 | 6.9 |
| St. Lucia | 0.4 | 2.4 | 3.8 | 4.0 |
| St. Vincent and the Grenadines | 3.2 | 4.1 | 8.4 | 7.2 |
| Trinidad and Tobago | 5.5 | 7 | 10.9 | 0.3 |
| Average | 3.1 | 5.5 | 9.0 | 5.6 |
Total Losses Due to High-Skill Emigration to the United States vs Remittances
| Estimated Education Expenditure (As a percent of GDP) | Emigration Loss (As a percent of GDP) (gamma=0.1, e=0.4) | Emigration Loss + Estimated Education Expenditure | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|---|
| Antigua and Barbuda | 4.7 | 6.5 | 11.2 | 3.0 |
| Bahamas, The | 1.5 | 3.8 | 5.3 | n.a. |
| Barbados | 7.4 | 4.5 | 8.9 | 2.3 |
| Belize | 2.2 | 5.1 | 8.2 | 4.7 |
| Dominica | 4.2 | 4.8 | 8.4 | 8.4 |
| Dominican Republic | 0.2 | 1.7 | 1.9 | 5.3 |
| Grenada | 3.1 | 5.6 | 9.6 | 11.0 |
| Guyana | 0.2 | 8.2 | 12.5 | 1.9 |
| Haiti | 0.4 | 8.3 | 9 | 10.1 |
| Jamaica | 9.1 | 8.1 | 14.1 | 7.4 |
| St. Kitts and Nevis | 1.9 | 6.5 | 13.5 | 6.9 |
| St. Lucia | 0.4 | 2.4 | 3.8 | 4.0 |
| St. Vincent and the Grenadines | 3.2 | 4.1 | 8.4 | 7.2 |
| Trinidad and Tobago | 5.5 | 7 | 10.9 | 0.3 |
| Average | 3.1 | 5.5 | 9.0 | 5.6 |
Total Losses Due to High-Skill Emigration to the United States vs Remittances
(Age at migration restricted to 16 or more years)
Total Losses Due to High-Skill Emigration to the United States vs Remittances
(Age at migration restricted to 16 or more years)
| Estimated Education Expenditure (As a percent of GDP) | Emigration Loss (As a percent of GDP) gamma=0.1, e=0.4) | Emigration Loss + Estimated Education Expenditure | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|---|
| Antigua and Barbuda | 3.7 | 3.9 | 7.6 | 3.0 |
| Bahamas, The | 1.0 | 1.7 | 2.7 | n.a. |
| Barbados | 6.0 | 2.5 | 8.5 | 2.3 |
| Belize | 1.8 | 2.9 | 4.7 | 4.7 |
| Dominica | 2.9 | 2.4 | 5.3 | 8.4 |
| Dominican Republic | 0.2 | 0.7 | 0.9 | 5.3 |
| Grenada | 2.5 | 3.3 | 5.7 | 11.0 |
| Guyana | 0.2 | 5.5 | 5.7 | 1.9 |
| Haiti | 0.3 | 5.4 | 5.7 | 10.1 |
| Jamaica | 7.1 | 5.4 | 12.5 | 7.4 |
| St. Kitts and Nevis | 1.4 | 3.9 | 5.3 | 6.9 |
| St. Lucia | 0.3 | 0.9 | 1.2 | 4.0 |
| St. Vincent and the Grenadines | 2.4 | 2.1 | 4.5 | 7.2 |
| Trinidad and Tobago | 4.4 | 4.4 | 8.8 | 0.3 |
| Average | 2.5 | 3.2 | 5.7 | 5.6 |
Total Losses Due to High-Skill Emigration to the United States vs Remittances
(Age at migration restricted to 16 or more years)
| Estimated Education Expenditure (As a percent of GDP) | Emigration Loss (As a percent of GDP) gamma=0.1, e=0.4) | Emigration Loss + Estimated Education Expenditure | Remittances (As a percent of GDP) Average 1980-2002 | |
|---|---|---|---|---|
| Antigua and Barbuda | 3.7 | 3.9 | 7.6 | 3.0 |
| Bahamas, The | 1.0 | 1.7 | 2.7 | n.a. |
| Barbados | 6.0 | 2.5 | 8.5 | 2.3 |
| Belize | 1.8 | 2.9 | 4.7 | 4.7 |
| Dominica | 2.9 | 2.4 | 5.3 | 8.4 |
| Dominican Republic | 0.2 | 0.7 | 0.9 | 5.3 |
| Grenada | 2.5 | 3.3 | 5.7 | 11.0 |
| Guyana | 0.2 | 5.5 | 5.7 | 1.9 |
| Haiti | 0.3 | 5.4 | 5.7 | 10.1 |
| Jamaica | 7.1 | 5.4 | 12.5 | 7.4 |
| St. Kitts and Nevis | 1.4 | 3.9 | 5.3 | 6.9 |
| St. Lucia | 0.3 | 0.9 | 1.2 | 4.0 |
| St. Vincent and the Grenadines | 2.4 | 2.1 | 4.5 | 7.2 |
| Trinidad and Tobago | 4.4 | 4.4 | 8.8 | 0.3 |
| Average | 2.5 | 3.2 | 5.7 | 5.6 |
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Prepared by Prachi Mishra.
See Borjas (1994, 1995) and Friedberg and Hunt (1995) for surveys of the empirical literature. The theoretical literature on international movement of factors includes for example, Bhagwati and Hamada (1974), Rivera-Batiz (1989), and Quibria (1989).
Davis and Weinstein (2002) simulate the welfare impact due to inflow of both labor and capital into the U.S.
Davis and Weinstein (2002) look at terms of trade effects of immigration into the U.S. If migration from the Caribbean results in relatively greater reduction in factor supplies and output in the export sector, thereby reducing the supply of exports on the world market, then this can result in a terms of trade gain for the region. For the terms of trade gain to be significant in magnitude for individual countries, they should be large in an economic sense i.e. their demand and supplies should affect world prices. To the extent that Caribbean countries lack market power, we can assume this effect to be of a small magnitude for these individual countries.
There is anecdotal evidence of a reasonable amount of intra-Caribbean migration, but it has not been systematically documented.
In the calculations, the assumed skilled labor share of GDP is 0.3. This follows from the assumption that the highly educated belong to the top 20 percent of income earners. The average income share of the top 20 percent is about 0.4, as estimated by Dollar and Kraay (2002). Consequently, the assumed share of skilled labor in GDP is: overall labor share in GDP*0.4 = 0.7*0.4 = 0.28.
Also, the U.S. census allows the calculation of adjusted emigration rates by restricting the sample to migrants only above a certain age at migration, to filter out those migrants who are likely to have received their education in the source country.
The Caribbean is also one of the largest sources of illegal aliens, with the Dominican Republic, Haiti, and Jamaica ranking only behind Mexico (Carlson, 1994)
