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Migration driving developed economies – IMF report

28 June 20200 comments

Migration drives economic growth and improves productivity in host countries, according to new research by the International Monetary Fund (IMF).

While migration has been the focus of intense political debate in recent years, and particularly since the advent of the COVID-10 pandemic, the IMF’s World Economic Outlook Report for 2020 found migration was an economic boon for migration destination countries.

“While most people have positive perceptions about immigrants, there are misconceptions and concerns. For instance, some think that migrants are a burden on economies,” the report says.

“But our new study in Chapter 4 of the April 2020 World Economic Outlook looks at the economic impact of migration on recipient countries and finds that migration generally improves economic growth and productivity in host countries,” the researchers say.

In 2019, 270 million people in the world were migrants—defined as people not living in their country of birth. The migrant population has increased by 120 million since 1990. However, the share of migrants in the world’s population has hovered around 3 per cent over the past 60 years, the IMF report says.

“But strikingly, the share of immigrants in the total population of advanced economies has risen from 7 per cent to 12 per cent, while the share of immigrants in emerging market and developing economies has remained at around 2 percent,” the researchers said.

“Migrants often settle within their home region. However, a significant part of international migration takes place over long distances, for example, from South Asia to the Middle East, and, in particular, from emerging market and developing economies toward advanced economies,” they said.

“We find that immigrants in advanced economies increase output and productivity both in the short and medium term. Specifically, we show that a 1 percentage point increase in the inflow of immigrants relative to total employment increases output by almost 1 percent by the fifth year.

“That’s because native and immigrant workers bring to the labour market a diverse set of skills, which complement each other and increase productivity. Our simulations additionally indicate that even modest productivity increases from immigration benefits the average income of natives.

The report says migration brings big gains to recipient countries and provides an opportunity for a better life to migrants. It may also create distributional challenges, as native workers in specific market segments could be hurt economically, at least temporarily.

The researchers recommended that recipient nations’ fiscal and labour market policies should be used to support the income and retraining of those natives facing labour market difficulties.

And labour market and immigration policies should be geared toward integrating immigrants, such as language training and easier validation of professional titles, can help build even better outcomes from immigration in recipient countries.

“International policy coordination is needed to tackle the challenges from refugee migration. This includes sharing the costs from hosting refugees and fostering their integration with emerging and developing economies,” the researchers said.

They said that migrating to another country was a costly business and explained why only a very small fraction of the population migrates.

But a major reason why people migrate is income differences between origin and destination countries, the report said.

“Richer countries attract more immigrants, especially from countries with younger populations. Countries with lower per capita income experience more emigration, but only if they are not too poor,” it said.

“We find that when per capita income at the origin is below $7000, countries with lower incomes have lower emigration toward advanced economies. This suggests that people get trapped in poverty since they are deprived of the resources needed to overcome migration costs.

“Wars mainly explain migration between emerging and developing economies—corroborating the importance of geographical proximity for refugee flows. Lastly, and importantly for the analysis of future migration pressures, the size of source country populations is a key driver of migration flows,” the report said.

See the full report here: