## Chapter 4: The Macroeconomic Effects of Global Migration ## Source details **Canonical URL:** [Chapter 4: The Macroeconomic Effects of Global Migration](https://www.imf.org/-/media/files/publications/weo/2020/april/english/ch4.pdf) ## Other formats - [Markdown version](/-/media/files/publications/weo/2020/april/english/ch4.pdf.md) - [Structured JSON version](/-/media/files/publications/weo/2020/april/english/ch4.pdf.json) --- ### Introduction and scope - Key questions addressed: - How has migration evolved over the past decades? What have been its drivers? - How will migration flows evolve? How will demographic and income developments affect migration flows? - What are the macroeconomic effects of migration in destination countries? How do policies shape these effects? What is the impact of migration on the global economy? - Context and scope: - Human beings have migrated since the dawn of time. - In 2019 270 million people in the world were migrants, defined in this chapter as individuals not living in their country of birth. - In absolute terms, the migrant population has increased by almost 120 million since 1990. - The number of migrants has been strikingly stable in proportion to the world population, hovering at about 3 percent over the past 60 years (De Haas and others 2019). - Immigrants in advanced economies make up about 12 percent of the population, up from 7 percent in 1990. - Migrants to emerging market and developing economies (EMDEs) constitute only 2 percent of the population and are composed to a significant extent of refugees. - The chapter does not consider all aspects of migration, in particular, its distributional effects. ### Main findings (overview) - Migration flows are shaped by demography at origin and income levels at origin and destination; conflicts are important drivers between EMDEs; migration costs are large. - Migrants as a share of the global population will remain broadly stable under a baseline scenario. - Continued rapid population growth in EMDEs will mean migration toward advanced economies will keep rising relative to the size of the native populations, even if higher incomes in source countries partly attenuate emigration pressures. - Climate change is expected to increase internal and short-distance migration; implications for international long-distance migration are less clear. - Large immigration waves raise output and productivity in advanced economies in the short and medium term; refugee flows into EMDEs do not appear to produce similar rapid gains. - Active labor market policies, vocational training and adult education, and integration policies can boost macroeconomic gains from immigration. - International financial support and policy coordination are needed to address refugee crises and support integration of refugees in destination countries. - Migration raises world GDP, in particular by raising productivity; average per capita incomes of natives increase as their skills are complemented with those of migrants. - Remittances lift income per capita in origin countries, helping to offset potentially negative effects of emigration. ### Stylized facts and quantitative patterns - Global migrant share has been about 3 percent over the past 60 years. - The migrant population in absolute terms increased by almost 120 million since 1990. - Advanced-economy immigrant share: about 12 percent (latest), up from 7 percent in 1990. - Migrant share in EMDEs: 2 percent. - The world share of migrants currently stands at 3.5 percent. - Between 1990 and 2019 the share of migrants from EMDEs to advanced economies rose from 4 percent to 9 percent of the advanced economy population. - EMDE-to-EMDE migration remained stable at about 2 percent of the EMDE population. - Per capita GDP in advanced economies is still almost five times as large as in EMDEs. - The number of countries with annual income per capita below $7,000 (in 2011 international dollars) has declined dramatically; sub-Saharan Africa remains an exception with a significant number of low-income countries. - Refugee stocks at the end of 2018: - Refugees: 20.36 million - Asylum-seekers: 3.50 million - Other populations of concern: 3.78 million - Large cumulative inflows of refugees, amounting to more than 1 percent of the destination countries’ population, have been observed in Germany and Turkey. - Extreme cases—immigration well above 4 percent of the recipient countries’ population—have occurred in Colombia (after the Venezuelan crisis) and in Jordan and Lebanon (resulting from the conflict in Syria). ### Migration corridors and patterns - Migration is uneven and follows evolving corridors, largely within broad regions where geographical and cultural barriers are lower. - Large interregional corridors include: - Latin America and the Caribbean to North America - South Asia to the Middle East - Middle East and North Africa to Europe ### Drivers of migration (gravity-model conclusions) - Approach: baseline gravity model treats migration as a choice weighing costs and benefits (wage gains, escape from conflict, welfare, climate adaptation) against costs (geographical, cultural, linguistic barriers; policy restrictions). - Key driver findings: - Migration is difficult and costly: more than half of the explained variation of migration flows can be attributed to geographical and cultural barriers. - Distance and lack of border contiguity significantly impede bilateral migration flows. - Lack of a common language or a former colonial link add important cultural and political barriers. - Demography at origin matters: larger populations in origin countries lead to more emigrants. - Holding population size constant, people in younger societies do not seem to emigrate more on average, but they emigrate more to countries where the income gap is larger. - Conflicts are important for EMDE migration: more intense conflicts drive more emigration, especially toward other EMDEs, though the effect appears temporary. - Refugees are a much more important component of immigration into EMDEs. - Migrants respond to income levels; below a threshold of $7,000 an increase in income provides means to emigrate toward advanced economies. ### Role of income at origin and destination (EMDEs to AEs) - Both origin and destination per capita income levels matter on their own. - If migration costs to advanced economies equaled those to EMDEs, virtually all world migration would be directed toward advanced economies. - Poverty-trap and threshold effects: - For very low origin per capita income, a marginal rise in income increases emigration (poverty trap effect). - Threshold for emigration toward other EMDEs: about $2,000. - Threshold for emigration toward advanced economies: about $7,000. - Economic growth in countries with income between $2,000 and $7,000 reduces emigration toward EMDEs while increasing it toward advanced economies. - Baseline gravity-model result: average world emigration flow equals 0.5 percent of origin population. - The gravity model explains more than 50 percent of variation in migration flows. ### Additional migration drivers and composition effects - Previous migrant stock increases migration due to network effects. - In OECD countries, tighter entry requirements and fewer integration measures are associated with reduced immigration; estimated coefficients suggest secular relaxation of entry requirements over past three decades is consistent with an increase in net immigration flows of about 35 percent (correlation, not strict causation). - Climate change affects international migration through income impacts; natural disasters, extreme temperatures and storms have additional small effects increasing emigration. - Currency crises are associated with more emigration beyond income effects; evidence for banking and debt crises is less clear. - No evidence for “welfare shopping” when destination government spending is used as proxy. - Composition: - Destination countries with a higher skill premium attract relatively more educated immigrants. - Origin countries with lower skill premiums feature emigrant populations relatively more skilled than the native population. - Lower bilateral migration costs (common border, diaspora network, shorter distances) tilt migration toward lower-skilled migrants. - A common language increases high-skilled immigration. ### Future migration scenarios (2020–50): methodology - Scenarios based on baseline regression reestimated using bilateral migration stocks; coefficients applied to future values of drivers. - Common assumptions: - Geographic and linguistic variables constant. - Demography evolves according to United Nations population projections. - Three income scenarios: 1. Baseline: Starting in 2019 real GDP per capita in the United States grows at a constant rate of 1.6 percent a year; other countries follow convergence paths to the United States determined by country-specific convergence rates estimated in Chapter 3 of the October 2019 WEO for 2008–17. 2. Higher growth in EMDE scenario: Per capita growth in each EMDE is assumed to be 1 percentage point higher a year. 3. Climate change scenario: Warming temperatures under “High Emission” Scenario 8.5 of the IPCC affect per capita GDP according to the nonlinear relationship estimated in the October 2017 WEO (effects explored through the income channel). ### Baseline scenario (2020–2050) findings - World migrant share between 2020 and 2050 is nearly stable, at just above 3 percent of the world population. - Share of EMDE immigrants into advanced economies increases to about 16 percent of the total population of advanced economies (driven by rise in absolute number of immigrants and population aging/fall in native population). - Rising population in EMDEs and emigration shifting toward advanced economies cause a fall in immigrant share in EMDE population. - Regional changes in migration pressures (absolute changes in millions of individuals, 2020–2050): - Migration pressures build up from Africa and the Middle East to Europe, largely due to a population boom in sub-Saharan Africa. - Under the baseline, sub-Saharan Africa population would increase by 1 billion between 2020 and 2050, generating out-regional migration pressure of 31 million individuals. - Under the baseline, the emigration rate in sub-Saharan Africa increases from 0.7 percent to just below 2 percent. - Migration pressures within Europe & central Asia fall (higher income per capita and falling population in the group of emerging market economies within the region). - Immigration pressure from south Asia into the Middle East falls because of south Asia’s continuing income convergence. - Growing population in Latin America & the Caribbean exerts continuing pressure on immigration to North America, though with less intensity than in the past. ### Alternative scenarios: higher EMDE growth and high temperature - Higher EMDE growth scenario (1 percentage point higher per year): - Migration pressures fall in all emigration-prone regions, including Africa and the Middle East taken as a whole. - Exception: sub-Saharan Africa emigration pressure increases marginally because higher growth alleviates poverty traps still present in many countries. - Higher growth in EMDEs reduces migration overall, but total effect is not very large. - High Temperature (climate change) scenario (IPCC “High Emission” Scenario 8.5): - Emigration pressures over next three decades from climate change are modest for two reasons: 1. Scenario ends in 2050, when temperature increase is still relatively modest. 2. Presence of poverty traps in hot regions reduces out-regional migration. - Climate change adds to emigration pressures for typical emigration regions except sub-Saharan Africa, where additional warming worsens the poverty trap and reduces out-regional migration pressures. - Interaction of lower growth or higher temperatures with poverty traps increases intraregional migration pressures. - Substantial uncertainties remain about future climatic impacts on international migration. ### Empirical analysis: large immigration waves (advanced economies) - Identification exploits historical settlement networks and refugee proximity to origin countries; a local projection framework is used to trace macro responses to instrumented immigration shocks. - Reported response corresponds to a 1 percentage point increase in the ratio of the immigrant flow relative to (the lag of) total employment. - Findings in advanced economies: - Output increases by almost 1 percent by the fifth year after the immigration shock. - About two-thirds of the output increase is attributed to an increase in labor productivity and the remaining one-third to employment growth (employment growth described as borderline insignificant). - Total factor productivity (TFP) rises in line with labor productivity. - Capital stock responds immediately, raising the capital-labor ratio. - No detectable effect found on the aggregate growth rate of native employment. - Immediate labor productivity response indicates significant dynamic gains even in the short term. - Complementarity between native and immigrant workers is emphasized as a mechanism; literature finds very limited effect of migration on average wages or employment of native workers. - Caveats: - Instrumental variables may not fully eliminate reverse causality (which would bias positive effects downward if present). - Increased heterogeneity could reduce support for public goods provision. - Higher initial unemployment in destination country may reduce aggregate gains. ### Role of policies in destination countries (correlations) - Three policy indicators examined in interactions with immigration shocks: 1. Spending on vocational training and adult education. 2. Spending on active labor market policies. 3. Integration restrictiveness (tighter policies related to immigrant integration). - Correlational findings: - Higher spending on vocational and adult training is associated with greater employment growth after an immigration shock. - Higher spending on active labor market policies is associated with greater employment growth after an immigration shock. - Tighter integration-restrictive policies are associated with lower employment growth after an immigration shock. - Results align with prior findings that tighter immigration policies are associated with lower labor force participation. ### Refugee inflows and EMDE outcomes - Refugee migration differs from economic migration: refugees flee on short notice, are less likely to target destinations based on skills or language, face legal and physical barriers to labor market entry, and are more likely to be nonworking. - Refugee home and host countries tend to be primarily EMDEs; labor market outcomes of refugees are significantly worse than natives and initially tend to generate net fiscal costs. - After a 1 percent increase in refugee inflow, there is no detectable short-term effect on output and productivity in EMDEs (estimates not designed to capture very large inflows). - Extreme refugee episodes (immigration flows greater than 4 percent of recipient country’s population) can have significant macroeconomic impact, especially when recipient economy suffers spillovers from neighboring conflict. - Policies facilitating labor market integration (low linguistic/cultural barriers, work permits) can allow even very large refugee waves to increase GDP and employment and attenuate fiscal costs. - Policies associated with improved outcomes: language training, physical and mental health support, shorter refugee recognition processes, shorter stays in asylum accommodations. - Policies with detrimental effects: regional dispersal assigning asylum seekers around the country and temporary employment bans. - International coordination is called for to resettle refugees and share fiscal costs. ### Long-term model simulations (through 2050) — calibration and results - Model scope: all Group of Twenty economies individually plus other regional groups; simulations account for future domestic population changes and future migration flows between a selected subset of countries. - Key calibration assumptions: - Total immigration into subset of receiving countries evolves according to the baseline scenario. - Upon arrival, immigrants have lower productivity than natives (but higher than in origin country) and earn a lower wage on average; productivity gap closes within 15 years. - Immigrants remit a fixed share of their labor income to origin countries; they face the same tax rates as natives and receive the same amount of transfers per capita as natives. - The model does not endogenously generate TFP increases from immigration; simulated TFP effects are introduced exogenously ranging from a lower bound of zero to an upper bound of a 1 percentage point increase in TFP for every additional 1 percentage point in the immigrant-to-total-employment ratio. - Simulation results (percentage deviations from the baseline): - Native population growth increases world GDP by about 4 percent between 2020 and 2050. - Migration flows alone (abstracting from TFP and wage catch-up effects) are responsible for an additional 2 percent growth in global output. - Gradual closing of productivity gap between immigrants and natives provides an additional small contribution to global GDP. - Positive TFP effects of immigrants (when assumed) add up to 4 percent to global growth. - Disaggregated impacts: - Positive GDP impact for the United States and the euro area from a larger labor force, increased investment, and potential higher TFP. - In the euro area, immigration helps buffer negative impact of declining native population on level of GDP. - Negative effects for Russia and Saudi Arabia reflect assumed reductions in immigration for those countries. - Per capita and fiscal outcomes: - When focusing only on immigration effects and netting out remittances: - Without TFP gains, small decreases in per capita net income are seen in some destinations (especially in the euro area) because arriving migrants are initially somewhat less productive than natives. - With relatively modest TFP increases, effects turn positive for per capita income. - Empirical evidence finds immigrants generally associated with small budget surpluses or deficits of about half a percentage point of GDP. - Simulations find overall small budget surpluses in destination countries driven by general equilibrium effects (including higher capital income of natives), even without positive TFP effects. - Effects on origin countries: - GDP falls in emigration economies in Europe, in the rest of the world, and in Mexico. - Income per capita, including remittances, increases in origin countries. - Positive impact on income per capita in Mexico is particularly strong when migrants are assumed to increase TFP in destination countries due to higher remittances and trade and world price effects. ### Key policy implications and considerations - Policies that enhance skills and labor market integration (vocational/adult training, active labor market policies, language training, faster recognition processes, work permits) are associated with better employment and integration outcomes after immigration shocks. - Tighter integration-restrictive policies and policies that prevent labor market access (temporary employment bans, certain dispersal approaches) are associated with worse labor market outcomes. - International coordination is recommended to share fiscal costs and support large refugee movements given humanitarian and economic considerations. - Distributional implications and short-term losers are not fully addressed by aggregate analysis; microdata studies highlight potential local or sectoral losers, especially in the short term. ### Box 4.1 — Immigration, labor markets, and automation (high-level conclusions) - Aggregate conclusions: - Migration generally improves macroeconomic outcomes of recipient economies. - Dynamic gains from immigration (rising TFP and investment) arise from complementarity between skills of immigrants and natives. - Aggregate gains are large and quick to materialize. - Migration toward advanced economies has been growing rapidly and will likely continue; demographic factors will play an important role. - EMDEs are both origin and destination of most of the world’s refugees and are particularly exposed to climate-change–induced migration. - Distributional and origin-country considerations: - Positive macro impact can bring negative distributional consequences for some individuals; fiscal intervention can address distributional concerns. - Simulations do not incorporate potential negative effects on origin-country TFP from brain drain. - Emigration may create incentives to accumulate human capital among non-emigrants. - Interaction with automation: - Empirical approaches find small aggregate impacts of immigration on native wages at horizons of 10 years or more, but effects are highly differentiated across subgroups. - Low-skilled immigration affects more negatively natives without high school and possibly disadvantaged minorities. - High-skilled immigration evidence is mixed. - Automation causes job polarization; immigration into low-paying service jobs can attenuate polarizing effects on natives’ incomes. - Case evidence: - Germany: foreign labor supported employment growth after the global financial crisis; macro evidence shows no discernible residual contribution by immigration to wage growth; microdata suggest immigration had negligible effects on aggregate wage growth and possibly slightly positive marginal impact after accounting for composition. - Venezuela crisis: 4.8 million Venezuelans (15 percent of population) had emigrated by end of 2019; 4 million settled in other Latin America and Caribbean countries; projected public spending related to migration could reach about 0.5 percent of GDP in Colombia by 2024, 0.4 percent in Ecuador, 0.3 percent in Peru, and 0.1 percent in Chile; Venezuela’s migration estimated to raise GDP by 3–5 percentage points between 2017 and 2027 in recipient economies. *Source: Chapter 4, "The Macroeconomic Effects of Global Migration," World Economic Outlook: The Great Lockdown (April 2020).* ### Introduction ### ch4 - Introduction ### Key questions addressed - How has migration evolved over the past decades? What have been its drivers? - How will migration flows evolve? How will demographic and income developments affect migration flows? - What are the macroeconomic effects of migration in destination countries? How do policies shape these effects? What is the impact of migration on the global economy? ### Summary of context and scope - Human beings have migrated since the dawn of time. - In 2019 270 million people in the world were migrants, defined in this chapter as individuals not living in their country of birth. - In absolute terms, the migrant population has increased by almost 120 million since 1990. - The number of migrants has been strikingly stable in proportion to the world population, hovering at about 3 percent over the past 60 years (De Haas and others 2019). - Immigrants in advanced economies make up about 12 percent of the population, up from 7 percent in 1990. - Migrants to emerging market and developing economies (EMDEs) constitute only 2 percent of the population and are composed to a significant extent of refugees. - The chapter does not consider all aspects of migration, in particular, its distributional effects. ### Chapter approach and analytical components - Presents recent trends in migration, differentiating between various types of migrants. - Estimates the drivers of migration using a standard gravity model and bilateral migrant stock statistics (1990–2015). - Builds scenarios for the evolution of global migration based on the estimated model of drivers. - Quantifies the macroeconomic effects of migration using empirical estimations and global model simulations. - Empirical analysis focuses on the effects of large waves of immigration in destination countries. - Model simulations present the potential impact of migration at the global level and in source and destination countries. ### Main findings - Migration flows are shaped by the evolution of demographics at the origin and by income levels at the origin and destination. Conflicts are important drivers of migration between EMDEs. Migration costs are large. - Migrants as a share of the global population will remain broadly stable under a baseline scenario. - Continued rapid population growth in EMDEs will mean that migration toward advanced economies will keep rising relative to the size of the native populations, even if higher incomes in the source countries partly attenuate those emigration pressures. - Although climate change is expected to increase internal and short-distance migration, its wider implications for international and long-distance migration—such as from EMDEs to advanced economies—is less clear based on existing evidence. - Large immigration waves raise output and productivity in advanced economies in the short and medium term, pointing to significant dynamic gains for the economy as a whole. Refugee flows into EMDEs do not appear to produce similar rapid gains. - Active labor market policies, spending on vocational training and adult education, and policies aimed at integrating migrants could boost the macroeconomic gains from immigration. - International financial support and policy coordination are needed to address refugee crises and support the integration of refugees in destination countries. - Migration raises world GDP, in particular by raising productivity. Average per capita incomes of natives increase as their skills are complemented with those of migrants. - Remittances from abroad lift income per capita in the origin countries, helping to offset the potentially negative effects of emigration. ### Stylized facts and quantitative patterns - Global migrant share has been about 3 percent over the past 60 years. - The migrant population in absolute terms increased by almost 120 million since 1990. - Advanced-economy immigrant share: about 12 percent (latest), up from 7 percent in 1990. - Migrant share in EMDEs: 2 percent. - The world share of migrants currently stands at 3.5 percent. - Between 1990 and 2019 the share of migrants from EMDEs to advanced economies rose from 4 percent to 9 percent of the advanced economy population. - EMDE-to-EMDE migration remained stable at about 2 percent of the EMDE population. - Per capita GDP in advanced economies is still almost five times as large as in EMDEs. - The number of countries with annual income per capita below $7,000 (in 2011 international dollars) has declined dramatically; sub-Saharan Africa remains an exception with a significant number of low-income countries. - Refugee stocks at the end of 2018: - Refugees: 20.36 million - Asylum-seekers: 3.50 million - Other populations of concern: 3.78 million - Large cumulative inflows of refugees, amounting to more than 1 percent of the destination countries’ population, have been observed in Germany and Turkey. - Extreme cases—immigration well above 4 percent of the recipient countries’ population—have occurred in Colombia (after the Venezuelan crisis) and in Jordan and Lebanon (resulting from the conflict in Syria). ### Stylized migration patterns and corridors - Migration follows uneven and evolving patterns along migration corridors. - Migration occurs largely within broadly defined world regions (for example, within Europe and central Asia), where geographical and cultural barriers are lower. - Large interregional corridors include: - Latin America and the Caribbean to North America - South Asia to the Middle East - Middle East and North Africa to Europe ### Drivers of migration (model-based conclusions) - The empirical gravity-model approach treats migration as a choice weighing costs and benefits (wage gains, escape from conflict, welfare, climate adaptation) against costs (geographical, cultural, linguistic barriers; policy restrictions). - Baseline-driver estimation and main conclusions: - Migration is difficult and costly. More than half of the explained variation of migration flows can be attributed to the effect of geographical and cultural barriers. - Distance and lack of border contiguity are significant impediments to bilateral migration flows. - Lack of a common language or a former colonial link also add important cultural and political barriers. - Demography in origin countries matters. Larger populations in origin countries lead to more emigrants. - Holding population size constant, people in younger societies, on average, do not seem to emigrate more, but they do emigrate more to countries where the income gap is larger. - Conflicts are important for EMDE migration. More intense conflicts drive more emigration, especially toward other EMDEs, although the effect appears to be temporary. - Refugees are a much more important component of immigration into EMDEs. - Migrants respond to income levels. In addition to the interacted effect of income gaps and youth, below a threshold of $7,000 an increase in income provides individuals with the means to emigrate toward advanced economies. ### Migration policy trends and composition effects - Immigration policies at the global level have generally become less restrictive since the end of World War II, although the liberalization trend appears to have slowed more recently and reversed in some cases. - Liberalization trends are evident in policies that regulate the entry and integration of immigrants, while policies concerning internal and border controls have tightened over time. - Policies targeting high-skilled individuals have become common in the past two decades. - Migrants from poor to rich countries are usually more educated than the average population in the origin country. - The effectiveness of migration policies in regulating migration flows is debated in the literature. ### Policy implications highlighted - Policies that support education and retraining can increase aggregate gains from immigration and facilitate adjustment for individuals who face temporary difficulties. - Active labor market policies, vocational training, adult education, and integration policies can magnify macroeconomic gains from immigration. - International financial support and policy coordination are necessary to address refugee crises and support refugee integration in destination countries. *Source: Chapter 4, "The Macroeconomic Effects of Global Migration," World Economic Outlook: The Great Lockdown (April 2020).* ### 1. From EMDEs to AEs ### 1. From EMDEs to AEs ### Role of income at origin and destination - The level of both per capita income at origin and at destination matter on their own. - The pull effect of income in destination countries: if migration costs to advanced economies were the same as those toward EMDEs, then virtually all world migration would be directed toward advanced economies. - For very low levels of origin per capita income, a marginal rise in income increases the emigration rate (poverty trap effect). - For income levels beyond a threshold, further increases in income lead to less emigration. - Threshold for emigration toward other EMDEs: about $2,000. - Threshold for emigration toward advanced economies: about $7,000. - Economic growth in countries with income between $2,000 and $7,000 reduces emigration toward EMDEs while increasing it toward advanced economies. - The baseline gravity model shows the average world emigration flow is equal to 0.5 percent of origin population. ### Explained variation and model performance - The gravity model explains more than 50 percent of variation in migration flows. - The model captures gradual migration flows and non-extreme conflicts well but is less successful in precisely fitting extreme migration events (economic collapses or destructive wars). ### Additional drivers - A previous stock of migrants from the same origin country significantly increases migration due to network effects. - In OECD countries, tighter immigration policies on entry requirements and fewer integration measures are associated with reduced immigration. - Estimated coefficients suggest secular relaxation of entry requirements over the past three decades is consistent with an increase in net immigration flows of about 35 percent (correlation, not strict causation). - Climate change affects international migration through its impact on income levels; natural disasters, particularly extreme temperatures and storms, have additional effects that lead to a further but small increase in emigration. - Currency crises are associated with more emigration beyond their effects on income; evidence for banking and debt crises is less clear. - No evidence for “welfare shopping” by international migrants when destination country government spending is used as a proxy. ### Composition of migration - Destination countries with a higher skill premium attract a relatively more educated group of immigrants. - Origin countries with a relatively lower skill premium feature emigrant populations that are relatively more skilled than the native population. - Drivers associated with lower bilateral migration costs (common border, diaspora network, shorter distances) tilt migration toward lower-skilled migrants. - A common language increases high-skilled immigration. ### Future migration scenarios (2020–50) — methodology - Scenarios are based on baseline regression reestimated using bilateral migration stocks; estimated coefficients applied to future values of migration drivers. - Common assumptions across scenarios: - Geographic and linguistic variables kept constant. - Demographic variables evolve according to United Nations population projections. - Three scenarios differ by assumptions for evolution of income per capita: 1. Baseline scenario: Starting in 2019 real GDP per capita in the United States grows at a constant rate of 1.6 percent a year; all other countries follow convergence paths to the United States determined by country-specific convergence rates estimated in Chapter 3 of the October 2019 WEO for 2008–17. 2. Higher growth in EMDE scenario: Per capita growth in each EMDE is assumed to be 1 percentage point higher a year. 3. Climate change scenario: Warming temperatures under “High Emission” Scenario 8.5 of the IPCC affect per capita GDP according to the nonlinear relationship estimated in the October 2017 WEO (effects explored through the income channel). ### Baseline scenario findings - World migrant share between 2020 and 2050 is nearly stable, at just above 3 percent of the world population. - The share of EMDE immigrants into advanced economies increases to about 16 percent of the total population of advanced economies (driven by a rise in the absolute number of immigrants and population aging/fall in native population). - Rising population in EMDEs and emigration patterns shifting toward advanced economies cause a fall in the immigrant share in the population of EMDEs. - Regional changes in migration pressures (absolute changes in millions of individuals, 2020–2050): - Migration pressures build up from Africa and the Middle East to Europe, largely due to a population boom in sub-Saharan Africa. - Under the baseline, sub-Saharan Africa population would increase by 1 billion between 2020 and 2050, generating out-regional migration pressure of 31 million individuals. - Under the baseline, the emigration rate in sub-Saharan Africa increases from 0.7 percent to just below 2 percent. - Migration pressures within Europe & central Asia fall (higher income per capita and falling population in the group of emerging market economies within the region). - Immigration pressure from south Asia into the Middle East falls because of south Asia’s continuing income convergence. - Growing population in Latin America & the Caribbean exerts continuing pressure on immigration to North America, though with less intensity than in the past. ### Alternative scenarios: higher EMDE growth and high temperature - Higher EMDE growth (1 percentage point higher per year) scenario: - Migration pressures fall in all emigration-prone regions, including Africa and the Middle East taken as a whole. - Exception: sub-Saharan Africa emigration pressure increases marginally because higher growth alleviates poverty traps still present in many countries. - Higher growth in EMDEs reduces migration overall, but the total effect is not very large. - High Temperature (climate change) scenario (IPCC “High Emission” Scenario 8.5): - Overall, emigration pressures over the next three decades stemming from climate change are modest for two reasons: 1. The scenario ends in 2050, when the increase in temperature is still relatively modest. 2. Presence of poverty traps in hot regions reduces out-regional migration. - Climate change adds to emigration pressures for typical emigration regions except sub-Saharan Africa, where additional warming worsens the poverty trap and reduces out-regional migration pressures. - Interaction of lower growth or higher temperatures with poverty traps increases intraregional migration pressures. - The literature is not settled; substantial uncertainties remain about future climatic impacts on international migration. ### Impact of large immigration waves - Analysis focuses on large immigration episodes because they are politically salient and test absorption limits of recipient economies. - Selection of immigration episodes: - For advanced economies: an episode is large if the annual inflow (as a share of population) is greater than the country’s median inflow during 1980–2018 and greater than the median inflow experienced by OECD countries during the previous five-year period and the following five-year period. - For refugee shocks into EMDEs: an inflow (as a share of population) that is within the country’s top 10th percentile of inflows during 1980–2018 and greater than the top 10th percentile experienced by all countries in the world during the previous five-year period and the following five-year period; refugee inflow shock must be sustained for at least two consecutive years. - Examples: - Refugee inflows into Turkey peaked at just above 1 percent of the country’s population (typical large episode focus). - Lebanon experienced inflows reaching 15 percent of the domestic population (top 1 percent of events; considered extreme). _Italic: Source: IMF staff calculations._ ### 1. Migration ### 1. Migration ### Estimation approach and model - Identification strategy for immigration shocks exploits historical settlement networks and refugee proximity to origin countries. - A local projection framework (Jordà 2005) is used to trace responses of macroeconomic variables to instrumented immigration shocks over time. - The model controls for country-specific time-invariant characteristics and for time-varying components common across countries; robustness checks include additional controls (see Online Annex 4.3). ### Effects of immigration in advanced economies - The reported responses show the effect of a 1 percentage point increase in the ratio of the immigrant flow relative to (the lag of) total employment. - Output increases by almost 1 percent by the fifth year after the immigration shock. - About two-thirds of the output increase is attributed to an increase in labor productivity and the remaining one-third to employment growth (employment growth is described as borderline insignificant). - Total factor productivity (TFP) rises in line with labor productivity. - The capital stock responds immediately, raising the capital-labor ratio. - No detectable effect is found on the aggregate growth rate of native employment. - The immediate response of labor productivity indicates significant dynamic gains from immigration even in the short term. - Literature emphasizes complementarity between native and immigrant workers as a mechanism: immigrants often move into occupations in short supply, enabling natives to upgrade skills and specialize; most literature finds a very limited effect of migration on average wages or employment of native workers. - Caveats: instrumental variables may not fully eliminate reverse causality (which would bias positive effects downward if present); increased heterogeneity could reduce support for public goods provision; higher initial unemployment in the destination country may reduce aggregate gains. ### Role of policies (correlations, not strict causal claims) - Three policy indicators examined in interactions with immigration shocks: 1. Spending on vocational training and adult education. 2. Spending on active labor market policies. 3. Integration restrictiveness (tighter policies related to immigrant integration). - Findings (interpreted as correlations due to potential policy endogeneity): - Higher spending on vocational and adult training is associated with greater employment growth after an immigration shock. - Higher spending on active labor market policies is associated with greater employment growth after an immigration shock. - Tighter integration-restrictive policies are associated with lower employment growth after an immigration shock. - These results align with prior findings that tighter immigration policies are associated with lower labor force participation. ### Effects of refugee immigration in emerging market and developing economies (EMDEs) - Refugee migration differs from economic migration: refugees flee on short notice, are less likely to target destinations based on skills or language, face legal and physical barriers to labor market entry, and are more likely to be nonworking individuals. - Refugee home and host countries tend to be primarily EMDEs; labor market outcomes of refugees are significantly worse than those of natives and initially tend to generate net fiscal costs. - After a 1 percent increase in the inflow of refugees, there is no detectable short-term effect on output and productivity in EMDEs (estimates here are not designed to capture very large refugee inflows). - Extreme refugee episodes (immigration flows greater than 4 percent of recipient country’s population) can have significant macroeconomic impact, especially when the recipient economy is already suffering spillovers from neighboring conflict. - Labor market integration is facilitated by low linguistic and cultural barriers and by making work permits available; when these conditions hold, even very large refugee waves can increase GDP and employment and attenuate short-term fiscal costs. - Policies associated with improved refugee labor market outcomes: language training, physical and mental health support, shorter refugee recognition processes, shorter stays in asylum accommodations. - Policies with detrimental effects: regional dispersal policies assigning asylum seekers around the country and temporary employment bans. - International coordination is called for to resettle refugees and share fiscal costs. ### Model simulations and long-term macroeconomic implications (simulations through 2050) - Model scope: all Group of Twenty economies individually plus other regional groups; simulations account for future changes in domestic populations and future migration flows between a selected subset of countries (see Online Annex 4.4 for calibration). - Key calibration assumptions: - Total immigration into the subset of receiving countries evolves according to the baseline scenario outlined earlier in the chapter; Figure 4.19 depicts simulated evolution of immigration shares. - Upon arrival, immigrants have lower productivity than natives (but higher than in origin country) and earn a lower wage on average; the productivity gap closes within 15 years. - Immigrants remit a fixed share of their labor income to origin countries; they face the same tax rates as natives and receive the same amount of transfers per capita as natives. - The model does not endogenously generate TFP increases from immigration; simulated TFP effects are introduced exogenously ranging from a lower bound of zero to an upper bound of a 1 percentage point increase in TFP for every additional 1 percentage point in the immigrant-to-total-employment ratio. - Simulation results (all values expressed in percentage deviations from the baseline): - Native population growth increases world GDP by about 4 percent between 2020 and 2050. - Migration flows alone (abstracting from TFP and wage catch-up effects) are responsible for an additional 2 percent growth in global output. - Gradual closing of the productivity gap between immigrants and natives provides an additional small contribution to global GDP. - Positive TFP effects of immigrants (when assumed) add up to 4 percent to global growth. - Disaggregated impacts: - Positive GDP impact for the United States and the euro area from a larger labor force, increased investment, and potential higher TFP. - In the euro area, immigration helps buffer the negative impact of declining native population on the level of GDP. - Negative effects for Russia and Saudi Arabia reflect assumed reductions in immigration for those countries. - When focusing only on immigration effects and netting out remittances: - Without TFP gains, small decreases in per capita net income are seen in some destinations (especially in the euro area) because arriving migrants are initially somewhat less productive than natives. - With relatively modest TFP increases, effects turn positive for per capita income, underscoring the importance of TFP gains from migration. - Immigration does not have a large negative effect on per capita incomes of natives and could substantially increase those incomes if TFP gains occur. - Fiscal implications: - Empirical evidence finds immigrants are generally associated with small budget surpluses or deficits of about half a percentage point of GDP. - Simulations find overall small budget surpluses in destination countries driven by general equilibrium effects (including higher capital income of natives), even without positive TFP effects. - Effects on origin countries: - GDP falls in emigration economies in Europe, in the rest of the world, and in Mexico. - Income per capita, including remittances, increases in origin countries. - The positive impact on income per capita in Mexico is particularly strong when migrants are assumed to increase TFP in destination countries due to higher remittances and trade and world price effects. ### Key policy implications and considerations - Policies that enhance skills and labor market integration (vocational/adult training, active labor market policies, language training, faster recognition processes, work permits) are associated with better employment and integration outcomes after immigration shocks. - Tighter integration-restrictive policies and policies that prevent labor market access (temporary employment bans, certain dispersal approaches) are associated with worse labor market outcomes. - International coordination is recommended to share fiscal costs and support large refugee movements given humanitarian as well as economic considerations. - Distributional implications and short-term losers are not fully addressed by aggregate analysis; microdata studies highlight potential local or sectoral losers, especially in the short term. *Source: Chapter 4, “The Macroeconomic Effects of Global Migration,” World Economic Outlook: The Great Lockdown (April 2020), International Monetary Fund.* ### Box 4.1). As with the distributional effects of interna- ### Box 4.1. Immigration: Labor Market Effects and the Role of Automation ### Aggregate macroeconomic conclusions - Migration generally improves the macroeconomic outcomes of recipient economies. - The “dynamic gains” from immigration, in the form of rising TFP and investment, can be attributed to the complementarity between the skills of immigrants and natives. - The chapter finds that these aggregate gains are large and quick to materialize. - Migrants are a remarkably stable share of the world population, but only a very small fraction of the world population migrates. - Migration toward advanced economies has been growing rapidly and will likely continue to do so; demographic factors (advanced economies aging rapidly, population growth continuing in EMDEs) will play an important role in the size, direction, and impact of future migration. - EMDEs are both origin and destination of most of the world’s refugees and are particularly exposed to migration induced by climate change. ### Distributional and origin-country considerations - The positive macroeconomic impact of immigration can bring negative distributional consequences for some individuals; fiscal intervention can address distributional concerns. - Simulations discussed do not incorporate some potentially negative effects on origin countries: - Large emigration flows, by reducing the GDP level, can contribute to debt sustainability problems. - The simulations assume emigration does not decrease TFP in source countries; however, negative productivity effects could materialize when emigration of more educated individuals (“brain drain”) occurs. - It is also possible that the opportunity to emigrate creates incentives to accumulate human capital among those who do not emigrate. ### Interaction with automation and labor market adjustment - Migration and technological change interact along several dimensions (see Online Annex 4.5 referenced in the source). - Three main empirical approaches to estimating immigration effects on natives’ labor market outcomes: - Spatial approach (evolution in high-immigration areas). - Skill cell approach (effects on wages of workers with similar skills). - Production function approach (imposes structure on substitutability of different workers). - Overall conclusion from empirical studies: the impact of immigration on the wages of natives is very small, especially at horizons of 10 years or more, but effects are highly differentiated across subgroups. - Low-skilled immigration affects more negatively natives who have not completed high school and possibly disadvantaged minorities. - High-skilled immigration: evidence mixed—some studies find positive impacts on wages and employment of both tertiary-educated and less-educated natives; some find negative effects within narrowly defined high-skilled groups. - Automation: job losses in middle-income jobs lead to income polarization. Immigration into low-paying service jobs can attenuate polarizing effects on natives’ incomes. - Evidence for 15 European countries (data for 1998–2010): - Two patterns emerge from occupational shifts measured by routine task intensity (RTI): - Overall employment shifts away from occupations with initially high RTI (many medium-paying). - Employment shares of immigrants relative to natives grow in low-paying jobs; natives increase employment shares in high-paying occupations with lower RTI. - The adjustment to automation is thus more costly for immigrants. - Note: bubble-chart evidence uses RTI index and change in occupational employment shares; bubble size represents employment share in 2010. ### Case study: Germany (impact on wages) - Foreign labor supported employment growth in Germany after the global financial crisis, with immigrants more than offsetting negative demographic trends. - After accounting for the Hartz I–IV labor market reforms and controlling for inflation expectations, productivity growth, and changes in labor market slack unrelated to immigration, wage growth is explained well by the traditional Phillips curve; no discernible residual contribution by immigration to wage growth at the macroeconomic level. - Microeconomic evidence from an administrative panel (Institut für Arbeitsmarkt- und Berufsforschung) for 2012–16: - After controlling for individual characteristics, business cycle, and endogeneity, there is no evidence that large immigration flows during 2012–16 dampened aggregate wage growth. - Controlling for composition effects (immigrants tend to earn lower wages and be younger/less skilled), the marginal impact of immigration on wages is estimated to be slightly positive. - Competition effects (depress wages of highly substitutable workers) were present but more than offset by complementarity effects (boost wages of natives who complement immigrants). - Immigration increased wages more in the relatively higher-wage job segment where within-sector skills complementarity with migrants is largest. - Negative wage pressures detected on earlier cohorts of migrants active in the same sectors as new migrants. - Overall conclusion for Germany: immigration had negligible effects on the growth of aggregate wages. ### Regional crisis case: Migration from Venezuela (impact on Latin America and the Caribbean) - Venezuela: economic activity contracted by about 65 percent between 2013 and 2019; extreme poverty rose from 10 percent of the population in 2014 to 85 percent in 2018. - United Nations High Commissioner for Refugees (UNHCR) estimates: - 4.8 million Venezuelans (15 percent of the population) had emigrated by the end of 2019. - 4 million settled in other countries in Latin America and the Caribbean. - Colombia received the largest number, followed by Peru, Ecuador, Chile, and Brazil. - Based on current trends, the number of Venezuelan migrants could reach about 10 million in 2024 (figure described as highly uncertain). - Recipient-country effects: - Short-term: pressure on public services and labor markets. - Medium-term: because Venezuelan migrants are relatively educated, potential growth could increase as labor force size and skills expand; downside risks if migrants do not integrate orderly. - Fiscal pressures and public spending estimates (using Colombia as benchmark and projecting to 2024): - Public spending related to migration from Venezuela could reach about 0.5 percent of GDP in Colombia by 2024, 0.4 percent in Ecuador, 0.3 percent in Peru, and 0.1 percent in Chile. - Impact on fiscal deficits would be smaller because tax revenue increases alongside expanding economies. - Growth modeling results: - Venezuela’s migration is estimated to raise GDP by 3–5 percentage points between 2017 and 2027 in recipient economies, driven by labor force expansion and investment. - Migration also leads to higher fiscal and current account deficits; the impact is largest for Colombia. - Policy challenges and recommendations for the region: - Manage the transition when growth has slowed, social tensions have increased, and fiscal consolidation needs exist. - Near-term: facilitate integration of migrants into domestic labor markets and ease processes to validate professional titles or to set up businesses to maximize growth impact and minimize need for public support. - Longer-term: provide migrants access to education and health care to ensure long and productive lives. *Source: Box 4.1 and related boxes in Chapter 4, World Economic Outlook: The Great Lockdown (April 2020).* ### References ### ch4 - References ### Economic impacts of migration and labor markets - Aiyar et al. 2016, “The Refugee Surge in Europe: Economic Challenges.” National Institute Economic Review 235 (1): F16–F31. - Alesina, Baqir, and Easterly 1999, “Public Goods and Ethnic Divisions.” Quarterly Journal of Economics 114 (4): 1243–284. - Alesina, Harnoss, and Rapoport 2015, “Birthplace Diversity and Economic Prosperity.” NBER Working Paper 18699. - Altonji and Card 1991, “The Effects of Immigration on the Labor Market Outcome of Less-Skilled Natives.” In Immigration, Trade, and the Labor Market. - Anelli et al. 2019, “Youth Drain, Entrepreneurship and Innovation.” NBER Working Paper 26055. - Autor and Dorn 2013, “The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market.” American Economic Review 103 (5): 1553–97. - Basso, Peri, and Rahman 2017, “Computerization and Immigration: Theory and Evidence from the United States.” NBER Working Paper 23935. - Bazzi 2017, “Wealth Heterogeneity and the Income Elasticity of Migration.” American Economic Journal: Applied Economics 9 (2): 219–55. - Beerli et al. 2020, “The Abolition of Immigration Restrictions and the Performance of Firms and Workers: Evidence from Switzerland.” NBER Working Paper 25302. - Beine, Docquier, and Ozden 2011, “Diasporas.” Journal of Development Economics 95:30–41. - Borjas 2003, “The Labor Demand Curve Is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market.” Quarterly Journal of Economics 118 (4): 1335–1374. - Borjas 2016, “The Wage Impact of the Marielitos: Additional Evidence.” NBER Working Paper 21850. - Card 1990, “The Impact of the Mariel Boatlift on the Miami Labor Market.” Industrial and Labor Relations Review 43 (2): 245–57. - Card 2001, “Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration.” Journal of Labor Economics 19 (1): 22–64. - Cattaneo, Fiorio, and Peri 2015, “What Happens to the Careers of European Workers When Immigrants ’Take Their Jobs?’” Journal of Human Resources 50 (3): 655–93. - Clemens 2014, “Does Development Reduce Migration?” Center for Global Development Working Paper 359. - Docquier, Ozden, and Peri 2013, “The Labor Market Impact of Immigration and Emigration in OECD Countries.” Economic Journal 124 (579): 1106–145. - Dustmann, Frattini, and Rosso 2015, “The Effect of Emigration from Poland on Polish Wages.” Scandinavian Journal of Economics 117 (2): 522–64. - Foged and Peri 2015, “Immigrants’ Effect on Native Workers: New Analysis on Longitudinal Data.” American Economic Journal: Applied Economics 8 (2): 1–34. - Goos, Manning, and Salomons 2014, “Explaining Job Polarization: Routine-Biased Technological Change and Offshoring.” American Economic Review 104 (8): 2509–526. - Peri (multiple): 2011a, 2011b, 2014 — works on immigrants and labor markets, productivity, and wages. - Peri, Shih, and Sparber 2015a, 2015b — on H-1B visas, STEM workers, and productivity; 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