## Emigration Slows Eastern Europe’s Catch Up With the West

_IMF Blog, July 20, 2016_

## Source details

**Canonical URL:** [Emigration Slows Eastern Europe’s Catch Up With the West](https://www.imf.org/en/blogs/articles/2016/07/20/emigration-slows-eastern-europes-catch-up-with-the-west)

## Other formats

- [Markdown version](/en/blogs/articles/2016/07/20/emigration-slows-eastern-europes-catch-up-with-the-west/index.md)
- [Structured JSON version](/en/blogs/articles/2016/07/20/emigration-slows-eastern-europes-catch-up-with-the-west/index.json)
- [Bundle manifest](/en/blogs/articles/2016/07/20/emigration-slows-eastern-europes-catch-up-with-the-west/bundle-manifest.json)

## Bibliographic details
- Authors: Nadeem Ilahi, Anna Ilyina, Daria Zakharova
- Published: July 20, 2016

---

### Overview and scale of emigration
- Close to 20 million, mostly young and skilled Eastern Europeans, left their countries over the past 25 years to seek better opportunities abroad — equal to the combined population of the Czech Republic and Hungary.
- Emigration has been sizable and persistent since the early 1990s opening up of Eastern Europe.

### Main drivers and characteristics of migration
- Economic motives predominate: the primary motivation to leave is better jobs and higher pay.
- Migrants tend to be younger and highly skilled (examples given: doctors, architects, engineers).
- Weaker government effectiveness and weaker institutions (guarding the rule of law, upholding accountability and fighting corruption) increase the likelihood that young and educated people emigrate.

### Economic impact on sending countries (Eastern Europe)
- Emigration slowed both overall and per capita output growth rates.
- Analytical IMF staff work estimates that in the absence of emigration between 1995 and 2012, real GDP growth would have been altogether 7 percentage points higher on the average in the region.
- Skills shortages lowered productivity growth in Eastern Europe.
- Large inflows of remittances supported investment and consumption but also:
  - Led to exchange rate appreciation, making economies less competitive.
  - Pushed up starting wages and reduced incentives to work, causing wages to rise faster than productivity and eroding returns on investment.
- Fiscal and labor-market consequences:
  - Lower output increased government spending on social benefits relative to GDP.
  - Aging demographics (departure of young) increased spending on retirement benefits relative to GDP.
  - Governments often responded by raising labor taxes, which lowered employers’ incentives to create jobs and made budgetary structures less jobs- and growth-friendly.

### Impact on receiving countries and the EU
- Westward migration contributed to stronger growth in Western European countries and was an economic boon for the European Union as a whole.
- Economic migration is framed as an indicator of the European Union project's success (freedom of movement aiding economic integration and higher incomes).

### Policy recommendations — For Eastern Europe (sending countries)
- Improve institutions and economic policies to:
  - Make countries more attractive for people to stay.
  - Encourage emigrants to return.
  - Attract workers from other countries.
- Consider further liberalization of immigration regimes, especially for skilled workers.
- Work with diasporas abroad to leverage expertise and savings, and provide incentives for remittances to be invested rather than spent.
- Retain and better utilize existing workforce through:
  - Better matching of education to employment needs.
  - More opportunities for on-the-job training.
- Fiscal policy choices matter: avoid increases in labor taxes; rely more on consumption taxes to be more conducive for investment and long-run growth.

### Policy recommendations — For the European Union (collective response)
- Given that East-West migration benefited the European Union as a whole, consider better redistributing the gains.
- Example measure: explicitly account for the negative effects of emigration on sending countries’ economic potential when determining the size and composition of European Union structural and cohesion funds.
- Such redistribution would align with the EU goal of reducing economic and social disparities across regions and promoting sustainable development.

*Source: IMF blog post by Nadeem Ilahi, Anna Ilyina, Daria Zakharova, July 20, 2016.*

---

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---

## References

- [study](http://www.imf.org/external/pubs/cat/longres.aspx?sk=42896.0)
- [https://www.imf.org/wp-content/uploads/2016/07/emigration-chart1.jpg](https://www.imf.org/wp-content/uploads/2016/07/emigration-chart1.jpg)
- [https://www.imf.org/wp-content/uploads/2016/07/emigration-chart2.jpg](https://www.imf.org/wp-content/uploads/2016/07/emigration-chart2.jpg)
- [https://www.imf.org/wp-content/uploads/2016/07/emigration-chart3.jpg](https://www.imf.org/wp-content/uploads/2016/07/emigration-chart3.jpg)
- [here](http://www.imf.org/external/mmedia/view.aspx?vid=5042244115001)

_Source: https://www.imf.org/en/blogs/articles/2016/07/20/emigration-slows-eastern-europes-catch-up-with-the-west_