Migration to Advanced Economies Can Raise Growth

IMF Blog, June 19, 2020

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Authors: Philipp Engler, Margaux MacDonald, Roberto Piazza, Galen Sher
Published: June 19, 2020

Overview and context

Migration has been the focus of intense political debate; public perceptions are often positive but misconceptions persist (for instance, that migrants are a burden on economies).
The analysis is based on Chapter 4 of the April 2020 World Economic Outlook, “The Macroeconomic Effects of Global Migration,” by Philipp Engler, Keiko Honjo, Margaux MacDonald, Roberto Piazza (team leader) and Galen Sher, under the guidance of Florence Jaumotte.
The pandemic has led to an abrupt stop to migration; while the Great Lockdown is temporary, it may add to longer term reticence toward openness and reduce countries’ willingness to receive migrants.

Migration patterns and key statistics

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.
The share of migrants in the world’s population has hovered around 3 percent over the past 60 years.
The share of immigrants in the total population of advanced economies rose from 7 percent to 12 percent.
The share of immigrants in emerging market and developing economies has remained at around 2 percent.
Migration often occurs within home regions, but significant long-distance flows occur (for example, from South Asia to the Middle East); a pronounced flow is from emerging market and developing economies toward advanced economies.
Refugee migration is more localized; emerging and developing economies are both the origin and the main destination of refugees.

Drivers of migration (push and pull factors)

High migration costs (geographic and linguistic barriers) explain why only a very small fraction of the population migrates.
Income differences between origin and destination countries are a major driver: 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: when per capita income at the origin is below $7000, countries with lower incomes have lower emigration toward advanced economies (poverty can trap people by depriving them of resources needed to overcome migration costs).
Wars mainly explain migration between emerging and developing economies, highlighting the importance of geographical proximity for refugee flows.
The size of source country populations is a key driver of migration flows.

Economic impact on recipient countries

Immigrants in advanced economies increase output and productivity both in the short and medium term.
A 1 percentage point increase in the inflow of immigrants relative to total employment increases output by almost 1 percent by the fifth year.
Complementarities in skills between native and immigrant workers raise productivity and, in simulations, even modest productivity increases from immigration benefit the average income of natives.
The positive productivity impact is not visible for refugee immigration to emerging market and developing economies, reflecting integration difficulties of these migrants into local labor markets.

Future migration pressures and scenarios

The population in emerging market and developing economies (in sub-Saharan Africa in particular) will continue to rise over the next 30 years; migration pressures toward advanced economies are likely to increase.
Example scenario: migration pressures building up from Africa and the Middle East to Europe between 2020 and 2050.
Global migration pressures are projected to remain roughly constant at 3 percent of the world’s population.
Higher incomes in emerging market and developing economies will reduce migration pressures in general, but for poorer countries (like those in sub-Saharan Africa) rising (though still low) incomes may enable more people to emigrate.
Climate change is expected to significantly increase internal and regional migration in emerging market and developing economies; its impact on migration toward advanced economies is less clear-cut because lower incomes in many poorer countries may “trap” more individuals in their region of origin.

Policy implications and recommendations

Migration provides big gains to recipient countries and opportunities for migrants, but can create distributional challenges: native workers in specific market segments could be hurt economically, at least temporarily.
Fiscal and labor market policies should be used to support income and retraining for natives facing labor market difficulties.
Active labor market and immigration policies to integrate immigrants—such as language training and easier validation of professional titles—can enhance outcomes from immigration in recipient countries.
International policy coordination is needed to tackle refugee migration challenges, including sharing the costs of hosting refugees and fostering their integration with emerging and developing economies.

Based on Chapter 4 of the World Economic Outlook, “The Macroeconomic Effects of Global Migration,” by Philipp Engler, Keiko Honjo, Margaux MacDonald, Roberto Piazza (team leader) and Galen Sher, under the guidance of Florence Jaumotte.