Development implications of migration and remittances
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Economic Implications of Remittances and Migration Dilip Ratha World Bank Global Consumer Money Transfer Conference London October 30, 2006
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Economic Implications of Remittances and Migration Dilip Ratha World Bank Global Consumer Money Transfer Conference London October 30, 2006. Development implications of migration and remittances. - PowerPoint PPT Presentation
Transcript of Development implications of migration and remittances
Economic Implications of Remittances and Migration
Dilip RathaWorld Bank
Global Consumer Money Transfer ConferenceLondonOctober 30, 2006
Development implications of migration and remittances
Migration and remittances continue to increase. South-South migration may be as large as South-North migration
Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances
There is considerable scope for reducing remittance costs faced by poor migrants
Development implications of migration and remittances
Migration and remittances continue to increase. South-South migration may be as large as South-North migration
Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances
There is considerable scope for reducing remittance costs faced by poor migrants
51 48
11
78
91
22
South (Developingcountries)
North (High-IncomeOECD)
North (High-Incomeexcl. OECD)
Number of migrants in millions
1985 2005 2005 20051985 1985
Global migrant stock is rising
Source: United Nations
South-South migration is almost as large as South-North migration(millions, 2005)
Migrant stock inSouth North
(HI OECD)
North (HI non-OECD)
Total
Migrants from:South 74 62 20 156North (HI OECD)
3 25 1.2 30
North (HI non-OECD)
1 4 0.3 5
TOTAL 78 91 22 191Source: Ratha and others (2006)
South-South migration is almost as large as South-North migration
South47%
North (HI-non-OECD)
13%
North (HI-OECD)
40%
Source: Ratha and others (2006)
Destination of migrants from the South
0 1 2 3 4
Cuba-USBurkina Faso-Cote
Malaysia-SingaporeIndia-Bangladesh
Vietnam-USChina-USIndia-US
Pakistan-IndiaEgypt-Saudi ArabiaIndia-Saudi Arabia
Algeria-FranceAfghanistan-Iran
Philippines-USIndia-UAE
Turkey-GermanyBangladesh-India
Mexico-US
South-South
South-North
10.4
millions of migrants
Top migration corridors include several South-South corridors (excluding the FSU)
Source: University of Sussex and World Bank
0 1 2 3 4 5
Russia-Kazakhstan
Kazakhstan-Russia
Ukraine-Russia
Russia-Ukraine
millions of migrants
Former Soviet Union corridors are among the largest South-South corridors
Source: University of Sussex and World Bank
-25
25
75
125
175
225
275 $ billionPrivate debt and portfolio equity
FDI
ODA
Recordedremittances
Remittances are large, have continued to increase
South-South remittances were likely between $19 to $53 billion in 2005Sources of Remittances to developing countries ($ billion, 2005)
By migrant stocks
By migrant stocks and host country incomes
By migrant stocks, host country incomes, and
sending country incomes
South 53 19 32
North 128 162 149
Total 181 181 181
Source: Ratha and others (2006)
23.5 22.5 21.8
13.4 12.8
7.9 7.2 6.7 6.5 5.7
IndiaChina
Mexico
Philippines
France
Spain
Belgium
United K
ingdom
German
y
Leban
on
Top recipients of remittances, 2005 (estimate)
$ billion
Top recipients of remittances, 2005
32
27 26 2422
Moldova Tonga Lebanon Lesotho Haiti
% of GDP
40
14 13 128
UnitedStates
SaudiArabia
Switzerland Germany Spain
Top sources of remittances
0.30.2
0.7
0.3
Low-income Lowermiddle-income
Uppermiddle-income
High incomeOECD
$ billion, 2005 % of GDP,
2004
Development implications of migration and remittances
Migration and remittances continue to increase. South-South migration may be as large as South-North migration
Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances
There is considerable scope for reducing remittance costs faced by poor migrants
Migration boosts welfare for most householdsChange in real income in 2025$ billion
0
20
40
60
80
100
120
140
160
180
High income countries Developing countries New migrants.
Global gains of $356 billion
Remittances reduce poverty
Evidence from a few household surveys shows that remittances reduce poverty
Cross-country evidence shows that a 10% increase in per capita remittances leads to a 3.5% decline in the share of poor people
Remittances also finance education and health expenditures, and ease credit constraints on small businesses
Remittances tend to rise following crisis, natural disaster, or conflict
Remittances as % of private consumption
0.5
1.7
1.21.4
2.0 2.0
1.0
1.82.0
Indonesia Thailand Mexico
year beforeyear of crisisyear after
Remittances improve countries’ access to capital
0
100
200
300
400
500
600
700
800
Excluding remittancesIncluding remittances
Present value of external debt as % of exports of goods, services, and remittances
Large remittance flows may lead to currency appreciation and adverse effects on exports
Remittances may create dependency
Remittance channels may be misused for money laundering and financing of terror
Downside
Development implications of migration and remittances
Migration and remittances continue to increase. South-South migration may be as large as South-North migration
Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances
There is considerable scope for reducing remittance costs faced by poor migrants
Remittance fees are high, and regressive
16
9
76
5 5
$100 $200 $300 $400 $500 $600
Fee and foreign exchange commission as % of principal
Weighted average of fees of four largest money transfer operators in the U.S.-Mexico corridor
$10$12
$27
$29$35
$13$23
$24
London-Lagos
Cotonou-Lagos
Singapore-Jakarta
Kuala Lumpur-Jakarta
Jakarta-Kuala Lumpur
Los Angeles-Mexico City
Guatemala City-Mexico City
Mexico City-Guatemala City
South-SouthNorth-South
Fee and FX commission $
South-South remittance costs tend to be higher than North-South costs
Policy priorities High remittance costs faced by poor migrants
can be reduced by increasing access to banking and strengthening competition in the remittance industry
Governments should not tax remittances or direct the allocation of expenditures financed by remittances
Policy priorities High remittance costs faced by poor migrants
can be reduced by increasing access to banking and strengthening competition in the remittance industry
Governments should not tax remittances or direct the allocation of expenditures financed by remittances
