The Policy Challenges of Migration:The Origin Countries’...

In evaluating the impact of remittances, themain subject of this report, it is important totake into account the implications of theinitial decision to emigrate. This chapter willanalyze the implications for migrants and ori-gin countries of migration for economic gainfrom developing to high-income countries.1

Focusing on this form of migration canhighlight some key policy dilemmas that gov-ernments face in improving the developmentalimpact of migration.

Migration is an extremely diverse phenom-enon. Its economic impact on each origincountry, and the impact of policy, will dependon many circumstances—among them theskills and former employment of migrants, thehistory of migration (the existence and loca-tion of a large diaspora), the sectors affected,patterns of trade and production, the invest-ment climate, and the size and geographicallocation of the country. For example, migra-tion policies appropriate for a large develop-ing country with substantial low-skilled emi-gration and effective institutions will differfrom the policies for a small island economywith substantial high-skilled emigration andweak institutions.

Migration is as complex as it is diverse, sopredicting the impact of policy changes will beproblematic until more research is done andbetter data obtained. In particular, the genderimplications of migration are poorly under-stood and require more research. Migrationalso has important social and political impli-

cations, that may be as important as the eco-nomic analysis provided here. For all of thesereasons, the analysis and policy recommenda-tions in this chapter must remain heavily qual-ified. Our purpose is to signal to policymakersin developing countries, and to the develop-ment community in general, the elements thatshould be considered in formulating migrationpolicy.

International migration often generates greatbenefits for migrants and their families,although at some risk. Migration can greatlyincrease incomes of both migrants and theirfamilies and has helped countless householdsescape poverty. While most workers gain greatlyfrom migration, the decision to migrate issometimes made with inadequate informationand at high risk and cost, particularly if themigration is irregular. By providing informationon migration opportunities and risks,governments could help avoid unfortunate,costlymigrationdecisions.Governments shouldalso consider means to prevent and prosecutetrafficking and other abuse of migrants, and tostrengthen migration-related partnershipsbetween origin and destination countries.

Increasing the emigration of low-skilledworkers would significantly reduce poverty indeveloping countries. In addition to enablingemigrants to escape poverty and to reducingpoverty in the country of origin throughremittances (discussed in chapter 5), low-skilled emigration can increase wages and

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The Policy Challengesof Migration:The OriginCountries’ Perspective

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reduce unemployment and underemploymentof poor workers in the country of origin.Many of the poorest lack the financialresources or the skills required for successfulemigration to high-income countries, butavailable data indicate that a significantnumber of them do emigrate, although atlower rates than the non-poor. Reducing therestrictions on low-skill emigration, whileremaining sensitive to concerns in desti-nation countries over social tensions, jobopportunities for low-skilled natives and thepotential burden on public expenditures, maybest be achieved through managed migrationprograms designed jointly by origin anddestination countries. Such programsshould provide for temporary, low-skilledmigration—with incentives for return.

Emigration of high-skilled workers mayreduce living standards of those left behind andimpair growth, but can also be beneficial. Likelow-skilled migration, high-skilled migrationcan greatly benefit migrants and their familiesand can help relieve labor market pressures.In addition, a well-educated diaspora canimprove access to capital, technology,information, foreign exchange, and businesscontacts for firms in the country of origin. Atthe same time, high-skilled emigration mayreduce growth in the origin country because(a) other workers lose the opportunity fortraining and mutually beneficial exchanges ofideas; (b) opportunities to achieve economiesof scale in skill-intensive activities may bereduced; (c) society loses its return on high-skilled workers trained at public expense; (d)the price of technical services (where thepotential for substitution of low-skill workersis limited) may rise. Highly educated citizensmay also help to improve governance, improvethe quality of debate on public issues,encourage the education of children, andstrengthen the administrative capacity of thestate—all of which may be reduced throughemigration of the highly skilled.

Because of the lack of data and the myriadof individual country circumstances that can

influence the impact, it is impossible to reli-ably estimate the net benefit, or cost, to origincountries of high-skilled emigration. We canonly offer some rough observations that reflectthe wide variation in high-skilled emigrationrates among countries:

• Very high rates of high-skilled emigra-tion affect a small share of developingcountries’ population, and many coun-tries with high rates of high-skilled emi-gration have poor investment climatesthat likely limit the productive employ-ment of high-skilled workers. On theother hand, the lack of high-skilledworkers may contribute to the poorinvestment climate and limit the supplyresponse to economic reform.

• Some countries also find it difficult toproductively employ all high-skilledworkers because of small economic scaleor misguided educational policies that re-sult in a large supply of college graduatesfor whom no suitable jobs exist.

• High-skilled emigration has had a severeimpact on public services with positiveexternalities. The loss of skills throughhigh-skilled emigration has particularlyimpaired health services in several devel-oping countries.

Origin countries harmed by high-skilledemigration face difficulties in managing theproblem. Service requirements for access topublicly financed education can be evaded andare likely to discourage return, and proposalsfor the taxation of emigrants to the benefit ofthe origin country have made little progress.Improved working conditions in public em-ployment and investments in the infrastruc-ture for research and development may beeffective in retaining key workers. Workingconditions can also be improved by strength-ening governance, which may require politicalwill rather than money. Origin countries canalso encourage educated emigrants to returnby identifying job opportunities, cooperatingwith destination countries that have programsto promote return, permitting dual nationality,

G L O B A L E C O N O M I C P R O S P E C T S 2 0 0 6

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and helping to facilitate the portability of so-cial insurance benefits.

The migration decision and itsimpact on migrants and theirfamilies

Making the costly and sometimes riskydecision to move to another countrygenerally involves the expectation of largeincreases (or lower variability) in income,described by economists as the net presentvalue of lifetime earnings.2 The migrant’s ex-pected income gain from emigration also re-flects his or her employment prospects at homeand the likelihood of employment overseas.

Better economic prospects drive migrationMigrants from developing to high-incomecountries generally enjoy large increases inearnings.3 A dataset compiled by the Interna-tional Labour Organization (ILO) shows thatworkers in high-income countries earn a me-dian wage that is almost five times the levelof that of workers in low-income countries,

adjusted for differences in purchasing power(Freeman and Oostendorp 2000) (figure 3.1).These data may overstate the wages thatmigrants expect, because their earnings, at leastinitially, tend to be lower than those of natives(Lucas 2004a). Moreover, many poor workerswho lack local language skills and have mini-mal education may find limited employmentprospects in high-income country job markets.On the other hand, these data may understatethe benefit of migration from the perspectiveof the household. In measuring differences inwelfare between migrants and those who donot migrate, migrants’ earnings in high-income countries are reduced to reflect thehigher cost of living in high-income countries—or purchasing power parity (PPP). To the ex-tent that migrants send earnings back home inthe form of remittances, however, this adjust-ment is not relevant, so household gains mayexceed the PPP-adjusted rise in earnings.4 Fur-thermore, the data on income differences mayinfluence expectations of future earnings formigrants and their children, and would un-doubtedly generate much larger migration, inthe absence of controls. Evidence of substan-tial migration pressure includes long queues ofapplicants for immigration to high-incomecountries, the rise in irregular immigration,the increase in asylum seekers (Hatton andWilliamson 2002), and the high fees paid tosmugglers who help migrants cross bordersillegally (Cornelius 2001).

The expectation of higher earnings is notthe only economic incentive for migration.Households may decide to send some mem-bers abroad to diversify the family’s source ofincome and thus reduce risk, as shocks affect-ing the level of wages and the probability ofemployment in the destination country maynot be correlated with the shocks affectingdomestic workers (Daveri and Faini 1999).5

Migration involves considerable costsDespite clear gains for many, migration involvescosts and risks that, together with restrictionson migration, help explain why most peopleprefer to stay at home. Migration can entail

T H E P O L I C Y C H A L L E N G E S O F M I G R A T I O N

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Source: Freeman and Oostendorp (2000).

Upper-middle-income countries

Lower-middle-income countries

Low-incomecountries

Figure 3.1 Median wage levels for workersin the same occupation, relative to high-income economies, 1988–92a

0

5

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30

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45

Percent

25

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35

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Note: Chart reports the median wage in each country/skillgroup relative to the highest wage for that skill group, withthe ratio in high-income economies as the numeraire. Thusthe median wage in low-income countries (averaged acrossskill groups) is 20 percent of the median wage in high-incomeeconomies.

a. Adjusted for purchasing power parity.

substantial up-front costs—transportation, feescharged by recruitment agencies, fees to obtaina visa and work permit, maintenance whilesearching for work, forgone earnings (if themigrant was or could be employed at home),the reduction in value of location-specific skills(for example, knowing one’s native language),and the pain of being separated from family andfamiliar surroundings. Obviously these costswill vary enormously among migrants.

Lack of data makes it difficult to directlytest the relationship between costs and the de-cision to migrate. However, distance can beused as a proxy for costs, representing notonly transport costs, but also migrants’ lim-ited familiarity with countries of destination.Adams and Page (2003) find that distance isa significant determinant of the directionof migration from developing countries tothe United States, European members of theOrganisation for Economic Co-operation andDevelopment (OECD), and the Arab Gulf.Long, Tucker, and Urton (1988) found thatdistance was an important constraint on inter-nal migration in the United States and theUnited Kingdom; what holds for internal mi-gration (without political barriers or languagedifferences, and with limited cultural differ-ences) probably holds even more strongly forinternational migration. Household surveysalso provide indirect evidence that distancehas an important impact on migration: whilesome of the poorest do migrate internation-ally, they are more likely to remain at home orto migrate internally (see below).

Among the largest quantifiable costs tomigrants are fees paid to private recruitmentagencies, whose role in the international labormarket has increased substantially, in part be-cause of the rise of temporary labor migrationprograms.6 A major conduit of job opportuni-ties for migrant workers, private recruitmentagencies often are instrumental in seeking outnew markets for job opportunities abroad.They also provide services such as languagetraining and assistance with settlement (seeXiang 2003 in the case of China). However,they also can be a source of abuse (ILO

2003b). Because many migrants lack informa-tion on foreign job markets, and some agen-cies may have considerable market power,recruitment agencies have captured a substan-tial share of the rents generated by limits onimmigration (Lucas 2004a). Available data(mostly from past years) indicate that recruit-ment charges range from $689 (in 1995) forSri Lankan immigrants to the Middle East to$8,000 (in 1996) for Thais seeking work inJapan (table 3.1).

Recruitment agencies’ potential for earningrents raises the issue of whether governmentsshould regulate their fees. As constraints onmigration generate significant excess profits,efforts to regulate recruitment fees wouldappear to have merit. However, limitations onthe terms of mutually agreed contracts can bedifficult to enforce, and excessive regulationcan drive recruiters underground or lead themto switch to other countries. A few govern-ments have attempted to regulate fees paid torecruiters, and require registration and mini-mum capital requirements or financial guar-antees to limit abuses (ILO 2003a). In general,successful regulation of recruitment agenciesinvolves a large pool of potential migrants (toreduce the likelihood of recruitment agenciesswitching to alternative sources), effectivegovernment institutions, and regulations thatfocus on the most egregious abuses (insteadof just reducing the market rate). Even thePhilippines, considered to have a model


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Table 3.1 Fees charged by recruitmentagencies

Country US$ Year

Migration to the Middle EastBangladesh 1,727 1995India 900 1995Pakistan 768 1995Sri Lanka 689 1995Sri Lanka 893 1986

Migration to JapanThailand �8,000 1996

Migration to MalaysiaThailand 666–1,000 1991

Sources: Abella 2004; Lucas 2004a; Eelens and Speckmann1990; Spaan 1994.

program, experiences difficulties in enforcingfee limits, while most recruiters, including theUnion of Filipino Overseas Contract Workers,argue that stringent regulation of recruitersimpairs the competitive position of Philippinemigrants relative to workers from other coun-tries (Martin 2005). Destination countriesare probably in a stronger position to regulaterecruitment agencies effectively.

Decisions to migrate are often madewith inadequate informationThe distance and differences in language andculture between countries of origin and desti-nation imply that migration is particularlyaffected by inadequate information. Migrantsmay have a distorted notion of the possibilitiesof employment and the likely wage in coun-tries of destination, as well as insufficient in-formation on the costs and potential risks ofthe trip. Smugglers, recruitment agencies, andothers with a financial stake in encouragingmigration may present a biased picture of themigration experience, and poor informationincreases the potential for migrants to sufferfrom fraud and abuse.7

Some origin-country governments haveattempted to protect their emigrant workersby regulating the terms of labor contracts. Forexample, Indonesia, the Philippines, and SriLanka have drafted model contracts for vari-ous occupations and host countries that detailworking terms and conditions to be specifiedin advance (Abella 1997). Such efforts can beuseful in articulating standards and informingmigrants of their rights. However, enforcementof such contracts in destination countries canbe problematic (IOM 2003). The Philippines,India, and Bangladesh review contracts priorto migrants’ departure, and Bangladesh veri-fies the genuineness of overseas work visas.Some countries have entered into bilateralagreements that require destination countriesto issue visas only if the contract is approvedby the origin country. Restrictive policies ofthis kind run the risk of encouraging irregularmigration if workers cannot secure approvalof contracts in advance. Some countries use fi-

nancial incentives, such as special exemptionsfrom travel taxes for those who clear contractswith government agencies, to facilitate govern-ment review of contracts. Some countries withlarge numbers of emigrants offer a compre-hensive set of services, including predeparturetraining, information on labor markets in des-tination countries, legal services,8 reintegra-tion support, and welfare funds financed fromfees paid to origin-country governments bydeparting workers.9

A diaspora can reduce the costsfacing migrantsThe stock of emigrants in countries of destina-tion can reduce the costs facing new migrantsfrom the same origin country. The majorcountries of origin with significant diasporasin high-income countries (figure 3.2) are forthe United States: China, Cuba, El Salvador,India, Mexico, Philippines, and Vietnam; andin other countries: Turkey (for Germany);Serbia and Montenegro, Morocco, and Algeria(for France); and China (for Japan andCanada). As migrant networks spread, privateinstitutions and voluntary associations emergeto provide a range of services, including coun-seling, social services, and legal advice; lodg-ing, credit and job search assistance; and themeans to reduce the cost of undocumented mi-gration, including smuggling and transport,counterfeit documents, and arranged mar-riages (Massey and others 1993). The migrantdiaspora can also reduce the likelihood of, andfears concerning, abuse (see Gunatilleke 1998for the example of Sri Lanka).

Evidence of how the diaspora encouragesmigration can be seen in the grouping ofimmigrants from the same country or localregion in countries of destination. Bartel(1989) and Jaeger (2000) find that U.S. immi-grants tend to move near former immigrants ofthe same ethnicity. Munshi (2003) finds that anindividual is more likely to be employed and tohold a higher paying nonagricultural job whena large number of migrants from his homecommunity are in the United States.10 Studiesof the Asia Pacific region have shown that


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networks raise migration rates once a few ini-tial migrants are established in destinationcountries (Massey and others 1998).

Irregular migration is often subjectto substantial costs and risksIrregular migration appears to have increasedsignificantly in major countries of destination,although the estimates are unreliable. Theestimates are based typically on the differencesbetween census reports and other immigrantregistries, arrests at the border or internally,and regularization programs (Jandl 2004).11

Irregular migration may have doubled in theUnited States between 1990 and 2000, andmay now account for some nine million peo-ple (Passel, Capps, and Fix 2004)—about25 percent of the total stock of migrants. Thescale of irregular migration in Europe mayalso be high. Just under 700,000 irregular mi-grants applied for regularization under the re-cent amnesty drive in Spain. Mid-range esti-mates provided by Jandl (2003) indicate thatirregular migrants range from less than 10percent of the total reported stock of migrantsin France to 60 percent in Greece (figure 3.3).

Most irregular migrants are low-skilledbecause (a) immigration laws in high-income

countries provide high-skilled workers withgreater opportunities for legal entry andresidence, and (b) it is more difficult for high-skilled workers to practice their professionswithout adequate documentation, such as edu-cational credentials (Chiswick 2000). Also,skilled migrants often have more to lose athome and may be less inclined to run the risksinvolved in irregular migration. Irregular


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% of reported migrant stock

Source: Medium estimates from Jandl 2003.

Note: See note 11 at the end of this chapter for a definition of“irregular” in this context.

Fran

ce

Figure 3.3 Estimates of stock of irregularmigration

Germ

any

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King

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Figure 3.2 Major developing country diasporas in developed countries

Millions of people

Major diasporas in the United States Other major diasporas

Millions of people

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Note: Data from the United States are based on country of birth, while most European migration data are based on nationality.

migrants also tend to be temporary, rather thanpermanent, immigrants (Carter 1999).12

Irregular migration imposes substantialcosts on migrants, compared with permanentmigration. It can be more expensive: the aver-age price in 1991 for smuggling an illegalmigrant from China to the United States wasestimated at $30,000 and from $3,750 to$12,000 for migrants smuggled to Lithuania(Salt and Stein 1997). Irregular migrants canalso be paid low wages, have poor workingconditions, and be subject to violations of theprotections afforded under industrial-countrylabor laws (Vayrynen 2003). Employers maybe able to pay irregular migrants less thanlegal migrants and natives because only cer-tain employers will hire irregular migrants, orbecause the migrants are reluctant to moveaway from support networks. Lower pay andhigher costs of migration also make irregularmigration less desirable for the origin country,because they cut into remittances. Remittancescan be reduced by the relatively expensivemoney transfer operations used by irregularmigrants who lack access to bank accounts(see chapter 6).

Irregular migrants can also be exposedto physical danger. Since 1994 an estimated2,600 undocumented migrants have diedcrossing the United States–Mexico border(Meek 2003). Entrapment into prostitutionis a danger for women and children (Wickra-masekera 2002). Trafficking in persons isestimated globally to involve some 600,000 to800,000 men, women, and children each year(U.S. Department of State 2004). Differentnational policies toward migration controlmake it difficult to combat trafficking andsmuggling, although the international proto-cols against these activities provide a commoninstrument to criminalize them.13 Severalgovernments, notably in Southeast Asia, haveinstituted restrictions on the emigration ofwomen, fearing their exploitation. Unskilledand semi-skilled women are allowed to emi-grate from Bangladesh only when accompa-nied by a male partner (Siddiqui 2003). Suchoutright bans, in addition to being limitations

on what is generally viewed as a basic right toemigrate, are likely to be counterproductive:they may compel many women to move asundocumented migrants, thus increasing theirvulnerability (Misra and Rosenberg 2003).More comprehensive, cooperative policies bygovernments are likely to have a more positiveeffect, including the dissemination of informa-tion on the risks of migration, strengthenedprotection for women in destination coun-tries, and stepped-up identification and prose-cution of traffickers. Migration agreementsbetween countries of origin, transit, and desti-nation can help achieve such policy coherence(as in the bilateral agreements between someEU states and Morocco and Tunisia, forexample).

There are costs for those left behindFinally, migration may impose costs on familymembers left behind, particularly children.For example, Battistella and Conaco (1996)find that the children of migrant parents fromLuzon, Philippines, performed worse in schooland tended to be less socially adjusted (partic-ularly if the mother had emigrated) than chil-dren with both parents at home. On the otherhand, Bryant (2005) found that the improve-ment in the children’s health and schooling (fi-nanced by remittances), coupled with stronginvolvement of the extended family, tended tomitigate the social costs of a parent’s migra-tion. In general, emigration does impose hard-ships on family members left behind, but italso improves household income and im-proves families’ ability to make compensatingadjustments that mitigate those hardships.14

The impact of international migrationon countries of origin variesThe impact of migration on countries of originvaries greatly, depending on the size of emi-grant flows, the kinds of migrants, and laborand product market conditions in the country.In describing these effects, it is useful to dis-tinguish between skill levels, given the differ-ences in the labor markets for low- and high-skilled workers.


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Low-skilled migrationLow-skilled migration can improve labormarket conditions for other poor workersThe stock of low-skilled emigrants who movedfrom developing to industrial countries in 2000averaged about 0.8 percent of developingcountries’ low-skilled, working-age residents—about the same as in 1990. The regions withcountries close to the major destination coun-tries had relatively high rates of low-skilledemigration (figure 3.4).15

The effects of South–North migration onworking conditions for low-skilled workers inthe developing world as a whole must besmall. In individual countries, however, large-scale emigration can place increased pressureon wages or reduce unemployment of low-skilled workers at the margin. For example,real wages in Pakistan’s construction sectorand the Philippines’ manufacturing sectorclosely trace the deployment of overseasworkers (Majid 2000; Gazdar 2003).16 Low-skill emigration also may reduce underem-ployment or raise labor-market participationwithout significant wage increases. Wagetrends in Albania, Bangladesh, and Sri Lanka,for example, display no obvious signs of

improvement, despite massive emigration(Lucas 2004a). The wage response to emigra-tion depends on the institutional setting inthe labor market in the home country (such asthe role of unions, public sector employment,and minimum wage laws); the extent of emi-gration relative to the domestic labor force;and the degree to which emigrants were pro-ductively employed before migrating.

The impact of international migration maydiffer considerably among regions withincountries of origin, depending on the degree ofgeographic concentration of emigration andthe links with other regions through internalmigration. People in regions lying close to acommon border with the destination countryor with easier access to overseas markets (suchas metropolitan centers or coastal areas) havea tendency to migrate (Long, Tucker, andUrton 1988; Malmberg 1997). These effectscan be greatly magnified through the influenceof migrant networks, once initiated from aspecific location (Gunatilleke 1998; Shah1998). Internal migration to areas of high de-parture can be quite important to the trickle-down benefits of international migration, andinternal migration also can have an importantpoverty-reducing impact (box 3.1).

Migration of low-skilled workersis usually beneficialWhether emigration results in reduced under-employment, increased labor-market partici-pation, or higher wages, low-skilled workersin the home labor market gain, either directlyor indirectly, from additional remittancespending. Emigration of low-skilled workersthus can act as a safety valve for the failure tocreate appropriate employment at home.There have been cases, however, usually in thecontext of South–South migration, wherelarge outflows of temporary or irregular work-ers have resulted in massive return flows dueto economic or political shocks in destinationcountries.17 Also, reliance on large-scale emi-gration may retard efforts to address the issueof employment expansion over the longterm, as a result of either the remittance-driven


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% of low-skilled workers in home region

Source: Docquier and Marfouk 2004.

Figure 3.4 Emigration rates for low-skilledworkers

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Although internal migration is much larger thaninternational migration, they are in some re-spects similar phenomena. Both are largely driven byeconomic disparities among regions, although con-flict and natural disasters (not discussed here) canalso catalyze large movements of people. Both inter-nal and international migration can be permanent ortemporary, voluntary or forced. Both can subject mi-grants to substantial risks. Both can result in im-proved labor conditions in the regions of origin.Internal migration in Bangladesh, for example,makes more rural land available for tenancy(Afsar 2003). While the risks are often higherwith international migration (particularly forirregular migrants), internal migration can also beplagued by trafficking of persons, particularly ofwomen and children, as evident in parts of Sub-Saharan Africa (Black 2004) and in India and China(Lee 2005).

Internal and international migration also havetheir differences. Wage differentials are often lowerwithin countries than between countries, reflectingsmaller differences in economic conditions withincountries than between countries.

Internal migration may have a larger role inreducing poverty than does international migration.While the expected wage gain is lower in internalmigration, poor workers may have a better chanceof finding work domestically than in economies withhigher wages, where workers’ lack of skills and lan-guage ability restrict job opportunities. Moreover,international migration tends to be more costly, sothe poorest workers may not be able to afford it.While data are sparse, household surveys in a fewcountries indicate the important impact that internalmigration has on poverty. In Sierra Leone, internalremittances helped reduce income inequality in poorareas in the 1980s (Black and others 2004). In theAsia Pacific region, international remittances accruedisproportionately to richer regions, while domestictransfers are directed mostly to poorer regions (UN-

Box 3.1 Internal versus international migrationESCAP 2003). In Ghana, internal remittances are esti-mated to reduce the level of poverty by 14 percent,compared with only 5 percent for internationalremittances (Adams 2005).

Internal migration can have large costs on receivingareas. The proliferation of HIV/AIDs in Ghana hasbeen linked to the movement of women from rural tourban areas, where unemployment and poverty oftenforce them into the unprotected sex trade (Black2004b). In some countries, internal migration to thecities has been so massive as to increase crowding andplace inordinate burdens on public services, whichlowers the quality of urban life.a

Internal migration often responds to substantialemigration abroad. In the Philippines, there are indica-tions of large movements from rural areas of thePhilippines into the Manila region from which mostoverseas workers are drawn, although this movementappears to have done little to help sustain wages inrural areas (Saith 1997). Bangladesh has seen rapid re-sponses of intra-village migration to replace departingworkers (Mahmud 1989). At the same time, as inter-nal migrants gain skills, resources, information, andnetwork contacts, they often emigrate internationally.For example, workers displaced by falling agriculturalprices in southern Mexico often moved to northerntowns to work in maquiladoras, later moving to theUnited States.

The links between internal and international migra-tion are inadequately understood, in part becausebasic data are lacking. To gather more data, it hasbeen recommended that a migration module in demo-graphic and health surveys, censuses, household in-come and expenditure surveys, and labor force surveysbe included (Afsar 2005).

aIn China, for example, rapid urbanization has been accom-panied by the emergence of urban enclaves of landless, unem-ployed migrants from rural areas (Pan 2004).

exchange-rate appreciation or the reducedpressure for policy reform. In general, how-ever, the opportunity to send low-skilledworkers abroad provides substantial benefitsto origin countries because of the impact onlabor markets and remittances.

Low-skilled migration has contributedto poverty alleviationThe reduced supply of low-skilled workersmay help to alleviate poverty, if as a result ofemigration, poor people receive higher wagesor find new opportunities to work or receiveremittances (see chapter 5). Low-skilled emi-gration also alleviates poverty to the extentthat the people emigrating are poor.18 It isunlikely, however, that a large proportion ofmigrants to industrial countries are pooraccording to the World Bank’s definitionof poverty as living on less than $2 a day—although certainly a very large share is poorcompared to even the poorest in high-incomecountries. Most migrants from Mexico to theUnited States come from households located atthe middle and upper-middle levels of the in-come distribution (Rivera 2005). Individualswith very low incomes are unlikely to be ableto obtain the financial resources necessary formigration (see, for example, Mahmud 1989for Bangladesh). Most of the world’s poor peo-ple live in countries that are far away from in-dustrial countries (Bangladesh, Brazil, China,India, Indonesia, and most of the countries ofSub-Saharan Africa), so transportation is ex-pensive. Moreover, many poor people lack therudimentary skills required to obtain a job inindustrial countries, as well as the social net-works that would facilitate migration and pro-vide assistance once in the destination country.

Nevertheless, the limited data indicate thatthe very poor do move abroad to some extent.In Sri Lanka, returns from household surveysshow that the share of households with a fam-ily member abroad is approximately equalacross income groups.19 Adams (2004) pro-vides model-based estimates implying thatabout 5 percent of Guatemalan householdswith incomes of less than $2 a day received

remittances from abroad (used here as a proxyfor having a household member who emi-grated). Adams (2005) shows that less than8 percent of Ghanaian households that re-ceived international remittances had estimatedincomes (excluding remittances) that fellwithin the first to fourth deciles of householdsby per capita expenditures; 55 percent had ex-penditures in the top three deciles. Lucas(2004a) quotes studies of Kerala (India), Pak-istan, the Philippines, and Thailand to supporta conclusion that most emigrants were notfrom the lowest income levels, although thepoorest did participate to some extent.

High-skilled emigrationThere is a sharp increase in high-skilledmigrationThe emigration of high-skilled workers fromdeveloping countries has increased since the1970s.20 By 1990, the stock of high-skilledSouth–North migrants in the United Statesalone was more than eight times the totalnumber of high-skilled migrants from devel-oping to industrial countries over the 1961–72period, not counting foreign students(Docquier and Rapoport 2004). The numberof highly educated emigrants from developingcountries residing in OECD countries doubledfrom 1990 to 2000, compared to an approxi-mate 50 percent rise in the number of devel-oping-country emigrants with only a primaryeducation (Docquier and Marfouk 2004).

Rates of high-skill emigration vary enor-mously among developing countries, from lessthan 1 percent (Turkmenistan) to almost90 percent (Suriname) and by region, from15 percent for Sub-Saharan Africa to 5 per-cent for Europe and Central Asia (figure 3.5).It is important to keep in mind this degree ofdiversity, as high-skill emigration can havevery different effects, depending on the sizeand economic conditions in origin countries.

The increase in high-skilled migration ispartly due to the growing importance ofselective immigration policies first introduced


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in Australia and Canada in the 1980s andlater in other OECD countries.21 Major re-cruiting countries have increased their intakeof skilled migrants and relaxed their criteriarelating to labor-market testing and job offers.Some countries (for example, Germany,Norway, and the United Kingdom) have intro-duced new programs; others (such as Austria,Republic of Korea, the Netherlands, andSweden) offer fiscal incentives to attract talentto specific sectors (OECD 2005). These pro-grams, and the migrants themselves, are re-sponding to rising skill premiums in industrialcountries that have tightened global competi-tion for skilled workers.

In some instances, high-skilled emigrationhas a negative impact on living standardsof those left behind and on growthThere are several reasons that migration ofhigh-skilled workers may decrease living stan-dards and growth. First, the total return toeducation may be greater than the privatereturn, because highly educated workers maybe more productive when interacting withsimilar workers, and they may help train otherworkers. One statistical measure of the bene-ficial impact of high-skilled immigrants isthat in the United States, both international

graduate students and skilled immigrants werefound to be positively correlated with patentapplications (Chellaraj, Maskus, and Mattoo2005). Highly educated citizens may alsomake contributions to public goods—for ex-ample, in improving governance and strength-ening the administrative capacity of thestate—which may be lost through high-skilledemigration (McMahon 1999).

Second, the productivity of firms mayincrease with size. If large firms require net-works of professionals with specialized skills,then overall productivity will be higher withmany professionals. For example, the value oftelephone networks increases with the numberof people connected. Expanding networksefficiently may require highly technical skills.

Third, emigration of high-skilled workersmay impose a fiscal cost. In most developingcountries education is heavily subsidized bythe state, so that the permanent emigration ofeducated workers represents a loss of fiscalrevenues.22

Finally, emigration of high-skilled workerswill increase the price of services that requiretechnical skills. It is difficult to provide com-parable levels of service with low-skilled work-ers, and greater resources devoted to trainingmay be lost through further emigration.

But high-skilled migration is oftenbeneficial for origin countriesThe costs of high-skilled emigration shouldbe evaluated against the beneficial effects ofmigration, skilled and unskilled: increased re-mittances, higher wages (for migrants andworkers who stay home), and benefits to des-tination countries (see chapter 2). Moreover,high-skilled emigration will have a limited im-pact if it is difficult for high-skilled workers tofind productive employment in the country oforigin. This may be the case for three reasons.First, the investment climate may be so poor,because of political instability or other rea-sons, that many high-skilled workers cannotpursue their professions. Even under such con-ditions, however, high-skilled emigration maybe harmful if it deprives the government of


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% of total tertiary-educated population


Figure 3.5 Emigration rates for those witha tertiary education, 2000

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competent administrators and limits theprospects for growth once the investmentclimate improves. Second, a significant pro-portion of high-skilled workers may not betrained in professions required by the econ-omy, perhaps because of government subsidypolicies. And third, some of the smallest de-veloping countries lack the economic scale toproductively employ a large number of spe-cialized professionals.23 These issues serve tounderscore concerns over the appropriatenessof state subsidization of university educationin many countries.24

Some recent articles have claimed thathigh-skilled emigration, even of productivelyemployed workers, may benefit development.The opportunity to emigrate increases the re-turns to education, leading more individuals toinvest in education with a view to emigrating.However, only some of the educated peoplewill actually emigrate. If the increase in humancapital of those unable to emigrate exceeds theloss from those who do emigrate, then soci-ety’s human capital rises following the openingof emigration opportunities (a phenomenonknown as the “brain gain”).25 The effect willbe largest in countries with large stocks ofemigrants (so that the probability of emigra-tion is high). These models have beenquestioned, however, because they assume thatforeign firms are not able to discriminateamong educated workers (otherwise theywould take the best qualified, and so destroyincentives for education by marginal candi-dates), and because these models do not applywhere family reunification programs, unre-lated to the skills, predominate (Schiff 2005).

Findings on the impact of high-skilledemigration are mixedIt is difficult to generalize about the impact ofskilled migration. The dispute over gains andlosses has remained largely conjectural andhas not been settled by the available empiricalstudies. On balance, it is not possible at pre-sent to provide an aggregate, reliable estimateof the true impact of high-skilled emigration.Some partial conclusions follow.

The available data indicate that high ratesof high-skill emigration affect only a smallshare of developing countries’ population. Adata set developed by Docquier and Marfouk(2004) indicates that the 77 countries withhigh-skilled emigration rates (to industrialcountries) in excess of 10 percent account foronly one-quarter of developing-country popu-lation (table 3.2).26 Moreover, about half ofthese people live in countries with very poorinvestment climates (included in the bottom25 percent of developing countries, as mea-sured by the United Nations’ Human Devel-opment Index), which may indicate that manyhigh-skilled workers face limited opportunitiesto practice their professions. It is important tonote that these data do not distinguish by pro-fession (even though high emigration rates forliterature professors and physicians wouldhave different economic impacts) or by quality(the emigration of a Nobel laureate physicistwould represent a greater loss than the emi-gration of an average university graduate).

Some countries encourage skilled migra-tion. China, Cuba, India, the Philippines, SriLanka, and Vietnam all have programs tofacilitate training for migration, suggestingthat some policymakers see the benefits ofskilled migration—among them remittances,relieving job market pressures, developmentof an extensive diaspora, and expectationsthat many migrants will eventually returnwith improved skills (as discussed below).

Direct, cross-country tests of the relation-ship between high-skilled emigration andgrowth have been mixed. The preponderanceof evidence supports the view that education


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Table 3.2 Emigration rates of skilledworkers, 2000Percentage of workers with tertiary education living abroad

Less than 10% to 20% to More than10% 20% 30% 30%

Number of countries 62 33 16 28Share of developing 75 19 3 3

country population (%)


makes an important contribution to growth.27

Beine, Docquier, and Rapoport (2001) de-tected a positive and significant impact onhuman capital formation from the opportu-nity for emigration, whereas Faini (2003)found that a higher probability of migrationfor workers with secondary education had novisible impact on secondary educationalachievement in the home country.

High-skilled emigration has had enormousimpact on some sectors, especially healthThe sectoral distribution of high-skilled emi-grants is important for assessing the implica-tions for countries of origin. Meyer andBrown (1999) estimate that about 12 percentof developing-country nationals trained in sci-ence and technology live in the United States.If accurate, these estimates suggest that high-skilled emigration may be much more seriousfor production than shown by the data fromDocquier and Marfouk (2004) given above,where total high-skilled emigration to indus-trial countries was estimated at about 8 per-cent of the stock of high-skilled developing-country nationals.

High-skilled emigration may have a partic-ularly severe impact on the health sector, andthe emigration of doctors and nurses may re-duce the likelihood of some countries meetingthe Millennium Development Goals for re-ducing child mortality, improving maternalhealth, and combating HIV/AIDS and tubercu-losis. Chanda (2001) estimates that at least 12percent of the doctors trained in India live inthe United Kingdom, that Ethiopia lost half ofits pathology graduates from 1984 to 1996,that Pakistan loses half of its medical schoolgraduates every year; and that in Ghana onlyabout one-third of medical school graduatesremain in the country. Perhaps one-half of thegraduates of South African medical schoolsemigrate to high-income countries (Pang,Lansang, and Haines 2002), and Jamaicahad to train five doctors, and Grenada 22, tokeep just one (Stalker 1994).28 Of course, theincentive for migration is often conditionednot only by the opportunity for higher earnings

abroad, but also by poor working conditionsand public sector services in origin countries.

Origin countries face considerabledifficulties in limiting high-skilledemigrationEven if high-skilled emigration were found tobe detrimental to living standards and growth,countries of origin would face serious ob-stacles in reducing it. Some countries haverequired that graduates of publicly fundededucation work for a period of time in publicsector jobs. But such requirements can beevaded, and their existence is likely to discour-age return of migrants to the country of origin.Several proposals have been made for interna-tional schemes to tax high-skilled emigrants,with the funds earmarked for developing coun-tries. Such schemes have made no progress, asthey would be hard to enforce. Calculating thewelfare loss from high-skilled emigration andthus setting an appropriate level of tax wouldbe difficult. Moreover, the schemes wouldrequire the cooperation of migrants and coun-tries of destination—something not likely to beachieved. Bhaghwati (1976) advocates thatdeveloping countries should subject their na-tionals working abroad to local taxes, as doesthe United States. However, many developingcountries would find such a system of taxationdifficult to administer.

Some governments encourage skilled work-ers to stay by improving working conditions,providing research facilities, and giving incen-tives for research (see the discussion of incen-tives for return, below). China has reporteda nine-fold increase from 1995 to 2003 inforeign programs offered in cooperation withlocal institutions, which has resulted in lowernumbers of students going abroad (Vincent-Lancrin 2004). Such programs may requiresubstantial resources, and poorer countrieswill face difficulties in creating the conditionsrequired to retain their most-skilled workers.In some cases improvements in governance,which may require political determinationrather than large expenditures, may help toretain workers.


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Cooperation from destination countriesmay helpEffective means of limiting high-skilled emi-gration, or increasing its benefits, will requirethe cooperation of countries of destination.One example has been the United Kingdom’scode of practice for the international recruit-ment of health-care workers, which restrictsthe active solicitation of health care profes-sionals from developing countries. However,implementation has been difficult because thecode does not apply to private sector recruiters(House of Commons 2004). A recent proposalto require countries of destination to provideCaribbean countries with subsidies for train-ing health professionals could increase thesupply of health workers in both origin anddestination countries (Commonwealth Secre-tariat 2005).29 More broadly, contributions bydestination countries to education in origincountries could both compensate origin-country governments for their training of emi-grants and improve the qualifications of work-ers coming to destination countries. Anotherapproach, which would improve the coherenceof development policies, would be for destina-tion countries to increase their investment insectors in which they lack skills, rather than“raiding” those skills from poor countries.

DiasporasA large diaspora can expand marketaccess for origin countries A potent benefit of high-skilled emigration isthe creation of a large, well-educated diaspora,which improves access to capital, information,and contacts for firms in countries of origin. Im-migrants play a role in facilitating trade by pro-viding information and helping to enforce con-tracts (Rauch and Trindade 1999) and by actingas intermediaries that can match buyers with re-liable local suppliers (Yusuf 2001). Johnson andSedaca (2004) emphasize that diasporas can actas “first movers” who catalyze growth oppor-tunities and make connections between marketsthat otherwise would not exist. Barré and oth-ers (2003) cite the importance of diasporas in

generating possibilities for codevelopment be-tween firms in the countries of origin and desti-nation, and expanding technical cooperation.With the growth of outsourcing of manufactur-ing components and telecommunications andother services, diaspora networks may be of in-creasing importance. However, despite thebroad agreement on the importance of diaspo-ras and the many anecdotal comments on howthey have assisted development, it is difficult toquantify these benefits.

The diaspora can be a significant source offoreign-exchange earnings (beyond remit-tances) for countries with sizeable emigration.Orozco (2003) documents diaspora-relatedincreases in exports and tourism receipts forCentral America. Gould (1994) and Headand Ries (1998) found that increased emigra-tion to the United States and Canada raisedexports from countries of origin.

There is some evidence that the diasporaplays an important role in the transfer ofknowledge between destination and origincountries. Agrawal, Cockburn, and McHale(2003) find that patent applications are likelyto be filed in both the country of residence andthe country of origin. Meyer and Brown (1999)and Brown (2000) identify Internet-based ex-patriate networks of skilled professionals andstudents that facilitate the transfer of knowl-edge. However, the effectiveness of these net-works is open to question: less than half of the61 Internet-based networks examined in 2004were updated regularly, and only 56 percentwere updated within the past year.30 Origin-country governments can help maintain ties tothe diaspora by supporting professional net-works, promoting dialogue with government,and funding educational, linguistic, and cul-tural programs.

The return of expatriates canbenefit development

The return of expatriates to their homecountry is widely perceived as benefittingdevelopment (Ellerman 2003). Expatriates may


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be more effective than foreigners in transfer-ring knowledge back home because of theirunderstanding of local culture. However, re-turnees may also represent retirees, or the less-skilled of the skilled cohort of emigrants(Borjas and Bratsberg 1994; Lowell andFindlay 2001), or may have difficulties inreadapting to the home country (Faini 2003),or their skills may have deteriorated whileabroad (Ghosh 1996). Returnees may be thosedisappointed by the wages or working condi-tions or may have more difficulty in finding orretaining jobs.31

A range of programs have been establishedto encourage return of highly educated na-tionals living abroad, with mixed results.Among developing-country governments, forexample, China, the Philippines, Taiwan(China), Thailand, and Tunisia have offered awide range of incentives, including researchfunding, access to foreign exchange, expandedreal estate investment options, and studyopportunities.32

The domestic policy environment is criticalto productive return. Cervantes and Guellec(2002) cite the favorable impact of returningexpatriates in the Republic of Korea, attractedby strong research and development (R&D)environments and infrastructure investments.Industrial parks helped to lure entrepreneursback to China. In Taiwan (China), the HsinchuIndustrial Park attracted more than 5,000returning scientists in 2000 alone (Saxenian2002). Conversely, a poor investment climatewill inhibit return. In Armenia, barriers toforeign direct investment (FDI) and inade-quate enforcement of contracts have preventeda more active involvement of the Armenian di-aspora in local development (Gevorkyan andGrigorian 2003). Saxenian (2000) cites the re-luctance of Indian entrepreneurs to return be-cause of government regulations that increasethe administrative cost of operating abusiness—although the Indian diaspora hascontributed to the development of informationtechnology in Bangalore.33

Both origin and destination countries canhelp facilitate return, on both a temporary and

permanent basis, through changes in regu-laion. Both can allow dual citizenship, anincreasingly common practice (Aleinikoff andKlusmeyer 2002). Origin countries can elimi-nate rules that prevent emigrants from owningor investing in property back home. Permanentresidents can be protected from losing theirstatus if they leave for a relatively limited pe-riod of time, as this discourages productivetemporary returns to the origin country.Destination countries can also allow returningmigrants to benefit from the rights they acquireduring their work abroad, such as pensions,health insurance, and disability programs(Holzmann, Koettl, and Chernetsky 2005).34

Such arrangements, however, require effectiveinstitutions in the origin country to providesuch services and are best achieved through ne-gotiations between origin and destinationcountries.

Destination countries have provided variousincentives for the return of migrants. For exam-ple, France has provided loans and technicalassistance to migrants from Mali and Senegalto establish businesses in their home countries.However, few of the businesses appear to havebeen successful, either because of the inade-quate investment climate in the recipient com-munities (Gubert 2005) or because participantshad worked in low-level jobs in France andlacked entrepreneurial skills (Magoni 2004).Many of these programs are quite small.35

International organizations, too, have man-aged programs to promote return, althoughthey tend to cover few emigrants. The IOM’sReturn of Qualified African Nationals pro-gram successfully attracted more than 2,000highly skilled persons back to 41 Africancountries from 1974 to 1990, and the pro-gram was later expanded to the Migration forDevelopment in Africa program (MIDA).36

Similar programs have been run for LatinAmerican countries, Afghanistan, andBosnia and Herzegovina.37 The United Na-tions Development Programme’s TOKTENproject promotes temporary return (three-week to three-month development assign-ments), which is often easier to achieve.


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Temporary migration andinternational agreements

The number of temporary workers admit-ted to high-income countries under skill-based programs rose substantially in the1990s, doubling in the United Kingdom andalmost quadrupling in the United States (fig-ure 3.6). Foreign student programs are alsoproliferating, in part due to competitive mar-keting and entry policies by Australia,Canada, Germany, and the United Kingdom.Inflows of unskilled, seasonal workers alsohave increased since the early 1990s in mosthigh-income countries that have such pro-grams (UN 2004). Greater emphasis on tem-porary migration may reflect opposition toexpanding permanent migration.

Temporary labor migration schemes varygreatly from country to country. Skilled mi-grants tend to have more opportunities underunilateral visa programs (such as the U.S. H-1B visa and the temporary skilled migrationprograms of Australia and Canada), whileunskilled migrants often must rely on bilateralor regional agreements, such as the seasonalwork programs between Germany and coun-tries in central and eastern Europe.

Temporary migration may facilitategreater migration flowsWhile temporary migration programs can gen-erate benefits similar to those of permanent mi-gration (such as higher incomes for migrants,improved efficiency in destination countries,remittances for origin countries), in some re-spects those benefits differ between permanentand temporary migration. For the legal mi-grant, being admitted on a temporary basismay be less desirable than permanentresidence, which provides for free movementbetween destination and origin countries.However, the existence of temporary migrationprograms (reflecting resistance to permanentmigration) may facilitate larger legal flows.

From the point of view of the destinationcountry, temporary migration offers the flexi-bility to target required skills and to adjustentry in response to changes in labor demand.Temporary migration can reduce fiscal pres-sures that may be associated with low-skilledimmigration, in that temporary migrants tendnot to bring their dependents (who may re-quire public services). At the same time, pro-grams can be made conditional on employ-ment, thereby limiting social tensions fromimmigration. Provisions for temporary migra-tion also can be viewed as offering an alterna-tive to irregular migration.

The record of destination governments inensuring that temporary migration programsare indeed temporary has been mixed. Forexample, over 22 years, most workers in theMexico–U.S. guest workers program returnedat the end of their seasonal jobs, although somefound ways to obtain permanent status (Martin2003). Similarly, from 1960 to 1973, three-quarters of the 18.5 million foreigners whocame to work in Germany left. But 25 percentremained. Coupled with rules that allowedmany to eventually bring their dependents, thisresulted in significant permanent settlement.There is some evidence that the recent guestworker programs in Europe, particularly thoseinvolving subcontracting for short-term pro-jects and some return incentives, have managedhigher return rates (Lucas 2004a).


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Thousands

Note: Double counting occurs if a person enters the UnitedStates more than once during the year.a. Reflects the number of admissions under H-1B visas,not the number of persons.

Source: United Nations.

Figure 3.6 Number of temporary workersadmitted under skill-based programs

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There are advantages and disadvantagesto temporary migrationReliance on repeated, temporary migrationfor workers also has some economic draw-backs. Hiring a temporary immigrant maymean a shorter duration of employment com-pared with hiring a permanent immigrant, andthus higher costs for training. Temporary mi-grants are also less likely than permanent onesto invest in skills specific to the destinationcountry (such as language proficiency andlicensing requirements), because the returnsare enjoyed over a shorter period of time(Chiswick 2000). Nevertheless, for emigrantsfrom developing countries, the wage differen-tials are so large that they may justify sub-stantial investments in acquiring such skills,even for temporary stays.

For the origin country, remittances (andrepatriation of assets) may be higher withtemporary migration, because temporary mi-grants are less likely to bring their dependentsand more likely to maintain close ties withthe home country. Perhaps most importantly,temporary migration programs can provide anopening to increase legal, unskilled migration,which generates the greatest developmentalimpact for origin countries, as already noted.On the other hand, temporary migration mayprovide a less reliable means of exportinglarge labor surpluses, as cancellation of futureaccess is easier for destination countries thanexpelling existing migrants. However, it is thisflexibility (coupled with less long-run popula-tion pressure, fewer concerns over integration,and fewer pension commitments) that makestemporary migration desirable for destinationcountries, thus facilitating agreements forlarger unskilled migration (Winters 2005).

Bilateral agreements can play animportant role in low-skilled, temporarymigrationBilateral labor agreements have become amajor vehicle for low-skilled, seasonal workersin agriculture, tourism, and construction, asevidenced by agreements between the UnitedStates and Mexico, Germany and central and

eastern European states, and Saudi Arabia andEgypt and Libya. There are several hundredsuch agreements worldwide, including some168 signed in the last 50 years in Latin Americaalone, half in the past 10 years (IOM 2005a).38

Bilateral agreements could improve the bene-fits of temporary migration for origin countriesthrough greater certainty of access and condi-tions. This may be particularly important inmarkets where increased competition fromother suppliers might lead to a reduction in ac-cess (as occurred in Saudi Arabia and the Mid-dle East in the 1990s). Bilateral agreements canhelp build the confidence in both origin anddestination countries that a particular channelof migration will generate real benefits andminimize costs—for example, that migrantswill be treated well and will return at the end oftheir contract.

Several factors impede the maximizationof gains from bilateral agreements, however.Some origin countries may lack sufficientlyreliable information on demand for theirworkers in destination countries, and in whichsectors, to negotiate appropriate agreements.Destination countries may likewise have dif-ficulty reliably estimating labor shortages inparticular sectors. And origin countries mayface resource constraints in implementingobligations with regard to prescreening of mi-grants or monitoring of their return, althoughthese may be covered by the destinationcountry (as in a nurses program betweenRomania and Italy). Origin countries may alsolack bargaining power to conclude termsfavorable to them or to conclude agreementsat all. For example, of 18 bilateral agreementsproposed by the Philippines with countriesin Africa, Asia, Europe, and the MiddleEast, five countries refused to enter intoagreements, and others have remained inac-tive (Go 2004).

Nevertheless, there is scattered evidencethat countries like the Philippines have beenable to use bilateral agreements to gainfavorable employment conditions for theirmigrants—and in some cases to support theirreturn and reintegration (Lucas 2004b).


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Bilateral agreements can help ensure thatorigin-country credentials are accepted indestination countries, for example.39 They canhelp ensure that temporary migration is indeedtemporary, and that returning migrants arereintegrated, by supporting the transfer oftechnology and human resource developmentin the origin country, as under Spain’s agree-ments with Colombia and Ecuador (IOM2005a). Bilateral agreements can also ensurethat the origin country cooperates in monitor-ing and managing migration, for example, byincorporating a readmission provision (as in the1997 agreement between Italy and Albania).

They also can limit the effects of braindrain. For example, a pilot scheme betweenthe Dutch and Polish ministries of healthprepared Polish nurses for employment in theDutch health care system for a maximumperiod of two years and to facilitate theirsubsequent return and reintegration into thePolish health care system.40 Other proposalstake a development-cooperation approach,under which destination countries fund thetraining (to their standards) of a given numberof nurses in excess of origin country demand,with the surplus nurses granted temporaryvisas to work in destination countries for aspecified period, with guaranteed return.

Except in the EU, regional andinternational agreements have hadlittle impact on migrationAt the regional level, there has been someprogress on removing technical and adminis-trative barriers to the cross-border exchangeof skilled personnel for business purposes inAfrica, Europe, Latin America, and parts ofAsia. Also, several consultative processes onmigration have emerged at the regional andglobal levels.41 However, with the major ex-ception of the EU, most regional arrangementshave had little impact on the free movement ofless-skilled foreign workers or on permanentmigration (World Bank 2005).

International treaties have had only limitedimpact on migration. Mode 4 of the General

Agreement on Trade in Services (GATS) hasthe potential to improve cooperation on laborservices between countries of origin and desti-nation, but so far it has not facilitated a signif-icant rise in cross-border labor movements(box 3.2). The ILO has pioneered the develop-ment of international instruments for protect-ing the rights of migrant workers, and the UNGeneral Assembly adopted the InternationalConvention on the Protection of the Rights ofAll Migrant Workers and Members of TheirFamilies, which clearly defines the rights ofmigrant workers, including irregular workers(Wickramasekera 2002). The convention en-tered into force in 2004. However, none of themajor destination countries have ratified it yet,and its means of enforcement are limited.

International agreements governingmigration contrast sharply with thosefor tradeA major impulse behind the General Agree-ment on Tariffs and Trade and its successor,the World Trade Organization, was that mul-tilateral agreements that provide for nondis-crimination among countries would maximizethe gains from trade. By contrast, there is lit-tle support for multilateral, nondiscriminatoryapproaches to migration, at least in destina-tion countries. In part this is because theeconomic implications of nondiscriminationdiffer between trade and migration. In trade,nondiscrimination maximizes economic effi-ciency by allowing the lowest-cost supplier tocompete, thus reducing prices and forcinghigh-cost producers to improve efficiency orexit the market. But labor markets in high-income countries are generally not permitted(through minimum-wage laws and social-insurance schemes) to adjust fully to thelowest-cost supplier. Thus the benefits ofnondiscrimination are weaker in migrationthan in trade. U.S. consumers benefit if Indianshirts are cheaper than Mexican shirts, butU.S. employers benefit little if Indians are will-ing to work for less than Mexicans—thedecline in wages is limited.


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The WTO General Agreement on Trade in Ser-vices (GATS) does not cover labor migration perse, but rather the narrower concept of movement ofpeople across borders as one of four modes of deliv-ering services. Mode 4 covers the temporary move-ment of persons across borders for the purpose ofsupplying a service. “Temporary” movement is notdefined, but permanent migration is explicitlyexcluded, as are workers in most nonservice sectors,such as agriculture or manufacturing.

Mode 4 service suppliers can be viewed in termsof both duration and purpose of stay: they enter acountry for a specific purpose (to fulfill a servicecontract), for a limited and (generally) specified pe-riod of time, and are usually confined to one sectoror one job (they do not enter the labor market andare not free to search for employment). Mode 4 isnormally understood to include business visitors(persons who come for three months or less to nego-tiate a contract), intracorporate transferees (personstransferred within a company from one country toanother), and suppliers of contractual services (indi-viduals or employees of foreign companies with acontract to supply a service to a client in the receiv-ing country). While Mode 4 includes persons at allskill levels, to date market-opening commitments byWTO members have been limited to the highlyskilled.

Relatively few market-opening commitments onMode 4 have been made by both developed and de-veloping countries. Those that have been made tendto be subject to restrictions on number, type, and du-ration of stay of service suppliers. Countries’ actualregimes for temporary entry of workers tend to bemore liberal than their GATS commitments, how-ever, and considerable movement on service issues isoccurring in a range of sectors (such as health),notwithstanding the near-absence of relevant GATScommitments.

Five issues arise regarding GATS Mode 4 as aninstrument to manage labor mobility. First, GATScommitments are fixed commitments of guaranteed

Box 3.2 Mode 4 and international migrationtreatment, while migration regimes seek to retainflexibility to make adjustments in line with labor-market conditions. Second, GATS commitmentsfollow the most-favored-nation (MFN) principle—that is, treatment offered to one country must beextended to all WTO members—whereas migrationregimes can offer special treatment to countries withwhich regulatory trust or other special relationshipshave been built (through visa waiver programs, forexample). Third, GATS Mode 4 covers only a rela-tively limited subset of the workers moving aroundthe globe. Agricultural workers, for example, are notgenerally viewed as falling under the GATS. Fourth,multilateral trade negotiations have a 50-year history,while migration has largely remained a national pol-icy prerogative characterized by limited internationaldialogue. Finally, movement of people, especially thelower-skilled, raises a raft of issues related to socialand cultural integration, exploitation, impact onlocal labor markets, and, more recently, security thattrade agreements are ill-equipped to address.

Against this background, what role might theGATS play in managing labor mobility? The GATSis a narrow, but sharp, instrument that can deliver apowerful guarantee of access, but only for certaintypes of workers. Beyond this, however, GATS nego-tiations can be used to create a sense of urgency thatmay serve to bring migration authorities to the tableto discuss ways to manage mobility. Bilateral or re-gional approaches could, for example, include low-skilled workers and develop creative, cooperative ap-proaches to issues such as remittance transfer, braindrain, and loss of investment in education, prescreen-ing of temporary workers, and return. These agree-ments could assist in building regulatory trust andimproving management schemes in receiving andsending countries. Over time, by creating a templateof basic requirements or criteria that could be ap-plied to all countries on a nondiscriminatory basis,they could be used to extend access to a wider groupof countries and so approach the MFN principle ofGATS.

But the largest reason that nondiscrimina-tory approaches are limited is that people arenot goods: migration has much broader impli-cations for society than does trade. Destina-tion countries tend to be concerned thatimmigrants from countries with very differentcultures will not integrate easily into society,and high-income countries tend to limit low-income migrants for fear of overburdeningpublic services (see chapter 2). Thus eventhose countries that have immigration regimesthat do not discriminate by country tend todiscriminate by level of skill.

A final important distinction between tradeand migration is that trade is subject torelatively effective regulation, while manycountries of destination face considerabledifficulties (and internal disagreements) in reg-ulating immigration. The lack of effectiveregulation and incomplete efforts to controlimmigration encourages many low-skilled mi-grants to run substantial risks that can lead toconditions akin to slavery, great physical dan-ger, and even death. On the other hand, thesame lack of control works to the advantage ofmigrants by offering opportunities that mightnot otherwise exist and by benefiting groupswithin destination countries. The evidence inthis chapter suggests that cooperation betweenorigin and destination countries, throughagreements that provide for temporary, low-skilled migration, and through enforcement oflaws protecting migrants from exploitationand abuse, can improve the impact of migra-tion for countries and for migrants.

Notes1. Of course, migration may arise out of a combi-

nation of economic, political, and social goals. Also,migration among developing countries is an increas-ingly important phenomenon, but given data limita-tions we focus here on migration from developing toindustrial countries.

2. Empirical work largely confirms the view thatincome differentials are important determinants ofmigration. Borjas (1987), Karemera, Oguledo, andDavis (2000), and Hatton and Williamson (2002)found that migration to the United States was nega-tively related to source-country income per capita,

among other variables. Solimano (2002) found thatreal per capita income differentials between Argentinaand source countries were the main determinant of netmigration flows in the twentieth century.

3. See also chapter 2, which points out thatmigrants’ earnings (per worker) increase eleven-fold,before adjusting for differences in purchasing powerin high-income versus developing countries.

4. The basic idea is that the opportunity to earnmoney based on developed country prices but spend it(through remittances) based on developing countryprices is a major benefit from migration. The sameadjustment from the perspective of the migrant isdiscussed in the modeling exercise in chapter 2.

5. See the discussion of remittances and smoothingof household consumption in chapter 5.

6. By the late 1990s, public employment servicesalready played an insignificant role in the recruitmentof foreign workers, except where migration wascovered by bilateral labor agreements (ILO 1997). Forexample, nine out of ten workers sent from Asiahave used private recruiters (Abella 1997); and forRomania, most jobs in countries with which the gov-ernment has not secured bilateral agreements are foundby private intermediaries (Diminescu 2004).

7. Hugo (2004) describes how work contractorsare the primary source of information for potentialmigrants from Indonesia, and relates this to the highlevels of exploitation of Indonesian contract workerscompared with workers from other countries.

8. Support services provided through Philippinelabor attachés have provided critical legal counselingand protection (Moreno-Fontes Chammartin 2005).

9. The funds operated by the Philippines, Pakistanand Sri Lanka provide scholarships, legal aid indestination countries, insurance against death anddisability, and loans for predeparture costs, housing,and self-employment. The administration and deliverycan often be difficult, particularly on insurance (Tan2004), and some emigrants may resent the mandatorynature of the schemes (Abella 1997).

10. Also regarding Mexico, Mora and Taylor(2005) find that the presence of a family member in theUnited States increases by 7 percent the probabilitythat an individual will migrate, while McKenzie (2005)shows that larger migration networks increase theprobability of other community members migrating.

11. An irregular migrant in this context is definedas any person entering, residing, and working in a coun-try without proper documentation of their legal statusin that country, or any person who has committed acrime or breach of immigration law in that country andtherefore is not entitled to remain in that country.

12. However, Cornelius (2001) notes that the shareof irregular migrants who settle permanently in the


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United States has increased—a trend accelerated bytighter border enforcement adopted in the mid-1990s.

13. Protocol to Prevent, Suppress and Punish Traf-ficking in Persons, Especially Women and Children;and Protocol against the Smuggling of Migrants byLand, Sea and Air, 2000. These supplement the Con-vention against Transnational Crime, 2000.

14. Dedicated government offices such as thePhilippines Overseas Workers Administration, unionssuch as the seamen’s union in the Philippines, and non-governmental organizations (NGOs) can help familiesand communities make adjustments when family mem-bers migrate.

15. These data are described in Docquier andMarfouk (2004), which relies on census data (plusextensive estimations), and thus undercounts irregularmigrants, who are mostly low skilled. The data aretaken largely from industrial countries, so that low-skilled migration to other developing countries, as wellas high-income countries in the Middle East and Asia,is not reflected (which, for example, reduces the ratioof low-skilled emigrants from South Asia).

16. Similarly, mine labor recruiting in South Africaincreased wages in the plantation sectors in bothMalawi and Mozambique, which ultimately resulted inthe curtailed permission to recruit in Malawi in theearly 1970s (Lucas 1987).

17. For example, the compulsory repatriation ofworkers to Kerala following the Gulf conflict in1990–91 threw Kerala into a fairly sharp recession(Lucas 2004b).

18. This is not invariably true, for example, if thedeparture of one household member leaves his or herdependents impoverished. In general, family income islikely to rise with emigration, but cases of real hardshipcaused by emigration do exist.

19. This calculation is based on income that in-cludes remittances from the emigrant, so the number ofSri Lankan households with a family member abroadthat were poor prior to migration is probably larger.

20. Much of the data on high-skilled migrationrefers to individuals who have some tertiary education,although other kinds of qualifications (electrician,plumber, ability to handle sophisticated machinery) areof economic interest.

21. See Lowell (2001) for a list of programs toattract high-skilled workers.

22. For example, forgone income tax revenuesassociated with Indian-born residents of the UnitedStates may be equal to one-third of current individualincome tax receipts in India (Desai, Kapur, andMcHale 2001), although this is a very low share oftotal government revenues.

23. Such countries benefit highly from remittances.Remittances to countries with populations of less than

1.5 million totaled about 6 percent of gross nationalincome, compared with an average of 1.7 percent forall developing countries.

24. Available data do not distinguish émigréseducated at home from those educated abroad, an issueof growing importance as education is increasinglymarketed to the developing world by high-incomecountries.

25. This theory is developed in Mountford (1997),Chau and Stark (1999), Stark (2003), and Drinkwaterand others (2002).

26. These data do not include high-skilled emi-grants to other developing countries, which may be animportant issue for many developing countries.

27. Microeconomic evidence tends to find thateducation is associated with higher earnings (Mincer1991). After some considerable debate, recent articlesfind that years of schooling have a positive impact onproductivity growth (de la Fuente and Domenech2002), and that the quality of education (as measured,for example, by pupil-student ratios or the dropoutrate) may matter more than the quantity (Barro andLee 2000).

28. Clemens (2005) presents an alternative view,arguing that health systems in Africa are not greatlyweakened by emigration because the option to emi-grate encourages entry into the medical field.

29. Institutions exist in countries of origin thattrain workers for external labor markets, for examplesome nursing schools in the Philippines and a medicalschool in Budapest that teaches in German. However,these schools do not receive funds from potential coun-tries of destination (World Bank 2004).

30. Data are based on a survey carried out for abackground paper, available on request.

31. Workers who stayed in Albania had higher-quality skills than returnees (De Coulon and Piracha2002), and returnees from Sweden were found to beless successful economically than emigrants who stayed(Edin, LaLonde, and Åslund 2000). See also Hugo(2002) on re-emigration from Australia and Constantand Massey (2003) on Germany.

32. See Pang, Lansing, and Haines 2002 onThailand, Lucas (2004a) on China, and the IOM officein Tunis on Tunisia.

33. The High-Level Committee on the IndianDiaspora (2001) notes the role of expatriates in at-tracting R&D investments from Intel, Oracle, TexasInstruments, Sun Microsystems, and IBM.

34. Recognizing benefits earned abroad mayreduce costs to the destination-country government, asmany such services are likely to be less expensive in de-veloping countries. The cost implications have someuncertainty, as some migrants will choose to returneven without portability of benefits.


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35. For example, a program between Germany andEritrea disbursed only 65 loans from 1993 to 1997,while a project in Italy’s Veneto region trained only 30Albanian immigrants in setting up companies orlaunching joint ventures with local companies in theircountry of origin.

36. The Return of Qualified Africans program wasevaluated by the European Commission as contribut-ing to development at micro levels (IOM 2005b).

37. The Return for Qualified Afghans has beencriticized for offering low compensation packages andinvolving few individuals despite being expensive torun (Jazayery 2002).

38. Australia, Argentina, Canada, and the UnitedStates entered into bilateral labor agreements withcountries of origin in the mid-twentieth century. Thebracero program admitted some five million Mexicanfarm workers to the United States between 1942 and1966. In Europe, Germany and France recruited guestworkers from southern Europe, Turkey, and NorthAfrica after the Second World War until the economicdownturn of the 1970s.

39. An example is the agreement that provides forthe acceptance of Vietnamese information technologycredentials in Japan (Vietnam Trade 2005).

40. The pilot ended in January 2005, and the out-comes are being evaluated by the Dutch government.

41. Regional examples include the Regional Con-ference on Migration (Puebla Process) and Lima Processin the Americas; MIDSA and MIDWA in Africa; and theManila, APC, and Bali Processes in Asia. Inter-regionalprocesses include the “5 plus 5” (a migration dialogueestablished in 2002 between southern Europe—France,Italy, Malta, Portugal, Spain—and the Maghrebgroup—Algeria, Libya, Mauritania, Morocco, andTunisia. Global consultation forums include the UNGlobal Commission on International Migration, theBerne Initiative, IOM’s International Dialogue on Mi-gration, and ILO’s International Labor Conference.

ReferencesAbella, M. 1997. Sending Workers Abroad: A Manual

for Low- and Middle-Income Countries. Geneva:International Labour Office.

———. 2004. “The Role of Recruiters in LaborMigration.” In International Migration:Prospects and Policies in a Global Market, ed.Douglas S. Massey and J. Edward Taylor. Oxford:Oxford University Press.

Adams, Richard. 2004. “Remittances and Poverty inGuatemala.” Policy Research Working Paper3418. World Bank, Washington, DC.

———. 2005. “Remittances and Poverty in Ghana.”Mimeograph. World Bank, Washington, DC.

Adams, Richard, and John Page. 2003. “InternationalMigration, Remittances, and Poverty in Develop-ing Countries.” Policy Research Working Paper3179. World Bank, Washington, DC.

Afsar, Rita. 2003. “Internal Migration and the Devel-opment Nexus: The Case of Bangladesh.”Bangladesh Institute of Development Studies,Dhaka.

———. 2005. “Internal Migration and Pro-PoorPolicy.” In Migration, Development, and PovertyReduction in Asia, ed. Gervais Appave and FrankLaczko. Geneva: International Organization forMigration.

Agrawal, Ajay, Iain Cockburn, and John McHale.2003. “Gone But Not Forgotten: Labor Flows,Knowledge Spillovers, and Enduring Social Capi-tal.” Working Paper 9950. National Bureau ofEconomic Research, Cambridge, MA.

Aleinikoff, T. A., and Klusmeyer, D. 2002. CitizenshipPolicies for an Age of Migration. Washington,DC: Carnegie Endowment for International Peace.

Barré, Rémi, Valéria Hernandez, Jean-Baptiste Meyer,and Dominique Vinck. 2003. Diasporas scien-tifiques: Comment les pays en développementpeuvent-ils tirer parti de leurs chercheurs et deleurs ingénieurs? (Scientific diasporas: how candeveloping countries benefit from their expatriatescientists and engineers?) Paris: IRD Editions.

Barro, R., and J. W. Lee. 2000. “International Data onEducational Attainments—Updates and Implica-tions.” Working Paper 7911. National Bureau ofEconomic Research, Cambridge, MA.

Bartel, A. P. 1989. “Where Do the New U.S. Immi-grants Live?” Journal of Labor Economics 7(4):371–91.

Battistella, Graziano, and Ma. Cecilia G. Conaco.1996. “Impact of Migration on the Children LeftBehind.” Asian Migrant 9(3): 86–91.

Beine, Michel, Frederic Docquier, and Hillel Rapoport.2001. “Brain Drain and Economic Growth:Theory and Evidence.” Journal of DevelopmentEconomics 64: 275–89.

Bhagwati, Jagdish. 1976. “The Brain Drain.”International Social Science Journal 28: 691–729.

Black, R., 2004. “Migration and Pro-Poor Policy inAfrica.” Working Paper C6. Sussex Centre forMigration Research, University of Sussex.

Black, Richard, Savinna Ammassari, Shannon Mouil-lesseaux, and Radha Rajkotia. 2004. “Migrationand Pro Poor Policy in West Africa.” WorkingPaper C8. Sussex Centre for Migration Research,University of Sussex.

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