Development implications of migration and remittances

1. Economic Implications of Remittances and MigrationDilip RathaWorld BankGlobal Consumer Money Transfer ConferenceLondonOctober 30, 2006

2. 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

3. 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

4. Global migrant stock is rising Source: United Nations

5. South-South migration is almost as large as South-North migration Source: Ratha and others (2006)

6. South-South migration is almost as large as South-North migration Destination of migrants from the South Source: Ratha and others (2006)

7. Top migration corridors include several South-South corridors (excluding the FSU) Source: University of Sussex and World Bank

8. Former Soviet Union corridors are among the largest South-South corridors Source: University of Sussex and World Bank

9. Remittances are large, have continued to increase Private debt and portfolio equity FDI Recorded remittances ODA

10. South-South remittances were likely between $19 to $53 billion in 2005 Source: Ratha and others (2006)

11. Top recipients of remittances, 2005 (estimate) $ billion

12. Top recipients of remittances, 2005 % of GDP

13. Top sources of remittances $ billion, 2005 % of GDP, 2004

14. 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

15. Migration boosts welfare for most householdsChange in real income in 2025$ billion Global gains of $356 billion .

16. 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

17. Remittances tend to rise following crisis, natural disaster, or conflictRemittances as % of private consumption

18. Remittances improve countries’ access to capital Present value of external debt as % of exports of goods, services, and remittances

19. Downside • 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

20. 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

21. Remittance fees are high, and regressive Fee and foreign exchange commission as % of principal Weighted average of fees of four largest money transfer operators in the U.S.-Mexico corridor

22. South-South remittance costs tend to be higher than North-South costs

23. 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

24. 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