International Migration Reduces Poverty In Developing Countries, But Results In Massive Brain Drain For Some, Says World Bank Study

“The studies show that remittances reduce poverty and increase spending on education, health and investment,â€? said World Bank economist Maurice Schiff, who co-edited the book with Caglar Ozden, also an economist at the Bank. “The findings are consistent in all three country studies in this volume, and further studies are under way to see if they apply in other countries.â€?

Close to 200 million people are living in countries other than the ones in which they were born, and remittances are estimated to reach about $225 billion in 2005, according to a forthcoming World Bank publication, Global Economic Prospects 2006. This makes remittances the biggest source of foreign exchange in many countries and has major implications for strategies to reduce poverty in developing nations.

“In Mexico, the larger the share of households with migrants in a region, the more favorable the effect of increases in remittances on rural poverty,â€? concludes one of the book’s eight studies, by researchers Jorge Mora and J. Edward Taylor. And in Guatemala, says another chapter by Richard H. Adams Jr., remittances reduce the level, depth and severity of poverty. The greatest impact was on the severity of poverty, with remittances accounting for over half the income of the poorest 10 percent of families.

It is no accident that the main sources of migrants to Europe are from Africa and the Middle East, while the dominant source regions for migrants to the United States are from Mexico, Central America, and the Caribbean. Proximity to the destination country matters to potential migrants, the study says, especially those who are poor and unskilled, as it costs less to migrate to a nearby country than to a distant one. In addition, a chapter in the book by David McKenzie finds that the presence of migrant networks in the destination country encourages further migration, as they further reduce the cost of migrating, while also providing contacts needed to find jobs.

“As a larger share of the community migrates, migration costs fall and relatively poorer members are able to migrate, and to benefit from the larger network as well,â€? McKenzie concludes.

On a larger scale, migration dramatically increases global economic output by enabling workers to move to locations where they are more productive, and as a result, earn much higher wages than they would have in their developing home countries. A large portion of these economic gains accrues to the migrants and to their families back at home through the remittances they send.

“The household survey evidence presented in this book demonstrates a direct link between migration and poverty reduction in the countries studied,â€? said François Bourguignon, the World Bank’s Chief Economist and Senior Vice President for Development Economics. “It is groundbreaking work that is essential to sound policymaking in this area.â€?

While remittances increase incomes and reduce poverty, the book shows that their impact—and the impact of migration, more broadly—on education differs between Mexico and Guatemala. In Guatemala, (both rural and urban) households receiving remittances spend relatively more on education, and proportionately less on day-to-day consumption. But in rural Mexico, children in migrant families acquire less education than the non-migrants, probably because they aim to follow their parents’ example and migrate to unskilled jobs in the U.S., for which more education is neither necessary nor rewarded.