Sunday, October 11, 2009

Migration and Development

The Economist: The aid workers who really help
UNDP: Human Development Report 2009

Migration can enhance human development, according to the 2009 Human Development Report. About 200 million migrants around the world help their home countries by not only sending cash remittances but also sending "social and political remittances." The impact they bring to their home countries is "huge and benign."

Migrants remit cash on a vast scale to poorer countries and this amount exceeds official aid. According to the World Bank, migrants sent $328 billion from developed to poorer countries in 2008, while official aid from OECD members to those countries was $120 billion. India received $52 billion from its diaspora, more than it took in foreign direct investment. This flow of cash increases demand in home countries and supplies hard currency. Cash remittances and material aid during natural disasters and emergencies are also helpful. The Economist noted that technological advances (mobile phones and online banking) and competition between remittance agencies provide easier, safer and cheaper ways of remitting cash.

Moreover, migrants contribute to the social and political development in their home countries by sending useful values and knowledge. So called "social remittances" include reductions in fertility, higher school enrollment rates and the empowerment of women in home countries. In India's case, the government responded to the requests of many Indian-origin people living abroad by creating more transparency and simplified regulations for foreign investors.

In order to realize these benefits, the report calls for policy reforms in six areas: 1) opening up existing entry channels to more workers; 2) ensuring basic human rights for migrants; 3) lowering the transaction costs of migration; 4) finding solutions that benefit both destination communities and the migrants; 5) making it easier for people to move within their own countries; and 6) mainstreaming migration into national development strategies.

Discussion Questions:
1) The report argues that migrants also benefit the host countries (e.g., boosting economic output, contributing to social diversity and the capacity for innovation, etc.). However, during the time of recession, how likely is it that governments in developed countries would pursue policy reforms suggested by the report? Should they? If so, why?
2) Large inflows of cash remittances into small economies may lead to inflation or currency appreciation. What could be other negative effects of remittances? See UICIFD's E-Book Part Four II, "Remittances and Development"

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