Measuring the Impact of International Migration and Remittances: Will Latin America Be a Big Winner?

This study evaluates the potential gains of international migration, based on stock of migration and corresponding remittance flows in complete bilateral dimensions. The model incorporates 3 types of households in both high-income and developing countries, differentiated by nativity. Labor market is decomposed into 3 categories–high, mid, and low skills–and again differentiated by country of origins. This study assumes that emigration rates from each country are held constant as a policy shock, as opposed to the constant share of migrant workers in labor force in each host country in a baseline scenario, while updating each year based on the growth of labor force. The recursive dynamic CGE model simulates from 2004 base year to the projection year 2020. The preliminary simulation results reaffirm the win-win nature of international migration for both origin and host countries. The global GDP increases by 1.4 percent from the baseline scenario. Measured at 2004 prices, international migration also generates $760 billion of global income in 2020, corresponding to 1.27 percent increase. The bulk of the gains accrue to the origin of developing countries, amounting to $640 billion, or approximately 85 percent of the global gain. Thus the south-north migration is the key driver of raising the global income, generating the global endogenous income-generating growth process. Migrant households in high-income countries reap the largest gains, amounting to $450 billion. Yet the mechanism and sources of gains are differentiated between migrant-receiving high-income host countries and migrantsending low-income developing countries. The former benefits from the increase in capital income, offsetting the decline in wages. In contrast, the latter gains from the rise in labor income and remittances. Latin America will be a global winner, with an increase in real GDP by 1.8 percent, and the region capture a quarter of the aggregate income gain in developing countries.