Sudharshan Canagarajah's blog

There has recently been heated debate regarding migrant employment behavior in host countries during and after economic crises. The popular view is that migrants have an incentive to remain unemployed as long as they have access to unemployment benefits, free health care, and education. Thus, many argue, that migrants should not be provided with benefits as they create perverse incentives for migrants to stay unemployed. However, recent data does not support such a simple relationship. In fact recent data shows that sometimes migrants that lose jobs tend to find work quickly during and after crises.

A recent article in the Economist based on OECD Migration Outlook 2011 provided some useful data to show the complex patterns of migrant unemployment compared to nationals. The data shows that the relationship between migrants and unemployment incidence depends on a variety of labor market conditions including unemployment benefits, skill level of migrants, business cycle patterns, the sectors they are employed in, and labor market flexibility.

At approximately 46 million, the diaspora population originating from the ECA (Europe & Central Asia) countries is the largest of all the development regions. Over ten percent of the population of the ECA countries currently lives outside their home countries, a much larger share than the 3 percent of the world’s population who are defined as migrants. Even if some immigrants choose to fully assimilate in the recipient countries, there is still a significant number who maintains active links to their countries of origin. The flow of remittances in ECA coming from this Diaspora is also quite significant, more than 30 percent of GDP in some ECA countries. This financial contribution has led to a dialogue on potential Diaspora Bonds to attract much needed investment for capital projects (see Dilip Ratha’s work).

The more I work on migration issues, I have come to realize the uniqueness of the CIS region migration phenomena. Migration in what is currently called the CIS region (the former Soviet Union) includes both migration within the region and external migration. Although the CIS countries are now nation states, they were earlier part of one country. The migration phenomena, therefore, existed for more than 70 years before the fall of Soviet Union in 1991. Despite being ethnically different, almost all speak Russians (although the fluency in Russian is declining over time, especially in the younger generation). There is substantial movement of goods and services and trade integration across the region.

Knowledge product innovation in ECA: The case of MIRPAL

It is almost eighteen months since World Bank Europe and Central Asia (ECA) region launched a program of knowledge sharing in the post crisis environment for countries heavily dependent on remittances and looking for ways to address the

vulnerability that emanated from the global economic crisis. For many Commonwealth of Independent State (CIS) economies in ECA region, which had seen high economic growth rates on the back of Russia’s economic boom, the global crisis and its impact on trade and remittance flows was an important shock. For many, neither the neither magnitude, nor trends of the remittance shock was clear, because the research and policy response has been very limited.

A liberal trade regime is regarded by most economists as being necessary for sustainable economic growth and poverty reduction over the long term. One of the main reasons for this is that trade liberalization helps to boost incentives for export growth, and in turn exports are one of the main drivers of long term economic growth. Most of the fastest growing developing countries in the last three decades, such as the East Asian tigers, have also sustained very rapid export growth. Exporters usually face greater competitive pressure than do suppliers of goods to the domestic market, and so must constantly innovate to improve efficiency and the quality of their products. Hence exports usually lead the economy in upgrading technology and improving factor productivity, both of which are crucial for long term growth.

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The Russian economy suffered a double blow in 2008; first from the drop in world crude oil prices and secondly from a reversal of capital account inflows. The fall in national income and the adjustment of the balance of payments to the external shocks triggered a steep recession. After recording real GDP growth of 8.1 percent in 2007, growth fell to 5.6 percent on 2008 and then to negative 9 percent in 2009, one of the steepest falls of any major economy. This affected remittances, mainly to other CIS economies, through two channels: first because of a contraction in employment, especially in the cyclically sensitive construction industry and secondly because the depreciation of the Russian rouble, by 51 percent against the US dollar between March 2008 and March 2009, reduced the dollar value of remittances.

Remittances to Tajikistan fell much more sharply in the final quarter of 2008 than can be attributed to seasonal factors alone. The slump continued throughout 2009 with gross inflows of remittances valued in US dollars for the year falling 31 percent below the total for 2008. How did this fall in remittances, of more than $800 million (about one sixth of GDP) relative to the level in 2008, affect the macroeconomy in Tajikistan? There are three possible channels of adjustment to a reduction of foreign exchange inflows of this magnitude.