Published on People Move

Migration and Remittances in Inclusive Growth Analytics

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Even though migration brings about large overall gains globally, whether or not it has a positive impact on growth in a given country has caused more controversy in the empirical literature. The answer depends on the country specific circumstances, and the type of the study. Often the analysis is limited to one specific aspect of migration ignoring the other, possibly more influential indirect channels through which migration impacts growth dynamics. A holistic context specific analysis is needed to inform the policy choices that set up the most favorable conditions ensuring that migration dynamics contribute to an inclusive growth process.

One of the most influential current frameworks for context-specific growth analysis has been the Growth Diagnostics by Hausmann, Rodrik and Velasco. This framework has been further adjusted for inclusive growth diagnostics by Sida and the World Bank. The main difference between traditional and poverty reducing growth diagnostics is that the inclusive analysis takes the individual rather than the firm or the economy at large as the analytical starting point, and argues that the way for sustainable and inclusive growth goes through productive employment. Finding ways to enhance individuals’ ability to participate in, contribute to, and benefit from growth through productive self- or wage employment becomes the focus of the analysis.

 In countries where large parts of the working age population are residing abroad and/or when the country is heavily dependent on remittances, the growth dynamics becomes affected by migration. The current analytical frameworks are yet to be tuned to accommodate such an addition that has an impact on several key variables incorporated in a traditional growth and/or inclusive growth study. Describing the trends in migration, the push and pull forces that dominate the migration flows, the employment markets in the main destination countries, as well as challenges and opportunities induced by migration will need to be discussed in the migration-enhanced version of the framework.

In addition to determining the overall growth impact of migration, determining how migration affects poverty will determine how inclusive the growth process is, and how large the final welfare outcome of migration will be. In case people living in poverty are able to participate in and benefit from the income opportunities presented through migration, it should have a positive and substantial effect on poverty reduction, not just on overall economic growth.


Elina Scheja

Economist, Migration and Remittances Team, Development Prospects Group, World Bank

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