International Migration

Beyond the effects on migrants’ origin households, international migration can have more widespread economic effects on entire origin regions. The evidence on this front has grown substantially in recent years, though the literature remains more limited than household-level studies due to the methodological challenges of identifying area-level causal effects.

Important evidence of origin-area impacts comes from recent studies of negative shocks experienced by migrant populations. Caballero et al. (2023) examine how Mexican migrant exposure to Great Recession (2007–09) employment shocks in the US affected origin communities. Using exposure variation across Mexican municipalities – due to the specific US locations of migrants from Mexican source areas – they find that negative shocks to migrant employment led to reduced educational investments in origin areas. Conover et al. (2023) show that declines in migration from the Great Recession led to increased labour supply in Mexico and lower employment probability and wages for men. Relatedly, Bucheli and Fontenla (2022) study how return migration influences economic development back in Mexico. Households with return migrants experience higher income, greater investment in housing, and increased likelihood of starting businesses. These effects extend beyond individual households, generating positive spillovers for local communities, highlighting return migration as an important channel through which international mobility contributes to economic growth and development. Theoharides (2020) exploits the sudden closure of migration opportunities for Filipino women to work as entertainers in Japan, examining how this policy change affected origin communities. Areas more dependent on this migration stream experienced significant negative effects: lower household incomes and higher rates of child labour. Declines in the migration of entertainers spilled over to other migration channels, and origin areas experienced declines in migration greater than the decline in entertainers.

Impacts of international migration on migrants’ origin areas can be long-lasting and increasing over time. Khanna et al. (forthcoming) study how persistent improvements in international migrant income prospects affect long-run economic development across Philippine provinces. Exploiting exchange rate shocks from the 1997 Asian Financial Crisis that differentially affected provinces depending on their overseas migrant destinations, they document substantial positive impacts that grow over subsequent decades. The positive exchange rate movements initiate a long-run process of educational investment, increased migration, and more higher skilled (and higher-wage) migration, resulting in substantial increases in migrant income over time. Migrant incomes are invested in education and small enterprises at home, leading migrant-origin areas to see increases in income from domestic (non-migrant) sources as well. Remarkably, three-quarters of long-run income gains come from increases in domestic income rather than migrant income itself. This process leads to the structural transformation of the economy away from agriculture and towards the modern sectors (particularly the service sector).

Analysis of a historical migration episode provides additional evidence of long-run development effects of labour migration. Dinkelman and Mariotti (2016) and Dinkelman et al. (2024) study the effects of Malawian labour migration to South African mines, exploiting variation in colonial-era migrant recruitment stations and a short-term bilateral migrant labour programme in 1967–74. They find that areas with greater exposure to this time-limited migration opportunity exhibit significantly higher educational attainment, better health outcomes, and more developed local economies decades later. The primary mechanisms through which the effects operate appear to be human and physical capital accumulation funded by migrant earnings. Theoharides (2018) also finds positive effects of migration opportunities on human capital in origin areas, with increases in education beyond the households of the migrants.

These findings collectively suggest that the benefits of international migration extend well beyond the migrants themselves and their immediate families to encompass broader origin communities. International migration not only has positive economic effects on origin areas in the short run, but can also initiate virtuous cycles in the long run in which migrants invest their earnings in human and physical capital in origin areas. These investments can bear fruit in the long run in the form of higher domestic (non-migrant) earnings; increased migration rates in higher-skilled, higher-wage migrant work; and ultimately structural transformation of the economy away from agriculture towards the modern sectors.

For full reference list see the end of the conclusion chapter.