drivers of international migrations and their impact on developing countries economies

 drivers of international migrations and their impact on developing countries economies

Abstract

International migration plays an important role in the development of developing economies. This paper looks at the drivers of international migrations and their impact on developing countries economies with a focus on remittances. This review is motivated by the fact that remittances today being more than official development assistance and foreign direct remittances. The review identifies the major drivers of international migration to understand why they remit money to the country of origin and how it impacts on the economy. This review concludes that international migration is motivated by economic development, as supported by major research papers and statistics. As a result, people send money back home to improve the living conditions of households left behind. The research shows that remittances play a major role in developing economies, but this depends on macroeconomic policies that are put in place. The review concludes that remittances must be controlled through the formulation of complementary macroeconomic policies in order to play the role of alleviating poverty in developing countries.

Introduction

International immigration has become the center of attention among the government. International bodies and academics. Today, more than 272 million people are international immigrants meaning that 3% of the world population is international immigrants. Statistics support the view that migrants move from developing countries to developed countries because most international migrants are from India, and most of them reside in the United States. Half of the immigrants live in 10 countries. The United States has the most significant number of migrants of 51 million (UN, 2019). it is followed by Germany and Saudi Arabi, which host 13 million people. Then the United Kingdom host ten million. Concerning country of origin, India has the highest number of international immigrants of 18 million. It is followed by Mexico with 12 million.

Amidst the growing interest in this field, this review is concerned with the links between international migration and economic development in developing countries. The main subject is the impact of international migration and the effects of remittances on developing economies. This is because of remittances, which have become a crucial source of finance in developing countries. Migrants contributed to the development of their home country by sending remittances. International migrants are estimated to have remitted $439 billion in developing countries (OECD, 2015). what is alarming is that the amount remitted has surpassed the Official Development Assistance. This paper will look at the impacts of international migration with a focus on the effects of remittances.

This topic is important to academics, government, and international bodies. International bodies, together with the government, are identifying ways to deal with migration pressures. This is amidst the rise in illegal emigrants who are destabilizing the economies of developed nations by putting pressure on resources and lowering wage levels. This topic is important because it will focus on showing why migration occurs, and then it will show the impacts of migration on developing economies with regards to remittances. The study can be used by government and international bodies to deal with pressures of migration and the current migration crisis by identifying the drivers of migration. It can further be useful in showing the role of policies in ensuring that remittances improve the economies of developing countries. With a wide range of research on the area of migration, this review will also be used to assess the methodology used by studies and identify certain weaknesses that can be used to come up with better economic models.

Methodology

this paper conducts a thematic literature review. It identifies two major themes that are based on the topi. The first theme is on the drivers of international migration. This section looks at three main drivers; economic development, migration policies, and human security. The research pays more attention to economic growth as the source of migration. The paper then looks at the impact of international immigration with a focus on the role of remittances. in this theme, it looks at the positive and negative impacts of remittances. These themes will be used to show that the main driver of international migration is economic development, and it plays a huge role in the reduction of poverty in developing economies. However, this is dependant on the macroeconomic policies that a country puts in place. The review proposes that developing countries must identify complementary macroeconomic policies to fully benefit from international migration.

Methodology

This paper uses a conceptual model where it follows a thematic by identifying studies that have a similar conclusion. The studies used in this case developed an econometrics model to test the various hypothesis. the pares widely use the

the first one is the wide use of secondary data. The studies widely rely on secondary data. To develop economic models, very few studies conduct primary research. One of the studies that used primary data is (Gullette 2007). the study used semi-structured interviews to collect data. It had a sample size of 89 households, and out of these, 121 people had migrated from this household. The use of primary data makes the research stronger as opposed to reliance on secondary data to test the hypothesis. The paper was able to gain in-depth knowledge of certain characteristics of a population, such as income patterns and living standards. Moreover, the study can determine the opinion of households with regard to international migration. Compared to other papers that have widely used research, the model used by this paper is not based on assumptions. The researcher is able to gain first-hand information. A second study that used primary data is (Depoo, 2014), which measures the motivations of remittances. The study used the survey method and had 300 participants. The study contributed to the literature by showing that migrants send money to the country of origin to promote economic development and out of family obligations. Secondly, it identifies a new aspect of remittances that is paying back the finances of migration. The cost of migration is high, and migrants get support from family and friends. Sending money back home is a way of paying back this money (Depoo, 2014, p. 204). these two studies that use primary data have a certain characteristic of providing a good explanation of population in terms of age, education, and income which are important when measuring the level of remittances and implications on households in the country of origin.. one of the major problems of relying on secondary data is that it limits researchers to use data that is available. For instance, the study by (Masron & Subramaniam, 2018) focuses on data of countries that were available. Similarly, the study by (Fajnzylber & Humberto, 2008) is limited to several countries in Latin America due to the availability of data. Similarly, the study by (Gimenez-Gomez, Walle, & Zergawu, 2019)also indicates that the set of panel data was limited by the availability of data.

The studies that widely look into remittances and implications on poverty in developing countries all agree that remittances boost private consumption, and this leads to a reduction in poverty. However, these studies have a certain weakness. They fail to match migrants to families of origin. The study by (Fajnzylber & Humberto, 2008) widely assesses the implication of remittances and poverty, but it generally uses data of migrants and households without matching migrants to origin family. Matching migrants is vital because of several reasons. First, it can be used to determine if remittance enhance inequality the level of education of the migrant. The study by Fajnzylber & Humberto, 2008 notes that if migrants from better-off families and are well educated, the remittances will cause inequality. If this study had a matched sample of migrants to origin family, it can have a stronger claim and show how inequality is caused. Secondly, matching sample size to the original family can indicate the implications of income due to the movement of a family member. The study can determine the amount of income that the household lost due to international migration and if it is covered by remittances that are currently. One of the studies that matched the migrant’s sample to the household origin is (Osili, 2007). by doing this, this study identified the characteristics of the migrant, unlike other studies. It shows the age, number of households, years of schooling, landholdings of the family of origin. This study focuses on savings, and with a matched sample, it managed to contribute some new information to literature such as remittances reduce as family assets increase. The study successfully shows that skilled and highly educated migrants sent larger transfers to family origin compared to uneducated and semi-skilled migrants. The study proves that there is a need to match migrants to the household of origin to gain more insights into how remittances contribute to poverty levels. Matching migrants to the household of origin can be crucial in identifying some of the forces that cause remittances to have a negative implication on developing countries. For instance, a matched sample can help researchers understand why households who receive savings have less incentive to work and prefer leisure, which contributes to a reduction in labour supply.

Based on these shortcomings, the review concludes that the best methodology is one that combines secondary and primary data. The collection of primary data is time-consuming and expensive. However, studies can narrow down the sample size. For instance, study, instead of focusing on wide areas such as the study by (Gimenez-Gomez, Walle, & Zergawu, 2019), which focuses on Africa and (Fajnzylber & Humberto, 2008) which focuses on Latin America, studies can focus on a single country. Secondly, the methodology should match migrants to households in the country of origin.

Implications

one of the main implication of this study is on the importance of macroeconomic policy to curb the negative effects of remittances on developing countries. From the research, the negative implications of remittance son development of developing countries include inequality, appreciation of real exchange rate, increasing inflation, lowering property to save with banks, and lowering the incentive to work. the research indicates that for remittances to have a positive implication on developing countries, there is a need to identify the right microeconomic policy (Fajnzylber & Humberto, 2008). the research concludes that countries with better macroeconomic policies. it can be used by a developing country to offset the inequality impacts that are caused by remittances in order to reduce poverty. it can further be used to deal with high inflation rates to also ensure that it adequately reduces poverty. moreover, the government can come up with monetary and fiscal policies to deal with the implications of currency appreciation. for instance, the government can control importation to protect the local industry. the monetary and fiscal policies are crucial in dealing with some of the spill effects of remittances.

the research provides insight on the effectiveness of remittances compared to foreign aid. there has been a long debate on the effectiveness of foreign aid. one of the reasons that makes foreign aid ineffective is due to corruption where funds are misused, and they do not end up meeting the intended use. the research indicates that remittances are effective because they directly go to households. The remittances are freed from the bureaucracy process and being susceptible to corrupt government officials. by reaching households, the funds serve a major role in boosting the income of low-income families. the research indicates that funds serve the purpose if they reach the targeted people. countries are offering foreign aid can consider changing their focus. More attention can be given to low-income families, and their income can be increased. according to the World Bank(2005), remittances reduce poverty because money is spent on vital elements such as education and health. education has been identified as an ineffective tool for ending the vicious cycle of poverty. this means that foreign aid can be directed towards the support of education and improving health facilities in a community. however, fo foreign aid to have an impact, it must reach its end users. the middle actors must be eliminated, and foreign aid goes directly to low-income families.

the literature review also indicates that savings and investments have a more profound impact on the economy as opposed to spending. (Masron & Subramaniam, 2018) Indicate that migrants’ savings and investment in small business, real estate, and other assets play a crucial role in poverty reduction. furthermore (Opperman & Adjasi, 2019) show that remittances lower poverty through increasing savings and investments and not thorough a rise in consumption. Money that is spent on consumption has a small effect on the economic development of the country. This shows that there is a need to direct remittances towards economic development through its use in investment and savings. some households use remittances to start small issues. small business have been identified as a good source of employment. For instance, in the US 48% of the population is employed by small businesses (SBA, 2012, p. 1). Government and non-governmental organizations that focus on economic development can support investments made by international migrants. the governments can relax rules on small businesses to encourage more migrants to invest in small businesses.

the review widely indicates that one of the main drivers of migration is economic development. the study by takes a different opinion (Gimenez-Gomez, Walle, & Zergawu, 2019) shows that countries should focus on dealing with human security issues in developing countries to deal with the problem of immigration and is opposed to economic development. However, economic development is still the leading motivator of economic development, given the recent crisis of illegal immigration in the US and in Europe. there has been a migration crisis in the world today. There have been serious cases of people trying to desperately get into Europe. the most recent one, where 39 people were found dead in a truck as they were trying to move into England (Berger, 2019).moreover, statistics indicate that there were 4.8 million illegal immigrants in Europe (Passel & Connor, 2019). illegal immigrants have an impact on the economy of the destination country. they will enjoy the services that the government provides, such as health and free education, and yet they do not pay taxes (Maha, 2010). the put pressure on resources of a country. Moreover, they destabilize the wages in a country by being a cheap source of labour. given these negative impacts of immigration, developed countries should enhance focus on the economic development of low-income countries to lower the drivers of illegal migration. Developed countries can develop funds to support small businesses, which are the main source of employment for small income earners. moreover, developed countries can come up with migration programs that target low-income households. According to (Fajnzylber & Humberto, 2008), if migrants are from low-income families, the remittances will have a larger impact on the reduction of poverty by dealing with inequality. moreover, low-income families can spend remittances on education and health, which puts an end to the vicious cycle of poverty (World Bank, 2005).

Conclusion

Migration studies identified a number of international migration motivations. The first one and the most profound is economic development. People move to improve their living conditions. This explains the reason international migration occurs from low-income countries to developed countries. The studies also consider the human security issues in countries of origin, such as war ethnicity and weak institutions, as a major driver of international migration. The studies introduce the aspect of climate change in international migration. People are moving from countries that are experiencing acute water shortages and poor weather conditions in search of a better life. International migration tends to have implications on the country of origin. The main implication of international migration on the country of origin is remittances. Once migrants move to the host country, most of them send money to the country of origin. These remittances have positive and negative implications on the country of origin. The main aim was to assess the implication of developing countries. Based on previous research, remittances play a huge role in the reduction of poverty. Moreover, the studies show that it is more effective compared to foreign aid and foreign direct investments. However, there are studies that show that remittances cause poverty is by enhancing inequality. This is because migrants are from better-off families and remittances they send back puts low-income earners at a worse off situation. Secondly, remittances have reduced the incentive to work because some households rely on it. The remittances cause the rate of exchange to appreciate, which makes exports less competitive. Lastly, it impacts the financial sector through people demanding less credit because they have a stable source of income. It also reduces the propensity to save as the income of households increases due to remittance they tend to spend more.

By assessing the reason migration occurs and how international migration impacts developing countries with a focus on remittances, this research arrives at a number of conclusions. International migration’s main driver is economic development because migration mainly occurs from developing to developed countries. It explains the reasons migrants send money back home to also improve the lives of the people left behind. Moreover, it is a way of migrants accumulating saving and investment in country of origin in case the migrants were to go back to the country. However, this research finds that international immigration can have deteriorating impacts on the economies of developing countries. It concludes that for developing countries to enjoy the benefits of international migration, they must develop complementary macroeconomic policies.

The main strength of literature is the use of reliable sources. The literature review has made use of wide resources of journal articles to arrive at a conclusion. These journals are a strong source of information because they make use of an econometric approach, such as the least square methods and regression analysis, to test the hypothesis. The study compares the various researches to understand the reason international migration occurs and how remittances impact the developing countries economies. The study’s weaknesses are on the reliance on secondary data. The study was limited by time and cost; hence it could only use secondary data in the review. The use of secondary analysis limits the study of the scope of the study to the data that is available.

This research identifies a number of research gaps. the first one is the existence of contradictions between the research paper. (Fajnzylber & Humberto, 2008) proposes that international migrants tend to be from better-off families, and they are educated. Conversely, (Borjas, 1989) proposed that people from high-income families have less incentive to migrate as they benefit from high-income inequalities that exist in developing countries. It is shown that educated migrants move to countries that are willing to pay higher prices for educated people. Given the contradictions, it will be crucial to conduct research on the characteristics of international migrants with a focus on the level of income and educational attainment in the country of origin. This research can adequately test if international migration causes inequality in developing countries through the remittances of migrants from better-off families. Secondly, the internet and technology has opened up geographical boundaries. As a result, people have become more aware of the opportunities abroad. Moreover, people can see the differences in services and infrastructure between developed and developing economies. There is a need to look at how social media and other internet sources are contributing to international migration. Research of this kind can try to explain if the recent migration crisis in Europe has also been motivated by the internet and technology. Moreover, the research can explain how the internet is impacting on remittances by providing people with nonbanking ways of sending and saving money. Thirdly, research by (Gimenez-Gomez, Walle, & Zergawu, 2019)proposes that noneconomic factors such as conflicts between human rights violations and political instability are the main drivers of international migration. The author concludes that developed nations should not only focus on the economic development of developing nations but also focus on improving human security to deal with the migration crisis. Future research should focus on showing if human security has surpassed economic development as the main drivers of migration. Lastly, future research should focus on identifying the most effective macro-economic policies to deal with the adverse effects of remittances.

In conclusion, both academics and policymakers are widely interested in drivers of international migration and the role of remittances in economies. This research has been helpful by showing that developing countries are the main beneficiaries of international migration through remittances. The remittances lower power and improve financial markets. However, developing countries must use complementary macroeconomic policies to limit the adverse effects of remittances on the economy. The research can also be useful to developed nations, the IMF and the World Bank, which focus on the economic development of low-income countries. The research concludes that these institutions should change focus from foreign aid and instead promote remittances, which are a better way of curbing poverty in developing countries.