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The development challenge

Although there can be negative effects on the countries of origin, emigration produces a net benefit not only for the welfare of migrant households, but also for the rest of society.

At the household level, the departure of labour implies a decrease in production. In some cases, namely in rural areas where labour markets are inefficient, this "lost-labour effect" may lead to food insecurity. On the other hand, remittances sent by migrants to the home country help alleviate poverty, and contribute to spurring financial and human capital investment.

At the aggregate level, labour supply may decrease when households receiving money transfers have less incentive to work. But labour outflows also contribute to increasing real wages in the countries of origin. In Honduras, for instance, a 10% rise in emigration helped boost average wages by around 10%.

The book argues that the impact of emigration on labour markets strongly depends on two factors:

  • • Destination: the benefits are lower when migrants move to another developing country than when they go to richer countries in the North;
  • • Migration policies in countries of destination: international externalities significantly affect sending-country welfare, not only in the households that send migrants and receive remittances, but also in other households with which they interact.
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