4

CHAPTER

THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

The share of immigrants in advanced economies has risen Introduction

significantly in recent years, while escalating conflicts Human beings have migrated since the dawn of time.
have caused large refugee flows that have primarily In 2019 270 million people in the world were migrants,
affected emerging market and developing economies. defined in this chapter as individuals not living in their
This chapter examines the drivers of migration, its recent country of birth. In absolute terms, the migrant popu-
evolution, its possible developments going forward, and lation has increased by almost 120 million since 1990.
its economic impact on recipient countries. Four main However, the number of migrants has been strikingly
findings emerge. First, the costs of migration are high stable in proportion to the world population, hovering
and significantly constrain the ability of individuals to at about 3 percent over the past 60 years (De Haas and
move across borders. Second, the pressures from migra- others 2019). Thus, only a very small fraction of people
tion on advanced economies will continue to rise, as the in the world migrate, one reason being that migration is
population in emerging market and developing economies very costly.
is expected to continue to grow over the next 30 years. Large episodes of migration toward rich countries—
However, higher incomes in emerging market and primarily reflecting a search for better economic
developing economies would dampen overall emigration opportunities—are not new in history and have
pressures. Third, conflicts are an important driver of occurred even when transportation costs were much
migration, especially into emerging market and devel- higher than today (Figure 4.1). Currently, immigrants
oping economies. In the future, climate-related disasters in advanced economies make up about 12 percent of
could possibly intensify emigration, but the evidence the population, up from 7 percent in 1990.
of such pressures is limited to date. Fourth, immigra- Migrants to emerging market and developing
tion into advanced economies increases output and economies (EMDEs) constitute only 2 percent of the
productivity both in the short and medium term, but population and are composed to a significant extent of
these positive effects are not clearly detected for refugee refugees (Figure 4.2). However, average numbers mask
flows in emerging market and developing economies. significant heterogeneity, with some EMDEs receiving
The findings of this chapter lend support for two main very large inflows of refugees.1
policy conclusions. First, appropriate labor market and In recent years, migration has taken center stage in
integration policies could magnify the positive macroeco- the political discourse in many countries, especially
nomic effects of immigration. That said, distributional advanced economies. Opinion surveys indicate that
dimensions also need to be considered because immi- in main destination countries (for example, Ger-
gration may affect, at least temporarily, some groups many, United Kingdom, United States), a majority
of people native to the country where the immigrants of the public has a positive view of immigration
arrive. Second, international cooperation is needed (Pew Research Center 2019). However, there are also
to address large waves of refugee migration, especially misconceptions and concerns about migration among
into emerging market and developing economies. local populations. A common misconception is that
the number of immigrants is twice as high as it is in

1The term “refugee” throughout this chapter refers to refugees,

This chapter was prepared by Philipp Engler, Keiko Honjo, asylum seekers, and populations of concern. The category “other
Margaux MacDonald, Roberto Piazza (lead), and Galen Sher, under populations of concern” refers to individuals who do not necessarily
the guidance of Florence Jaumotte. It includes contributions from fall directly into other categories (refugees, asylum seekers, internally
Jorge Alvarez, Hamid Faruqee, Emilio Fernandez-Corugedo, Jaime displaced persons, returned refugees, and returned internally dis-
Guajardo, Xin Li, and Jean-Marc Natal, and was prepared with placed persons), but to whom the United Nations High Commis-
support from Shan Chen, Jaden Jonghyuk Kim, and Ilse Peirtsegaele. sioner for Refugees extends protection and assistance services, based
Giovanni Peri was a consultant for the project. on humanitarian or other special grounds.

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 WORLD ECONOMIC OUTLOOK: The Great Lockdown

Figure 4.1. Historical Immigrant Share of the US Population Figure 4.2. Total and Share of Refugees among
(Percent) All Immigrants
(Percent, unless noted otherwise)
16
Advanced economies
14 Emerging market and developing economies
Refugees (millions; right scale)
12
18 30
10
16
8 25
14

6 12 20

4 10
15
2 8

0 6 10
1850 1900 50 2000 17
4
5
Sources: US Census Bureau (2006); and Pew Research Center (2019).
2
Note: Immigrants are defined as the foreign-born population. Their share is for the
50 US states and the District of Columbia.
0 0
1990 95 2000 05 10 15 Latest1
reality (Alesina, Stantcheva, and Miano 2019). Con-
cerns include higher competition for jobs in segments Sources: United Nations; United Nations High Commissioner for Refugees; and IMF
staff calculations.
of the local labor market, higher demand for public Note: The term “refugee” includes refugees, asylum seekers, and populations of
services, potential strains on public finances, and a concern.
1
Refers to the number of refugees in 2018 and to migrants, defined as the
perceived threat to the native cultural identity and foreign-born population in 2019.
social cohesion.
Migration raises a vast and multifaceted array of
macroeconomic issues. Among them, this chapter destination countries. The model simulations present
addresses the following set of questions: the potential impact of migration at the global level
•• How has migration evolved over the past decades? and in source and destination countries.
What have been its drivers? The main findings of the chapter are as follows:
•• How will migration flows evolve? How will •• Migration flows are shaped by the evolution of
demographic and income developments affect demographics at the origin and by income levels at
migration flows? the origin and destination. Conflicts are important
•• What are the macroeconomic effects of migration in drivers of migration between EMDEs. Migration
destination countries? How do policies shape these costs are large.
effects? What is the impact of migration on the •• Migrants as a share of the global population will
global economy? remain broadly stable under a baseline scenario.
However, continued rapid population growth in
The chapter begins by presenting recent trends EMDEs will mean that migration toward advanced
in migration, differentiating between various types economies will keep rising relative to the size of the
of migrants. It then estimates the drivers of migra- native populations, even if higher incomes in the
tion. Building on the estimated model of drivers, source countries partly attenuate those emigration
the chapter presents scenarios for the evolution of pressures. Although climate change is expected to
global migration, then quantifies the macroeconomic increase internal and short-distance ­migration, its
effects of migration using empirical estimations and wider implications for international and long-distance
global model simulations. The empirical analysis migration—such as from EMDEs to advanced
looks at the effects of large waves of immigration in economies—is less clear based on existing evidence.

78 International Monetary Fund | April 2020

 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

•• Large immigration waves raise output and pro- rioration in the provision of public goods may prompt
ductivity in advanced economies in the short and a hostile attitude toward immigration (Halla, Wagner,
medium term, pointing to significant dynamic and Zweimuller 2017). Relative winners and losers will
gains for the economy as a whole. Refugee flows also emerge in source countries. For example, some
into EMDEs do not appear to produce similar people in source countries might be at a disadvantage
rapid gains. because they could lose services provided by a pool of
•• Active labor market policies, spending on vocational talented individuals who have decided to emigrate.
training and adult education, and policies aimed While the analysis in this chapter does not address
at integrating migrants could boost the macro- these distributional effects, it nonetheless suggests that
economic gains from immigration. International average gains from migration are large and, if managed
financial support and policy coordination are needed well, potentially have widespread benefits. Policies can
to address refugee crises and support the integration help magnify and ensure equitable sharing of these
of refugees in destination countries. gains. For instance, policies that support education and
•• Migration raises world GDP, in particular by raising retraining can both increase the aggregate gains from
productivity. Average per capita incomes of natives immigration and facilitate the adjustment of individu-
increase as their skills are complemented with those als who may face temporary difficulties.
of migrants. Remittances from abroad lift income
per capita in the origin countries, helping to offset
the potentially negative effects of emigration. Stylized Facts
Under the surface of a globally stable share of
The chapter does not consider all aspects of migra- migrants, migration follows uneven and evolving
tion, in particular, its distributional effects. Native patterns along migration corridors. Migration occurs
workers in recipient countries whose skills are comple- largely within broadly defined world regions, such
mentary to those of immigrants can be expected to gain as within Europe and central Asia, where it is less
from the arrival of immigrants, while native workers constrained by the higher geographical and cultural
with similar skills may face stiffer competition in the barriers that characterize migration across continents
labor market. Distributional concerns and fears of dete- (Figure 4.3). Nonetheless, large interregional migration

Figure 4.3. Migration Flows between 2010 and 2020

Sources: United Nations; and IMF staff calculations.

Note: Migrants are defined as the foreign-born population in a destination region. For the definition of regions, see Online Annex Table 4.1. This figure shows
migration flows larger than 200,000 people between 2010 and 2020. The width of flows is proportional to the number of migrants.

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 WORLD ECONOMIC OUTLOOK: The Great Lockdown

corridors are equally important. Examples include the migration: relative income gaps and absolute levels
corridors from Latin America and the Caribbean to of poverty. Per capita GDP in advanced economies is
North America, from South Asia to the Middle East, still almost five times as large as in EMDEs, creating
and from the Middle East and North Africa to Europe. a significant pull effect on immigration. However,
Migration from EMDEs toward advanced econo- growth in EMDEs, especially China and India, has
mies has increased significantly over the past several significantly reduced this gap over recent decades and
decades. Figure 4.4 shows that, in absolute terms, will further reduce it in the future under a baseline
migration from EMDEs to advanced economies scenario (Figure 4.5).
has now reached almost the same level as migration The number of countries with annual income per
between EMDEs. Between 1990 and 2019 the share capita below $7,000 (in 2011 international dollars)
of migrants from EMDEs to advanced economies rose has declined dramatically. Sub-Saharan Africa is one
from 4 percent to 9 percent of the advanced econ- exception to this trend—the number of countries there
omy population, while EMDE-to-EMDE migration with low per capita incomes is still significant and,
remained stable at about 2 percent of the EMDE pop- though decreasing, could remain high in the coming
ulation. Given the small and falling share of the world decades. It is often assumed that higher average income
population residing in advanced economies, the large in a country leads to less emigration. While this is true
increase in the share of immigrants in those countries in many cases, it is nonetheless not always correct.
corresponds to just a one-half percentage point increase Some individuals are too poor to emigrate, and poverty
in the world share of migrants, which currently stands
at 3.5 percent.
Income and demographic developments are Figure 4.5. Real GDP per Capita below $7,000 and
associated with migration in general and with the Income Gaps
(Number of countries)
rise in migration from EMDEs to advanced econo-
mies in particular. On the income side, two aspects
East Asia and Pacific North America
are key to understanding the effect of income on Europe and central Asia South Asia
Latin America and Caribbean Sub-Saharan Africa
Income ratio of AEs to EMDEs
Middle East and North Africa
(right scale)
Figure 4.4. Stock of Migrants, by Corridors
(Millions) 160 12

AEs to AEs EMDEs to AEs EMDEs to EMDEs 140

10
120 120
8
100
100
80 6
80
60
4
60 40
2
20
40
0 0
1990 2000 10 20 30 40 50
20

Sources: Penn World Tables (PWT 9.1); and IMF staff estimates.
Note: The figure shows the number of countries with a real GDP per capita below
0
1990 2000 10 19 $7,000 measured in 2011 chained purchasing power parity terms (left scale). The
income gap is measured as the ratio of the population-weighted average of
advanced economies (AEs) and emerging market and developing economies
Sources: United Nations; and IMF staff calculations. (EMDEs). For the definition of regions, see Online Annex 4.1. The shaded area
Note: Migrants are defined as the foreign-born population. AEs = advanced shows projections based on the baseline scenario in the section of this chapter on
economies; EMDEs = emerging market and developing economies. future migration pressures.

80 International Monetary Fund | April 2020

 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

Figure 4.6. Cumulative Population Change, by Region wars, which occur mostly in EMDEs. In recent peri-
Relative to 1990 ods, large cumulative inflows of refugees, amounting
(Billions)
to more than 1 percent of the destination countries’
population, have been observed in Germany and
East Asia and Pacific North America
Europe and central Asia South Asia Turkey. Extreme cases—those featuring immigra-
Latin America and Caribbean Sub-Saharan Africa tion well above 4 percent of the recipient countries’
Middle East and North Africa
population—have occurred in Colombia (after the
5
Venezuelan crisis) and in Jordan and Lebanon (result-
ing from the conflict in Syria). Because refugees are
often poor and rarely have time to plan their emigra-
4 tion, they tend to travel shorter distances and remain
in their home region more often than other migrants
(Figure 4.7).
3 The differences in the conditions underlying the
migration decisions of refugees—legal status, ability to
choose their geographical relocation, and relative access
2
to formal labor markets—all suggest that the impact
of refugees on receiving countries could differ signifi-
cantly from that of other types of migrants.
1
Immigration policies also influence the level and
composition of migration. Immigration policies at
0 the global level have generally become less restrictive
2000 10 20 30 40 50 since the end of World War II, although this liberaliza-
tion trend appears to have slowed more recently, and
Sources: United Nations; and IMF staff calculations.
Note: For the definition of regions, see Online Annex 4.1. The shaded area shows reversed in some cases (De Haas and others 2019).
United Nations projections. Liberalization trends are clearly visible in the evolution
of policies that regulate the entry and integration of
immigrants, while policies concerning internal and
can trap them in their home country. The next section border controls have tightened over time (Figure 4.8).
of this chapter provides empirical evidence that, below Migration policies also attempt to affect the composi-
a threshold of $7,000, an increase in income pro- tion of the immigrant pools—for example, policies tar-
vides individuals with the means to emigrate toward geting high-skilled individuals have become common
advanced economies. in the past two decades (De Haas, Natter, and Vezzoli
Demographic changes are uneven across regions 2014). Indeed, migrants from poor to rich countries
(Figure 4.6). The population in advanced economies are usually more educated than the average population
has stabilized and in some cases is projected to decline in the origin country (Grogger and Hanson 2011).
(IMF 2019). By contrast, the population in EMDEs The effectiveness of migration policies in regulating
will continue to rise, especially in South Asia, North migration flows is the subject of substantial debate in
Africa and the Middle East, Latin America, and most the economic literature (see De Haas and others 2019
of all, sub-Saharan Africa. These trends will raise for an overview).
the number of potential migrants from EMDEs to
advanced economies. Countries with fast-growing
populations may face challenges in creating enough The Drivers of Migration
well-paying jobs for a young and growing workforce, This section looks more systematically at the drivers
while countries with aging and shrinking populations of international migration using a standard gravity
may face labor shortages. model. The model is based on the idea that migration
Conflict is another important driver of migration, is a choice that individuals make by weighing the
and it leads people to seek refuge in other countries. costs and benefits of staying home versus moving to
Refugees leave their home under sudden and dire different destination countries (Beine, Bertoli, and
­conditions triggered by the eruption of conflict or Fernández-Huertas Moraga 2016).

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 WORLD ECONOMIC OUTLOOK: The Great Lockdown

Figure 4.7. Refugee Stocks at the End of 2018

Refugees (20.36 million) Asylum-seekers (3.50 million) Other populations of concern (3.78 million)

Source: United Nations High Commissioner for Refugees.

Note: The category “other populations of concern” refers to stateless persons plus individuals who do not necessarily fall directly into other categories (refugees,
asylum seekers, internally displaced persons, returned refugees, and returned internally displaced persons), but to whom the United Nations High Commissioner for
Refugees extends protection and assistance services, based on humanitarian or other special grounds.

The benefits to the migrant include a potential (see Online Annex 4.2 for a detailed description of the
wage gain from moving to a richer country. The drivers considered; All annexes are available at www.imf.
younger the migrant, the larger these gains because org/en/Publications/WEO). The number of migrants is
younger migrants have a longer lifetime ahead of them obtained from the bilateral migrant stock statistics pub-
in which to benefit from the extra income. Other lished by the United Nations Department of Economic
possible benefits include escaping a conflict, finding a and Social Affairs. The data provide the number of
more generous welfare system abroad, or resorting to international migrants for every origin and destination
migration as a way of adapting to climate change. The country pair in the world every five years from 1990 to
costs of migration include overcoming geographical, 2015. The analysis follows the literature that derives net
cultural, and linguistic barriers. In addition, immigra- migration flows from the stock data (see Beine, Bertoli,
tion policy restrictions, such as visa requirements and and Fernández-Huertas Moraga 2016 for a review).2
limitations on the right to work, could be significant The estimated coefficients capture the importance
costs. Destination countries may also create preferential of the different drivers in a typical migration episode.
immigration pathways from former colonies, while The estimation is carried out both on the entire sample
networks of existing migrants from the same source of countries and by splitting the sample into the
country, and especially family members, can help new three main migration corridors depicted in Figure 4.4
immigrants adjust and provide resources in advance to (EMDEs to EMDEs, EMDEs to advanced economies,
pay for travel costs. and advanced economies to advanced economies).
Figures 4.9 summarizes the contribution of the base-
line migration drivers to explaining observed migration
Baseline Drivers
2Migration flows defined in this way do not capture some
Modeling the number of migrants starts from a
aspects of migration, including seasonal migration. The definition
simple baseline specification that contains the most of migrants adopted in this chapter also excludes from the analysis
important drivers and then adds various extensions issues related to second-generation immigrants.

82 International Monetary Fund | April 2020

 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

Figure 4.8. Restrictiveness of Migration Policies Figure 4.9. Explained and Unexplained Shares of the
Variation in Migration
Integration1 Entry and stay2 Border control3
Contiguous Income gap x young1
40 Distance Population origin
Common language Young population origin
30 Colonial link War
Income destination Unexplained
Income origin
20

10 1. From EMDEs to AEs

–10

–20

–30

–40

–50
1980 85 90 95 2000 05 10 14
2. From EMDEs to EMDEs
Sources: Determinants of International Migration dataset; and IMF staff
calculations.
Note: The indexes are normalized to zero in 1980. Positive (tightening) and
negative (loosening) policy changes are cumulated over time and summed across
coutries. Depending on their intensity, individual policy changes range between
–4 and +4. Missing values are treated as no change (zero).
1
The index measures postentry rights and other aspects of integration of a target
group.
2
The index covers issues related to entry and stay permits and regularizations.
3
The index measures the external and internal border controls that aim to secure
national territories through surveillance, detention, and sanctions of fraudulent acts.

flows for the two most relevant migration corridors Source: IMF staff calculations.
(EMDEs to EMDEs and EMDEs to advanced Note: The figure shows the increase in R-squared with the inclusion of each
economies). The main conclusions are as follows: variable, under all possible model combinations, following the hierarchical
partitioning method of Chevan and Sutherland (1991). Fixed effects are partialed
•• Migration is difficult and costly. More than half of out before applying the method. AEs = advanced economies; EMDEs = emerging
the explained variation of migration flows can be markets and developing economies.
1
Denotes the product between the income gap and the share of young population.
attributed to the effect of geographical and cultural
barriers. Distance and (lack of ) border contiguity
between two countries are significant impediments •• Refugees are a much more important component
to bilateral migration flows. The lack of a common of immigration into EMDEs, consistent with the
language or a former colonial link also add import- ­evidence on conflict (see the section in this chapter
ant cultural and political barriers to migration. on the impact of large immigration waves).3
•• Demography in origin countries matters. Larger pop- •• Migrants respond to income levels. In addition to the
ulations in origin countries lead to more emigrants. interacted effect of income gaps already discussed,
Holding the population size constant, people in
3This is in addition to the impact of war in causing a collapse in
younger societies, on average, do not seem to emi-
average income. For more on the role of war and violence in driving
grate more, but they do emigrate more to countries
emigration, see Beine and Parsons (2015). The effects of war are vis-
where the income gap is larger. ible over 5 years but not over 10 years or longer, which suggests that
•• Conflicts are important for EMDE migration. More war-related emigration is temporary. Possible explanations include
intense conflicts drive more emigration, especially the following: (1) Some migrants return to their home country once
the conflict has ended, and (2) Part of the migration after conflicts
toward other EMDEs, although the effect appears to that are not of extreme intensity reflects the anticipation of emigra-
be temporary. tion decisions that would have occurred anyway later.

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 WORLD ECONOMIC OUTLOOK: The Great Lockdown

the level of both per capita income at origin and at income increases the emigration rate. This indicates the
destination matter on their own. The role of income presence of “poverty traps” that prevent people who
at origin is more complex than a simple push narra- are very poor from being able to afford to emigrate.4
tive would suggest, as discussed below. For income levels beyond a certain threshold, a further
increase in income instead leads to less emigration.
The black line in Figure 4.10 depicts emigration Interestingly, in emigration toward other EMDEs, the
rates toward an average country as a function of the threshold—of about $2,000—is significantly lower
origin country’s per capita income. The blue and than in emigration toward advanced economies, for
red lines indicate what the emigration rate would be which the threshold is about $7,000. This property
toward advanced economies and EMDEs, respectively, gives rise to an important effect that shapes the evo-
if migration costs and other drivers were set equal lution of emigration corridors: economic growth in
to the world average. The pull effect of income in countries with income between $2,000 and $7,000 has
destination countries on immigration is evident from the effect of reducing emigration toward EMDEs while
the fact that the line for the corridor toward advanced increasing it toward advanced economies.
economies is orders of magnitudes higher than the line The results indicate that both population and eco-
toward EMDE destinations. In other words, if migra- nomic growth in EMDEs drove the rise of migration
tion costs to advanced economies were the same as from EMDEs to advanced economies between 1990
those toward EMDEs, then virtually all world migra- and 2015 (Figure 4.11). In 1990 there were many
tion would be directed toward advanced economies. countries with initial per capita income below the
Although higher income at destination always poverty trap threshold of $7,000 (Figure 4.5). Eco-
increases immigration, it is not necessarily the case nomic growth in these origin countries thus provided
that higher income at the origin decreases emigra- a larger number of individuals with the means to
tion. Figure 4.10 shows that, for countries at very migrate to advanced economies. At the same time,
low levels of per capita income, a marginal rise in given that many cases income per capita was already
above $2000, economic growth reduced emigration
to other EMDEs.
Figure 4.10. Income at Origin and Destination and Probability
of Emigrating
(Five-year emigration rate; percent) Additional Drivers
4 0.20 The inclusion in the baseline regression of other
World potential drivers suggests the following:
EMDEs to AEs •• A previous stock of migrants from the same origin
EMDEs to EMDEs (right scale)
country significantly increases migration due to
3 0.15
network effects (see also Munshi 2003; and Beine,
Docquier, and Ozden 2011).
•• In Organisation for Economic Co-operation and
2 0.10 Development (OECD) countries, tighter immi-
gration policies on entry requirements and fewer

1 0.05
4The poverty trap effects are captured by adding to the regression

model the square of log income per capita at origin. To exploit the
cross-sectional variation that allows the identification of poverty
0 0.00 traps, origin fixed effects are not included in the gravity estimation.
0.1 0.8 6.3 50.0 Poor people may not have enough savings to pay transportation
Origin GDP per capita (thousand 2011 PPP dollars; log scale) costs and support themselves and their families until a job is found
in the destination countries. Borrowing constraints limit the ability
Source: IMF staff calculations. of migrants to finance their emigration enterprise through debt. In
Note: The figure shows the partial relationship implied by the baseline estimation, addition, poorer people usually have lower levels of education, mak-
holding other factors constant. The average world emigration flow is equal to ing it more difficult for them to emigrate toward countries whose
0.5 percent of origin population. AEs = advanced economies; EMDEs = emerging immigration policies prioritize the attraction of high-skilled migrants
market and developing economies; PPP = purchasing power parity. (Clemens 2014; Bazzi 2017).

84 International Monetary Fund | April 2020

 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

Figure 4.11. Decomposition of Past Migration Flows, emigration is typically smaller. In contrast, cur-
1990–2015 rency crises are more frequent in EMDEs.
(Millions)
•• There is no evidence for the idea of “welfare shop-
ping” by international migrants if the destination
Income destination Population origin
Income origin1 Income gap x young2 country’s government spending is used as a proxy.

25 The gravity model used in this section explains

more than 50 percent of variation in migration flows.
20
However, while it does a good job of capturing the
15 drivers of gradual migration flows, including those
Change in the number of migrants

triggered by non-extreme conflicts, it is less successful

10
in precisely fitting the magnitude of extreme migra-
5 tion events, such as those associated with economic
collapses or destructive wars.
0

–5
Composition of Migration
–10
To complement the analysis of the drivers of total
–15 migration, this chapter builds on World Bank (2018)
and considers which drivers change the skill composi-
–20 tion of the pool of migrants. The evidence shows that
EMDEs to EMDEs EMDEs to AEs AEs to AEs
destination countries where the skill premium is higher
Source: IMF staff calculations. attract a relatively more educated group of immigrants.
Note: Derivation of the decomposition appears in Online Annex 4.2. Conversely, origin countries with a relatively lower
AEs = advanced economies, EMDEs = emerging market and developing
economies. skill premium feature an emigrant population that is
1
2
Includes the poverty trap effect of origin income. relatively more skilled than the native one. Moreover,
Denotes the product between the income gap and the share of young population.
most drivers that are associated with lower bilateral
migration costs (for example, a common border, a
integration measures are associated with reduced diaspora network in the destination country, and shorter
immigration.5 distances) tilt migration toward the lower skilled, consis-
•• Climate change affects international migration tent with the idea that travel costs are more binding for
through its impact on income levels (see Chap- these workers. However, a common language increases
ter 3 of the October 2017 World Economic Outlook high-skilled immigration, likely because communication
(WEO)). Natural disasters, particularly extreme abilities are relatively more important in high-skill jobs
temperatures and storms, have additional effects that (Grogger and Hanson 2011; Belot and Hatton 2012).
lead to a further but small increase in emigration.
•• Currency crises are associated with more emi- Future Migration Pressures
gration beyond their effects on income, but the
evidence for banking and debt crises is less clear. Drawing on the estimate of the historical drivers of
This is likely due to the fact that banking crises migration, this section provides three migration sce-
are more frequent in advanced economies, where narios for the period 2020–50. The scenarios provide a
general indication of the likely direction and intensity
of long-term migration pressures rather than a predic-
5The estimated coefficients suggest that the secular relaxation
tion of future migration. Indeed, future migration is
of entry requirements over the past three decades is consistent
with an increase in net immigration flows of about 35 percent.
subject to large uncertainties, including those stem-
It is important to emphasize that these results point mostly to ming from the difficulty of anticipating the long-term
correlation rather than patterns of causation because policies evolution of countries’ income levels.
could be endogenous to migration flows (in this case, the actual
Each of the three scenarios is based on the set of
effect of policies would likely be even larger). These calculations
also ignore other effects of immigration policies (De Haas and drivers from the baseline regression in the previous
others 2019). section of this chapter. In order to focus on long-term

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 WORLD ECONOMIC OUTLOOK: The Great Lockdown

Figure 4.12. Current and Projected Real GDP Per Capita, Figure 4.13. Migration Corridors
by Region (Percent of total population in destination group)
(Share of US GDP per capita)
AEs to AEs EMDEs to AEs
100 EMDEs to EMDEs World
2020 2050
90
18
80
16
70
14
60
12
50
10
40

30 8

20 6

10 4

0 2
East Europe Latin Middle South Sub- North
Asia & & America & East & Asia Saharan America
Pacific central Caribbean North Africa 0
Asia Africa 1990 95 2000 05 10 15 19 25 30 35 40 45 50

Sources: Penn World Tables (PWT 9.1); and IMF staff estimates. Sources: United Nations; and IMF staff estimates.
Note: Migrants are defined as foreign-born population. The shaded area shows
United Nations projections. AEs = advanced economies; EMDEs = emerging
market and developing economies.

effects of drivers, the model is first reestimated using

bilateral migration stocks (see Online Annex 4.2). The
estimated coefficients are then applied to future values are assumed to affect per capita GDP according to
of the migration drivers defined by the three scenar- the nonlinear relationship estimated in the October
ios. The scenarios, which differ from each other on 2017 WEO. Therefore, this scenario explores the
the basis of different assumptions for the evolution of effect of climate change on migration through the
income per capita, are as follows:6 income channel.
•• Baseline scenario. Starting in 2019 real GDP per
capita in the United States is assumed to keep In terms of common assumptions, geographic and
growing at a constant rate of 1.6 percent a year linguistic variables are kept constant in all scenarios,
(the average growth over the past decade). All other and demographic variables evolve according to United
countries are assumed to follow a convergence path Nations population projections.
to the United States (Figure 4.12), as determined
by country-specific convergence rates estimated in
Chapter 3 of the October 2019 WEO for 2008–17. Baseline Scenario
•• Higher growth in EMDE scenario. Per capita growth Under the baseline scenario, the world migrant
in each EMDE country is assumed to be 1 percent- share between 2020 and 2050 is nearly stable, at just
age point higher a year. above 3 percent of the world population (Figure 4.13).
•• Climate change scenario. Warming temperatures, Therefore, at the global level, there is no surge in migra-
under “High Emission” Scenario 8.5 of the Inter- tion. However, the share of EMDE immigrants into
governmental Panel on Climate Change (IPCC), advanced economies keeps increasing to about 16 per-
cent of the total population of advanced economies,
6Beyond income variables, other variables that could increase or
despite the negative effect that income convergence has
decrease future migration pressures include changes in migration pol- on EMDE emigration. The increase is driven by the
icies, the intensity of conflicts, and transportation costs. rise in the absolute number of immigrants (a numerator

86 International Monetary Fund | April 2020

 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

Figure 4.14. Change in Migrant Pressures Between 2020 and 2050, Baseline Scenario
(Millions of individuals)

Total Europe & central Asia Middle East & North Africa South Asia
East Asia & Pacific Latin America & Caribbean North America Sub-Saharan Africa

24 Europe & central Asia

22
20
18
16
18
16
North America 14
12
14 10
12 8
10
8
6 Middle East & North Africa
4
6 0
2
4 –2
0
2 –2
–4 East Asia & Pacific
0 6
–4
–2 4
–6
2
–8
–10 South Asia 0
0
–2
Sub-Saharan Africa –4
Latin America & Caribbean 4
2
0
0
–2
–4

Sources: United Nations; and IMF staff estimates.

effect) caused by growing population in EMDEs. Pop- growth in sub-Saharan Africa increases emigration
ulation aging and the decline of the native population from the region toward advanced economies in
also contribute to the increase in the immigrant share Europe. This is attributable to the significant number
(denominator effect). However, rising population in of countries in the region that in 2020 still feature
EMDEs and emigration patterns that continue to shift income per capita levels below the poverty trap
toward advanced economies cause a fall in the immi- threshold of $7,000.
grant share in the population of EMDEs. •• Migration pressures within Europe and central Asia
Figure 4.14 provides more details by presenting fall, caused by a combination of higher income per
absolute changes in migration pressures (expressed capita and falling population in the group of emerg-
in millions of individuals) between 2020 and 2050, ing market economies within the region.
disaggregated into broad world regions. A few pat- •• Immigration pressure from south Asia into the
terns stand out: Middle East falls because of south Asia’s continuing
•• Migration pressures build up from Africa and the process of income convergence.
Middle East to Europe. This is largely caused by a •• A growing population in Latin America and the
population boom in sub-Saharan Africa, where the Caribbean exerts continuing pressure on immigra-
population would increase by 1 billion between 2020 tion to North America, although with less intensity
and 2050, generating out-regional migration pressure than in the past.
of 31 million individuals.7 In addition, economic

7Under
Alternative Scenarios
the baseline scenario, the emigration rate in sub-Saharan
Africa increases from 0.7 percent to just below 2 percent. These Fostering higher growth and more job opportuni-
figures are in line with Gonzales-Garcia and others (2016). That ties in EMDEs is often heralded as a way to enable
study, which does not account for poverty trap effects, projects an
increase in migration from sub-Saharan Africa to OECD countries migrants to stay in their home countries and thereby
of 28 million people between 2013 and 2050. reduce migration pressure in advanced economies.

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 WORLD ECONOMIC OUTLOOK: The Great Lockdown

Figure 4.15. Alternative Migration Scenarios region that, under the baseline, provides the single
(Percent, unless noted elsewhere)
biggest contribution to the increase in future migration
pressure, it follows that higher growth in EMDEs does
Deviations from baseline in 20501
Baseline scenario (millions; right scale)2 reduce migration overall, but the total effect is not
very large.
The third scenario examines the impact of climate
40 1. Higher EMDE Growth Scenario 200
change on future migration. Overall, emigration
30 150 pressures over the next three decades stemming from
20 100 climate change are modest.8 Panel 2 of Figure 4.15
shows that climate change adds to emigration pressures
10 50
for all typical emigration regions except sub-Saharan
0 0 Africa. There, the additional warming has particularly
–10 –50
negative effects on income, worsening the poverty trap
and reducing out-regional migration pressures.
–20 –100 Although lower growth or higher temperatures cause
Total Latin Middle East Asia Europe South Sub- North
America East & & Pacific & Asia Saharan America a small reduction in out-regional migration pressures
& North central Africa
Caribbean Africa Asia
from sub-Saharan Africa, their interaction with the
poverty trap increases intraregional migration pressures.
This conclusion is in line with the climate change lit-
0.8 2. High Temperature Scenario 200
erature that finds a significant increase in internal and
0.6 150 short-distance migration as a result of climate-related
0.4 100 events (Rigaud and others 2018). More generally, the
0.2 50 literature on the effects of climate change and natu-
0.0 0 ral disasters on international migration is not settled.
Some studies find that climate change increases inter-
–0.2 –50
national migration, but a significant number of studies
–0.4 –100
do not find any impact. The apparently conflicting
–0.6 –150 results can be attributed to different research method-
Total Middle East South Latin Europe North Sub-
East & Asia & Asia America & America Saharan ologies and to the fact that the response of migration
North Pacific & central Africa to climate change is context-specific and thus differs
Africa Caribbean Asia
across countries (Beine and Jeusette 2018). There are
Sources: United Nations; and IMF staff estimates. still substantial gaps in the literature about the future
Note: EMDE = emerging market and developing economy. effect of climatic events on emigration (Cattaneo and
1
Bars represent percentage deviations in 2050 relative to the baseline scenario.
2
Squares represent out-regional migration pressures (stocks) in 2050 under the
others 2019).
baseline scenario. One circumstance that appears relatively established
is that climatic developments can trap individuals
and reduce emigration (Beine and Parsons 2017; Peri
and Sasahara 2019). The literature also indicates that
The next scenario, depicted in panel 1 of Figure 4.15,
fast-onset disaster events, such as floods or hurricanes,
examines the impact on out-regional migration of an
lead to migration that occurs over short distances and
additional 1 percentage point of annual growth in each
only temporarily because the displaced individuals
EMDE. The panel shows both the baseline scenario
return to the disaster zones quickly (see Cattaneo
(right scale) and the change in migration stocks relative
and others 2019 for a survey). However, studies have
to the baseline scenario (left scale). Migration pressures
fall in all emigration-prone regions, including from 8There are two reasons for this modest result. First, the scenario
Africa and the Middle East taken as a whole. The only ends in 2050, when the increase in temperature is still relatively
exception is sub-Saharan Africa, where emigration modest. Second, the presence of poverty traps in hot regions
pressure increases marginally because the higher growth reduces out-regional migration. There are significant uncertainties
in the estimate of the impact of climate change on migration,
alleviates poverty traps, which are still present in many given the lack of historical precedents for a global phenomenon
countries. Given that sub-Saharan Africa is also the of this type.

88 International Monetary Fund | April 2020

 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

necessarily relied on historical estimates. Warming Figure 4.16. Episodes of Large Immigration Inflows
(Percent of recipient countries’ population)
under the “high-emission” scenario would lead to
temperatures that have not been experienced for a 1
very long time, so it is hard to know how migration 3.0 1. Migration
All inflows, Germany
might react under such a scenario. Shock episodes, Germany
2.5
All inflows, Spain
Shock episodes, Spain
2.0
The Impact of Large Immigration Waves 1.5
The economic impact of migrants on destination 1.0
countries is estimated based on a data set of large
0.5
immigration episodes. Examining large waves of
migration is of interest because they are more likely to 0.0
2000 02 04 06 08 10 12 14 16 18
be politically difficult and can test the absorption limit
of recipient economies.9 Most of the impact analysis 14 2. Refugee
2
28
is performed for migration to advanced economies All inflows, Turkey
12 Shock episodes, Turkey 24
because of the requirement for annual data. A second All inflows, Lebanon (right scale)
10 20
exercise also examines the impact of large waves of Shock episodes, Lebanon (right scale)
8 16
refugees into EMDEs. The estimation strategy follows
6 12
three steps for both parts of the analysis, as follows:
4 8
•• The first step is the selection of immigration
2 4
episodes. A large episode is characterized by an
0 0
immigration flow that meets certain minimum
–2 –4
size thresholds relative to the recipient country’s 2006 08 10 12 14 16 18
population. In turn, the thresholds are defined in
ways that guarantee that the episode is large, both Sources: Organisation for Economic Co-operation and Development; United
relative to the country’s historical immigration Nations High Commissioner for Refugees (UNHCR); IMF World Economic Outlook
database; and IMF staff estimates.
experience, and from the perspective of typical epi- 1
Migrants are defined as foreign-born or foreigners, along with acquisition of
sodes at the world level.10 Panel 1 of Figure 4.16 nationality. Inflows are in gross terms.
2
Refugees are defined as individuals categorized as either “refugees,” “asylum
presents two episodes of large immigration waves seekers,” or “other” by the UNHCR. Inflows are defined as the annual change in
into advanced economies, Germany and Spain (the stocks due to data constraints.
squares on the lines indicate the inflows identified
as “large shock”). Panel 2 of Figure 4.16 depicts
cases of refugee immigration into EMDEs for
peaked at just above 1 percent of the country’s
Lebanon and Turkey. Refugee inflows into Turkey
population, an example of a typical large episode,
on which the estimation focuses. However, there
9In addition, difficult conditions in source countries are more
is significant variation within the category of large
likely to trigger sudden migration surges than strong economic refugee episodes. Episodes, such as the one in
growth in the destination country, helping to disentangle the effect
of migrants on the economy of recipient countries. Lebanon, during which inflows reached 15 percent
10For migration shocks into advanced economies, an episode is of the domestic population, belong to the top
large if the annual inflow (as a share of population) is greater than 1 percent of distribution of events and can thus be
the country’s median inflow during 1980–2018 and is also greater
than the median inflow (relative to the recipient country’s popula-
considered extreme.
tion) experienced by OECD countries during the previous five-year •• The second step aims to solve a reverse-causality
period and the following five-year period. Refugee shocks are instead problem, in which good economic conditions may
defined as an inflow (as a share of population) that is within the
cause large immigration inflows (Card 2001; Peri
country’s top 10th percentile of inflows during 1980–2018 and is
also greater than the top 10th percentile (relative to the recipient and Sparber 2009). To address this issue, an instru-
country’s population) experienced by all countries in the world mental variable is constructed that is independent of
during the previous five-year period and the following five-year economic conditions in the recipient country. The
period. Finally, to avoid including episodes characterized by sudden
reversals, the refugee inflow shock must be sustained for at least two construction exploits two properties of migration
consecutive years. patterns: migrants choose their destination partly

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WORLD ECONOMIC OUTLOOK: The Great Lockdown

based on the presence of networks of past migrants, Figure 4.17. Macroeconomic Effects of Migrant Inflows in
and refugees locate close to their country of origin Advanced Economies
(Percent)
(see the previous section of this chapter on the driv-
ers of migration).
Impulse response estimates 90 percent confidence intervals
•• The final step is the choice of the estimation
model. A local projection framework (Jordà 2005) 2.0
provides a convenient way to trace the response
of macroeconomic variables to the (instrumented) 1.5
immigration shocks over time. The model controls
1.0
for country-specific characteristics that are constant
over time and for time-varying components that 0.5
are common across countries. Further checks are
0.0
conducted to ensure that the estimations are robust
to the inclusion of additional controls (see Online –0.5
Annex 4.3 for details).
–1.0

Year 1

Year 5

Year 1

Year 5

Year 1

Year 5

Year 1

Year 5

Year 1

Year 5

Year 1

Year 5
The Effects of Immigration in Advanced Economies
Output Employment Labor Total Employment, Capital/labor
Figure 4.17 presents the responses of various mac- productivity factor native ratio
roeconomic aggregates in the recipient country in the productivity
first and fifth year after the immigration shock. The
size of the effect indicates the variable’s response to a Source: IMF staff estimates.
Note: This figure depicts the effect of a 1 percent increase in the migration inflow
1 percentage point increase in the ratio of the immi- to the employment ratio in the destination country on the macroeconomic variables
grant flow relative to (the lag of ) total employment. indicated, estimated based on a sample of Organisation for Economic Co-operation
and Development countries from 1980–2018 using the local projections method of
Output increases by almost 1 percent by the fifth Jordà (2005). Year 0 is the year before the shock, and year 1 shows the effect of
year. About two-thirds of this increase is attributed to the shock on impact. See Online Annex 4.3 for details of the model specification.
an increase in labor productivity and the remaining
one-third to employment growth (which is borderline
insignificant, however). An increase in total factor gains from specialization.11 For similar reasons, most
productivity (TFP) matches the rise in labor produc- of the literature finds a very limited effect of migration
tivity. As the capital stock responds immediately to the on average wages or employment of native workers.
higher employment and TFP, the capital-labor ratio Box 4.1 illustrates the potential labor market effects of
rises. When breaking down total employment growth complementarity between immigrants and natives in
into its components, the analysis does not detect any the context of growing automation.
effect on the aggregate growth rate of native employ- Most of the literature that investigates the produc-
ment (see Online Annex 4.3 for additional results). tivity impact of immigrants studies long-term effects.
The positive impact of immigration on productiv- The question arises whether the aggregate effect of
ity in recipient economies is a key empirical finding immigration could be less positive when looking at the
of studies on immigration (Peri 2011b; Ortega and short term or at large migration episodes, such as those
Peri 2014; Alesina, Harnoss, and Rapoport 2015; considered here. The concern is reasonable and moti-
Jaumotte, Koloskova, and Saxena 2016). The litera- vated by the presence of various economic frictions,
ture emphasizes that these results can be attributed to including slow adjustments in the labor market and
the complementarity between native and immigrant in the capital stock. The results in Figure 4.17 suggest
workers (see Chapter 4 of the October 2016 WEO). that aggregate gains from immigration materialize
As immigrants enter the labor market, natives move to
new occupations, which, in many cases, require pro- 11See Peri and Sparber (2009); Hunt and Gauthier-Loiselle (2010);

ficient linguistic and communication abilities or the Farré, González, and Ortega (2011); D’Amuri and Peri (2014);
Ortega and Peri (2014); Alesina, Harnoss, and Rapoport (2015);
performance of more complex tasks. Thus, as immi-
Cattaneo, Fiorio, and Peri (2015); Peri, Shih, and Sparber (2015a;
grants move into occupations that are in short supply, 2015b); Aiyar and others (2016); and Jaumotte, Koloskova, and
natives upgrade their skills, leading to economy-wide Saxena (2016).

90 International Monetary Fund | April 2020

 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

very quickly, even with potentially disruptive inflows. of policies, it is best to interpret this part of the analy-
Overall, the immediate response of labor productivity sis as uncovering correlations more than causal effects.
points to the existence of significant dynamic gains The analysis considers three main policies: (1) higher
from immigration, even in the short term.12 spending on vocational training and adult education,
The estimated positive macroeconomic effects of (2) higher spending on active labor market policies,
immigration in advanced economies are large. Even and (3) tighter policies related to the integration
though data limitations confines the analysis to of immigrants.
immigration into advanced economies, other studies Figure 4.18 plots the response of employment
that have concentrated on long-term effects (Ortega growth for levels of the policy indicator two standard
and Peri 2014) also find a large and positive impact deviations above or below the cross-country mean of
of immigration on income per capita in a broad the indicator. The figure shows that higher spending
sample, including EMDEs. However, some caveats on vocational and adult training and on active labor
should be considered when interpreting the estimated market policies is associated with greater employment
positive effects of immigration. First, although the growth after an immigration shock. Conversely, tighter
instrumental variables approach should, in principle, policies on the integration of immigrants are associated
guard against reverse causality issues, this strategy may with lower employment growth. This latter result is in
not work perfectly. The residual presence of reverse line with Chapter 2 of the April 2018 WEO, which
causality would likely imply that the positive effects finds that tighter immigration policies are associated
of immigration would be smaller. Second, the increase with lower labor force participation.
in the heterogeneity of a society due to immigration
may reduce support for the provision of public goods,
such as education (Alesina, Baqir, and Easterly 1999;
Figure 4.18. Policies and the Effects of Immigration on
Speciale 2012). Third, in line with previous studies
Employment Growth
(Åslund and Rooth 2007), this chapter also finds some (Percent)
evidence that aggregate gains could be smaller in the
presence of higher initial unemployment in the desti- Impulse response estimates 90 percent confidence intervals
nation country.
Finally, positive average effects may hide, at a more 4.0
disaggregated level, the existence of some losers from 3.0
immigration, especially in the short term. While the 2.0
large aggregate positive effects presented in this section 1.0
may suggest that negative effects are limited, a vast lit- 0.0
erature uses micro data to study the distributional con- –1.0
sequences of immigration. Box 4.1 presents a general –2.0
survey of the literature, and Box 4.2 presents an analy- –3.0
Mean policy - 2 SD

Mean policy + 2 SD

Mean policy - 2 SD

Mean policy + 2 SD

Mean policy - 2 SD

Mean policy + 2 SD
sis of the impact of immigration on wages in Germany.

The Role of Policies

To examine how policies influence the macro-
Employment growth; Employment growth; Vocational training
economic impacts of immigration, the estimation role of active labor role of integration and adult education
framework is extended by adding interactions between market policies restrictiveness
the immigration shock and different policy indicators.
The analysis examines how different policies affect Source: IMF staff estimates.
Note: This figure depicts the effect of a 1 percent increase in the migration-in-
the response of the labor market in terms of total flow-to-employment ratio in the destination country on employment growth for
­employment growth. Given the potential endogeneity education spending equal to the mean of the sample plus or minus two standard
deviations. The model is estimated based on a sample of Organisation for
Economic Co-operation and Development countries during 1980–2018 using the
local projections method of Jordà (2005). See Online Annex 4.3 for details of the
12Beerli and others (2020) also present evidence of a fast response model specification. The index of integration restrictiveness is calculated from the
of investment to immigration in Switzerland. For the role of capital Immigration Policies in Comparison data set using the methodology in Schmid and
in capital following migrants, see Klein and Ventura (2009). Helbling (2016). SD = standard deviation.

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WORLD ECONOMIC OUTLOOK: The Great Lockdown

The Effects of Refugee Immigration in Emerging Market support, shorter refugee recognition processes, and
and Developing Economies shorter stays in asylum accommodations are all associ-
Refugee migration, defined as people fleeing conflict ated with improved labor market outcomes.13 Regional
or persecution, is substantially different from economic dispersal policies, whereby asylum seekers are assigned
migration. Given the circumstances surrounding the to locations around the country, as well as temporary
need to flee, refugees typically leave on short notice, employment bans, tend to have detrimental effects
are less likely to target their destination country on the (Brell, Dustmann, and Preston 2020).
basis of their skills and knowledge of the language, and Beyond economics, there are compelling humanitar-
generally face substantial legal (and in refugee camps, ian reasons to host and support refugees. The costs and
physical) barriers to entering the labor market. Refu- difficulties created for host countries call for interna-
gees are also more likely to be nonworking individuals. tional coordination in the resettlement of refugees and
Refugee home and host countries tend to be primarily in the sharing of fiscal costs (United Nations 2016).
EMDEs. The empirical evidence shows that labor
market outcomes of refugees are significantly worse Model Simulations
than those of the native population and initially tend
to generate net fiscal costs (Evans and Fitzgerald 2017; The analysis of episodes of large immigration waves
Brell, Dustmann, and Preston 2020). suggests positive economic effects on destination
Therefore, it is not surprising that the positive economies. Looking toward the future, one question
macroeconomic effects of immigration discussed in the remains open: what are the long-term macroeconomic
previous section are not detectable in refugee immi- implications of future migration trends at the global
gration in EMDEs, at least in the short term. After a level and for the countries involved, including source
1 percent increase in the inflow of refugees, there is countries? This section uses migration pressures esti-
no detectable short-term effect on output and produc- mated in the baseline scenario earlier in this chapter
tivity. However, the estimate presented is not meant and simulations of a general equilibrium global model
to capture the very large cases of refugee inflows, to help shed light on this question.
such as the recent episodes of refugee immigration The model includes all Group of Twenty economies
into Colombia, Jordan, and Lebanon. These episodes individually plus other regional groups. (See Online
feature immigration flows greater than 4 percent of Annex 4.4 for a complete list of countries and for
the recipient country’s population and therefore are details on the model calibration.) The simulations,
extreme compared with a typical large episode consid- conducted through 2050, account for the macro-
ered in this section. economic effects of both future changes in domestic
Extreme episodes of refugee immigration are likely populations and future migration flows between a
to have a significant macroeconomic impact. In selected subset of countries. The impact of migration is
EMDEs, refugee inflows can occur at a time when the calibrated according to the following assumptions:
recipient economy is already suffering from the nega- •• Total immigration into the subset of receiving
tive spillovers of conflict in neighboring countries. This countries evolves according to the baseline scenario
may further worsen the capacity of the labor market to outlined earlier in this chapter. Figure 4.19 depicts
absorb the inflow of refugees and increase the burden the evolution of immigration shares in the main
on public finances (IMF 2017a; 2017b). Labor market recipient countries.
integration is facilitated when linguistic and cultural •• The labor market outcomes of immigrants are
barriers are low and work permits are made available to calibrated for different countries according to the
the refugee population. In these cases, even a very large available evidence. Upon arrival, immigrants have
wave of refugees can be expected to increase GDP and lower productivity than natives (but still higher than
employment, thus attenuating short-term fiscal costs the productivity they would have had in the origin
associated with refugee-related spending (see Box 4.3
on the impact of emigration from Venezuela on Latin 13See Joona and Nekby (2012); Aiyar and others (2016);

America and the Caribbean). The integration of Hainmueller, Hangartner, and Lawrence (2016); Sarvimäki and
Hämäläinen (2016); Gathmann and Keller (2018); Battisti,
refugees in advanced economies is affected by policies Giesing, and Laurentsyeva (2019); and Lochmann, Rapoport, and
as well. Language training, physical and mental health Speciale (2019).

92 International Monetary Fund | April 2020

 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

Figure 4.19. Simulated Stocks of Immigrants Figure 4.20. Macroeconomic Effects of Migration in
(Percent of total population) Recipient Countries
(Percentage points)
United States Euro area
Russia Saudi Arabia Impact of higher total factor productivity
Reduction in productivity gap between natives and migrants
40 Impact of change in migrant flows
Impact of change in native population
Total effect
35

30 1. Effect of Demography and Migration on Real GDP 90

30
25 75
20 60
25
15 45
20 10 30
5 15
15 0 0
–5 –15
10 –10 –30
–15 –45
5 Global GDP United Euro area Russia Saudi Other oil
States Arabia exporters
(right scale)
0
1990 2000 10 20 30 40 50
30 2. Effect of Migration on Real GDP
Sources: United Nations; and IMF staff estimates. 25 GDP per capita1
Note: Migrants are defined as the foreign-born population. Natives’ income percapita
20
15
10
country) and, correspondingly, earn a lower wage on
average. Over time, the productivity of immigrants 5
catches up with that of natives, and the wage gap 0
closes within 15 years. –5
United States Euro area Russia Saudi Arabia Other oil
•• Immigrants remit a fixed share of their labor income exporters
to their origin countries. They are subject to the
same tax rates as natives, and they receive the same Source: IMF staff estimates.
1
amount of transfers per capita as natives do from the Net of remittances.
government.14
•• The model does not allow for an endogenous
TFP increase after the arrival of immigrants, in Panel 1 of Figure 4.20 presents the simulated effects
contrast to the empirical findings reported earlier on GDP at the global level and on the main group of
in this chapter. The simulations, therefore, mimic migration recipient economies (all values are expressed
such an effect through an exogenous increase in percentage deviations from the baseline). Native
in the recipient economy’s TFP. The calibration population growth increases world GDP by about
ranges from a lower bound of zero to an upper 4 percent between 2020 and 2050. Abstracting from
bound of a 1 percentage point increase in TFP for TFP and wage catch-up effects, migration flows alone
every additional 1 percentage point in the share (blue bars) are responsible for an additional 2 per-
of immigrant-to-total-employment ratio (as in cent growth in global output. This contribution to
Peri 2011b). global growth occurs because migration allows labor
to move from low- to high-productivity countries.
14In OECD countries, there are few differences between the
An additional but small contribution to global GDP
benefits received by immigrants and those of native-born individuals.
If anything, immigrants receive fewer benefits than do natives comes from the gradual closing of the productivity
(OECD 2013). gap between immigrants and natives (green bars),

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WORLD ECONOMIC OUTLOOK: The Great Lockdown

but—more important—the positive TFP effect of received from abroad, increases (see also Di Giovanni,
immigrants (red bars) adds up to 4 percent to global Levchenko, and Ortega 2014). The positive impact
growth. Looking at more disaggregated numbers, the on income per capita in Mexico is particularly strong
impact on GDP is positive for the United States and once migrants are assumed to increase TFP in destina-
the euro area, thanks to the combined effect of a larger tion countries. In this case, remittances from Mexican
labor force, increased investment, and potentially migrants rise, while trade links with North America
higher TFP. In the euro area, immigration helps to and higher world prices for oil exports (due to the rise
buffer the negative impact on the level of GDP from in global GDP) lift the Mexican economy.
the decline in the native population. The negative The simulations presented in this section paint a
effect on Russia and Saudi Arabia reflects, instead, generally positive picture of the macroeconomic effects
the underlying reduction in immigration assumed for of migration in destination countries. However, it
those countries. is important to recognize that the analysis does not
Panel 2 of Figure 4.20 sets aside the effects of the tackle the distributional implications of migration (see
domestic demography and focuses only on the total Box 4.1). As with the distributional effects of interna-
effect of immigration. Lower bars correspond to tional trade (see the April 2019 WEO), these can be
the case in which no TFP gains from migration are relevant and may call for policy action. The analysis
assumed, while higher bars represent the results with also does not incorporate some potentially negative
TFP gains. The figure reports, for each destination, effects on origin countries. Large emigration flows,
the change in per capita income net of remittances by reducing the GDP level, can contribute to debt
sent home by immigrants and the change in per capita sustainability problems. Also, the simulations assume
income of natives alone. Without TFP effects, small that emigration does not decrease TFP in source coun-
decreases in per capita net income are seen, especially tries. However, negative productivity effects on source
in euro area countries. These reflect the fact that countries (Atoyan and others 2016) could materialize
migrants—while more productive in the destination as, for example, when a “brain drain” leads to the
country than in their home country—are initially emigration of more educated individuals (Grogger and
somewhat less productive than native workers. How- Hanson 2011). At the same time, it is also possi-
ever, the effects turn positive, even with a relatively ble that in some cases the opportunity to emigrate
modest TFP increase, pointing to the importance of might itself create incentives to accumulate human
this type of productivity gain from migration. For capital, even among those who end up not emigrat-
the same reason, immigration does not have a large ing.15 Migration and technological change interact
negative effect on the per capita incomes of natives along several dimensions, some of which are explored
and could possibly even increase those incomes in Online Annex 4.5.
substantially.
In principle, the fiscal implications of immigration
may raise distributional concerns. However, immi- Conclusions
grants are generally found to be associated with small Migration generally improves the macroeconomic
budget surpluses or deficits of about half a percent- outcomes of recipient economies. The “dynamic gains”
age point of GDP (OECD 2013). In line with this from immigration, in the form of rising TFP and
conclusion, the model simulations find that, although investment, can be attributed to the complementarity
immigrants receive lower labor income than natives between the skills of immigrants and natives. This
and thus pay less in labor taxes, general equilibrium chapter has found that these aggregate gains are large
effects (which include an increase in capital income of and quick to materialize.
natives) lead to overall small budget surpluses in desti- Migrating is very costly, and as such, only a very
nation countries, even without positive TFP effects. small fraction of the world population migrates. While
What are the effects of migration on origin coun- migrants are a remarkably stable share of the world
tries? In parallel to the rise in the GDP level in
15On the effect of emigration on the income of natives in origin
immigration countries, GDP falls in emigration
countries see Beine, Docquier, and Rapoport (2008); Docquier,
economies in Europe, in the rest of the world, and in Ozden, and Peri (2013); Dustmann, Frattini, and Rosso (2015); and
Mexico. Still, income per capita, including remittances Anelli and others (2019).

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 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

population, migration toward advanced economies across regions is unclear, in poorer countries it is likely
has been growing rapidly and will likely continue to to cause significant increases in internal and regional
do so in the future. Demographic factors will play an migration flows.
important role in determining the size, direction, and On the policy front, the positive macroeconomic
impact of future migration. With advanced economies impact of immigration can bring negative distribu-
aging rapidly, and population growth continuing in tional consequences for some individuals. This can be
EMDEs, migrants can play an important role in sus- addressed through fiscal intervention aimed at achiev-
taining economic growth in destination economies. ing a more equitable distribution of aggregate gains.
EMDEs are both the origin and destination of most Policy action should also include measures that actively
of the world’s refugees, an especially vulnerable group magnify the positive impact of immigration on the
of migrants. The conditions under which refugees economy. Active labor market and retraining policies,
migrate and the limited opportunities they have to together with immigration policies aimed at better
participate in the labor market of their host countries integrating migrants, are associated with improved
substantially reduce their potential to contribute to labor market outcomes following large immigration
their host economy. EMDEs are particularly exposed flows. International cooperation needs to complement
to migration induced by climate change. While the national policies in addressing the challenges from
quantitative effect of climate change on migration refugee migration, especially into EMDEs.

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WORLD ECONOMIC OUTLOOK: The Great Lockdown

Box 4.1. Immigration: Labor Market Effects and the Role of Automation
Three main approaches have been used in the litera- the level of their routine task intensity (Autor and
ture to address the challenges associated with empiri- Dorn 2013), an index measuring the extent to which
cally estimating the effects of immigration on natives’ tasks are “routine” and thus potentially automat-
labor market outcomes (Peri and Sparber 2009; Peri able.1 Two patterns emerge. First, overall employ-
2014; Foged and Peri 2015; IMF 2015; National ment shifts away from occupations (many of which
Academies of Sciences, Engineering, and Medicine are medium-paying) with an initially high routine
2017). task intensity (Figure 4.1.1, panel 1). Second, the
The spatial approach looks at the evolution employment shares of immigrants relative to those
of natives’ wage and employment growth in of natives grows in low-paying jobs (Figure 4.1.1,
high-immigration areas (Card 1990; Blau and Kahn panel 2, red bubbles). Instead, again in relative
2015; Peri and Yasenov 2015; Borjas 2016). The skill terms, natives upgrade their skills as their employ-
cell approach estimates the effect of immigrants on ment share in high-paying occupations with lower
the wages of other workers with similar skills (Borjas routine task intensities increases (green bubbles). The
2003). The production function approach imposes a adjustment to automation is thus more costly for
theoretical structure on the degree of substitutability of immigrants.
different workers (Ottaviano and Peri 2011).
The overall conclusion from these studies is that
the impact of immigration on the wages of natives is
very small, especially at horizons of 10 years or more. Figure 4.1.1. Automation and Labor Market
However, the estimated effects are highly differenti- Adjustment
ated across different subgroups of natives. Low-skilled 1
6 1. Job Reallocation across Occupations
Change in occupational employment

immigration affects more negatively natives who 5

have not completed high school and possibly those
shares (percentage points)

4 Native employees
belonging to disadvantaged minorities (Altonji and 3 Foreign-born
Card 1991; Borjas, Grogger, and Hanson 2012). 2 employees
Concerning the effects of high-skilled immigration, 1
Peri, Shih, and Sparber (2015a; 2015b) estimates a 0
positive impact on the wages and employment of both –1
–2
tertiary-educated and less-educated natives. Others
–3
find negative effects of high-skilled immigration within
–4
narrowly defined high-skilled groups (Borjas and –2.0 –1.5 –1.0 –0.5 0.0 0.5 1.0 1.5 2.0 2.5
Doran 2015). A still relatively unexplored topic is the RTI (index)
distributional consequence of the interaction between 1
immigration and automation. Automation and the 4 2. Job Reallocation and Wage
Change in occupational employment
shares; natives versus foreign-born

3
corresponding loss of jobs at the middle of the income
2
distribution lead to income polarization (Autor and
(percentage points)

1
Dorn 2013; Goos, Manning, and Salomons 2014). 0
Basso, Peri, and Rahman 2017 finds that immigration –1
into low-paying service jobs can attenuate the polariz- –2
ing effects on the income of natives. –3 High-paying jobs
An interesting question is whether immigration –4 Mid-paying jobs
Low-paying jobs
encourages natives to upgrade their skills to access –5
higher-paying occupations that benefit from automa- –6
–2 –1 0 1 2 3
tion. Data for 15 European countries are consistent RTI (index)
with this possibility. Figure 4.1.1 shows the changes
Sources: European Labor Force Survey; Goos, Manning, and
in employment shares of different occupations by Salomons (2014); and IMF staff estimates.
Note: RTI = routine task intensity.
1
Data are for 15 European countries for 1998–2010. Bubble
The authors of this box are Philipp Engler and Roberto Piazza. size represents the employment share in 2010.

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 CHAPTER 4 THE MACROECONOMIC EFFECTS OF GLOBAL MIGRATION

Box 4.2. Immigration and Wages in Germany

Foreign labor has supported employment growth in Phillips curve analysis. After controlling for a wide set
Germany in the aftermath of the global financial crisis, of individual characteristics, the business cycle, and
with immigrants more than offsetting well-entrenched endogeneity effects, there is no evidence that large
negative demographic trends. What was the impact immigration flows during 2012–16 had dampening
of immigrants on wage growth in Germany? This box effects on aggregate wage growth. Controlling for com-
provides an answer to this question using both macro- position effects (immigrants tend to earn lower wages
and microeconomic evidence. than natives and tend to be younger and less skilled),
The German labor market underwent major reforms the marginal impact of immigration on wages is
in the first half of the 2000s (known as the Hartz I-IV estimated to be slightly positive. Competition effects,
reforms), which led to a structural reduction in the which tend to depress the wages of workers who are
unemployment rate. Once this is taken into account, highly substitutable by immigrants, were present but
wage growth in Germany is explained well by inflation more than offset by complementarity effects between
expectations, productivity growth, and changes in native and immigrant workers, which tend to boost
labor market slack unrelated to immigration. This is in the wages of native workers who complement immi-
line with the traditional Phillips curve, and indicates grants in production. The evidence also suggests that
that there has been no discernible residual contribu- immigration increased wages more in the relatively
tion by immigration to wage growth at the macro- higher-wage job segment, where the within-sector
economic level. skills complementarity with migrants is the largest.
Microeconomic evidence from a large administrative Negative wage pressures are detected on earlier cohorts
panel data set from the Institut für Arbeitsmarkt- und of migrants typically active in the same sectors as the
Berufsforschung tends to confirm the outcome of the new migrants. All in all, taking composition, com-
petition, and complementarity effects into account,
The author of this box is Jean-Marc Natal. See also Klinger the analysis suggests that immigration had negligible
and others (2019). effects on the growth of aggregate wages in Germany.

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WORLD ECONOMIC OUTLOOK: The Great Lockdown

Box 4.3. The Impact of Migration from Venezuela on Latin America and the Caribbean
Venezuela is undergoing an economic and human- Figure 4.3.1. Recent Crises: Main Recipients1
itarian crisis of unprecedented scale for a country (Millions of people)
not at war. Economic activity contracted by about
65 percent between 2013 and 2019, and extreme Syrian crisis Projection
Venezuela 2019
poverty rose from 10 percent of the population in
2014 to 85 percent in 2018.
4.0
In this context, Venezuela is experiencing one of
the largest emigrations in history (Figure 4.3.1). The 3.5
United Nations High Commissioner for Refugees esti-
mates that 4.8 million Venezuelans (15 percent of the 3.0
population) had emigrated by the end of 2019, with
4 million settling in other countries in Latin America 2.5
and the Caribbean. Colombia received the largest
number, followed by Peru, Ecuador, Chile, and Brazil. 2.0
Based on current trends, the number of Venezuelan
migrants could reach about 10 million in 2024, 1.5
though this figure is highly uncertain.
The large migration flows are expected to have 1.0
mixed effects in recipient countries. In the short term,
0.5
they are putting pressure on the provision of public
services and labor markets. Over the medium term,
0.0
because immigrants from Venezuela are relatively
Turkey
Lebanon1
Jordan1
Germany
Iraq
Egypt
Colombia
Peru
Ecuador
Chile
Brazil
Argentina
Panama
educated, they would also increase potential growth as
the size and skills of the labor force expand. However,
there are downside risks to the gains in growth if
migrants do not integrate in an orderly manner. Source: United Nations High Commissioner for Refugees
(UNHCR).
In terms of budgetary pressures, recipient countries Note: 1Unofficial estimates used by authorities are greater
are providing support to migrants through humani- than those the estimates by the UNHCR.
tarian aid, health care, education, and labor market
policies. Using data for Colombia for each of these
categories as a benchmark, estimates suggest that pub- Venezuela’s migration is estimated to raise GDP by
lic spending related to migration from Venezuela could 3–5 percentage points between 2017 and 2027, driven
reach about 0.5 percent of GDP in Colombia by by an expansion of the labor force and investment.
2024, 0.4 percent in Ecuador, 0.3 percent in Peru, and Migration also leads to higher fiscal and current
0.1 percent in Chile. The impact on the fiscal deficit account deficits. The impact is largest for Colombia.
would be smaller, as tax revenue increases in line with A key policy challenge in the region is how to
the expanding economy. manage the transition at a time when growth has
Modeling techniques are used to estimate the slowed, social tensions have increased, and several
impact of migration from Venezuela on growth in countries need to reduce their fiscal deficits. In the
the recipient economies considering the age, number, near term, facilitating the integration of migrants into
and skill levels of migrants. The analysis also accounts the domestic labor market and easing the process to
for labor market displacements of local workers and validate their professional titles or to set up businesses
skill mismatches, given that most migrants’ skills are would maximize the impact on growth and minimize
underutilized in the informal sector. In this setting, the need for public support. Looking further ahead,
providing access by migrants to education and health
The authors of this box are Jorge Alvarez, Hamid Faruqee, care will be key to ensuring that they have long and
Emilio Fernandez-Corugedo, and Jaime Guajardo. productive lives.

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