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Long, Long Way From Home

I find the idea of migration-for-development pretty intriguing owing to the fact that it has the potential for wide-reaching effects, even if it’s often not practically never very popular in receiving countries.

The idea is simple—that wage and productivity differentials between the developing and developed worlds are large enough to benefit those who move from the former to the latter—but the mechanics are not, of course.

For example, the demand for skilled migrant labor in developed nations is typically higher than that of unskilled demand.  This is good in the sense that it provides incentives for workers to invest in their own skills in order to reap the benefits of migration.  But it’s also negative in that it isolates the poorest who lack resources to improve their human capital in the first place.

Temporary movement of persons (TMP) schemes can fix this problem by targeting the poorest and allowing them to work abroad for short durations.  This runs into a number of issues—what if they overstay their visas or become victims of exploitation?  Or what if, in the end, the durations are just too short to provide much benefit at all?  In a recent analysis of a program in New Zealand, these problems never manifested and program participants received much larger gains in annual income than did beneficiaries of other traditional types of interventions (more here).  Whether similar results could hold elsewhere remains to be seen.

Success will hinge on the development of the scheme itself—whether costs borne by migrants are low enough to justify their stay as well as whether migrants have repeated opportunities to work in foreign labor markets.  Equally important are the incentives behind labor demand, particularly regarding worker skill level.  Private sector demands should drive the migrant quotas so as not to undermine the receiving economy’s labor demand and supply disparities.

There’s more to the story, particularly in the implementation process.  But basically, much of this boils down to an incentive compatibility issue, i.e. how to ensure that everybody behaves as they should honestly or ‘truthfully’ behave.  And of course, that’s not so easy, is it?

Still, the success in New Zealand allows me some not-entirely-baseless optimism.  For some more on migration for development, check here for starters.