Managing Migration: The Role of Economic Instruments

This paper reviews economic policies and instruments available to the developed countries to reduce unwanted migration from developing countries, not all of which is irregular migration. Countries generally welcome legal immigrants and visitors, try to make it unnecessary for people to become refugees and asylum seekers, and try to discourage, detect, and remove irregular foreigners.There are three major themes:1. There are as many reasons for migration as there are migrants, and the distinction between migrants motivated by economic and non–economic considerations is often blurred. Perhaps the best analogy is to a river – what begins as one channel that can be managed with a dam can become a series of rivulets forming a delta, making migration far more difficult to manage.2. The keys to reducing unwanted migration lie mostly in emigration countries, but trade and investment fostered by immigration countries can accelerate economic and job growth in both emigration and immigration countries, and make trading in goods a substitute for economically motivated migration. Trade and economic integration had the effect of slowing emigration from Europe to the Americas, between southern Europe and northern Europe, and in Asian Tiger countries such as South Korea and Malaysia. However, the process of moving toward freer trade and economic integration can also increase migration in the short term, producing a migration hump, and requiring cooperation between emigration and immigration destinations so that the threat of more migration does not slow economic integration and growth.3. Aid, intervention, and remittances can help reduce unwanted migration, but experience shows that there are no assurances that such aid, intervention, and remittances would, in fact, lead migrants to stay at home. The better use of remittances to promote development, which at US$65 billion in 1999 exceeded the US$56 billion in official development assistance (ODA), is a promising area for cooperation between migrants and their areas of origin, as well as emigration and immigration countries.There are two ways that differences between countries can be narrowed: migration alone in a world without free trade, or migration and trade in an open economy. Migration will eventually diminish in both cases, but there is an important difference between reducing migration pressures in a closed or open world economy. In a closed economy, economic differences can narrow as wages fall in the immigration country, a sure recipe for an anti–immigrant backlash. By contrast, in an open economy, economic differences can be narrowed as wages rise faster in the emigration country.Areas for additional research and exploration of policy options include: (1) how to phase in freer trade, investment, and economic integration to minimize unwanted migration; (2) strategies to increase the job–creating impacts of remittances, perhaps by using aid to match remittances that are invested in job–creating ways.