How Immigrants Contribute to Developing Countries’ Economies

How Immigrants Contribute to Developing Countries’ Economies
Published on January 24, 2018 :: 194 pages
Executive summary
With more than one-third of international migrants residing in developing countries, immigration has an increasing weight on the socioeconomic development of low- and middle-income countries. Yet, policy debate on how immigrants affect host countries often relies more on perception than evidence. A more systematic analysis on the economic impact of labour immigration in developing countries will better inform policy makers to formulate policies aiming to make the most of immigration in destination countries.

The project Assessing the Economic Contribution of Labour Migration in Developing Countries as Countries of Destination (ECLM) – carried out by the OECD Development Centre and the International Labour Organization and co-financed by the European Union – was conceived to provide such analysis. This report synthesises the findings of the project, conducted between 2014 and 2018 in ten partner countries – Argentina, Cote d’Ivoire, Costa Rica, the Dominican
Republic, Ghana, Kyrgyzstan, Nepal, Rwanda, South Africa and Thailand –, puts them in the context of global analysis and provides evidence on the impact of labour immigration on the
development of host countries, and presents the main policy recommendations.

The contribution of immigrants to developing countries’ economies
Using both quantitative and qualitative methods, the analysis in this report focuses on three main dimensions of the economic contribution of immigrants in developing countries: labour markets, economic growth and public finance.

:: Labour markets: How well immigrants are integrated into the host country’s labour market is directly linked with their economic contribution to their destination countries. Immigrants in most partner countries have higher labour force participation and employment rates than native-born workers. However, the quality of jobs immigrants take remains a concern because they often face a lack of decent work.
Does immigration affect – either positively or negatively – the labour market outcomes of native-born workers? The analysis in the ten developing countries shows that the overall impact of immigration is negligible. The results, however, are diverse and highly contextual. This is in line with the majority of research on OECD countries which finds only a small effect.

:: Economic growth: The estimated contribution of immigrants to gross domestic product (GDP) ranges from about 1% in Ghana to 19% in Cote d’Ivoire, with an average of 7%. The immigrants’ contribution to value added exceeds their population share in employment in half of the partner countries. In countries where this is not the case, the differences were small. Overall, immigration is unlikely to depress GDP per capita. The analysis on how immigration affects productivity reveals less clear results. Various research methods were employed across the countries depending on data availability.

:: Public finance: How do immigrants affect the fiscal balance and the quality of public services in developing countries? Immigrants help increase overall public revenues, but the increase may not be always sufficient to offset the public expenditures they generate. This is the case for two countries, Kyrgyzstan and Nepal, where the deficit is less than 1% of GDP. In the other seven partner countries for which data are available, the net direct fiscal impact of immigrants is positive but below 1% of GDP. Overall, immigrants’ net fiscal contribution is therefore generally positive but limited. This is in line with the available evidence for OECD countries.