World Bank in its semi-annual Global Economic Prospects report said emerging market economies are expected to grow at 4.2 percent this year. Reuters
Noah Smith, Tribune News Service
When designing immigration policy, developed countries such as the US should think not just about how to benefit themselves, but how to spur global development.
For example, skilled immigrants and their children often invest in businesses in their ancestral countries, boosting economic growth and transferring technology. Sometimes they also move back. And their success often spurs developing countries to improve their education systems, in anticipation of sending more emigrants abroad. These flows of money, knowledge and people tend to create a win-win for rich and poor countries; the rich country gains skilled workers and investment returns, while the poor country gains capital, technology and opportunities for its people.
Then there are remittances. Immigrants working overseas often send money to their families back home. Given the lower prices in developing countries, these remittances can make a big impact. This type of transfer has grown in recent years.
According to a new report by the World Bank and the Global Knowledge Partnership on Migration and Development, remittances are now larger than either foreign direct investment or official development assistance to low- and middle-income countries other than China.
For some countries, including some in Latin America and the Caribbean, remittances represent a substantial portion of their entire national income:
It’s little wonder, therefore, that migrants from places like Honduras and El Salvador are clamouring to be let into the US — in other words, the livelihood of their families and their homelands depend on the money they send back.
This money can reduce poverty in some of the world’s poorest places, with tangible positive consequences for the quality of human life. Research shows that remittances lead to improved health outcomes and greater educational attainment for children in developing countries.
But do remittances contribute to sustainable economic growth? Here, the picture is murky; studies suggest remittances have a small effect on growth. Some researchers have found that families that receive remittances tend to work less. Others find that recipients tend to invest more, though this investment may be in the form of property speculation that does little to boost growth.
There is also the worry that countries that receive substantial remittances may come to be dependent on those flows, and thus refrain from doing the difficult and expensive work of creating valuable industries in their home economies — a situation that bears some resemblance to the way that natural-resource wealth often holds back long-term development in poor countries.
For the rich countries that are the source of remittances, there are also costs, although these are modest. For the US, remittances represent only a small portion of its huge, wealthy economy — about 0.3% of gross domestic product. But that number has ballooned in the last few decades:
When immigrants spend their earnings on goods and services produced nearby — haircuts, doctor’s appointments, legal services, rent and so on — that spending creates jobs for locals, creating what economists call a local multiplier effect. When they invest in their home country, the returns on that investment likewise tend to get spent in the US. But when a worker sends money abroad, that’s money that’s taken out of the local economy. This represents a modest but real loss of wealth for the US.
The leakage of money represented by remittances is not yet a major burden on the US economy. But it does reduce the economic benefit that accrues to native-born Americans from allowing in migrants from countries like Honduras, Guatemala and El Salvador, and could thus fan the flames of nativist sentiment. And it probably doesn’t do much to make those countries richer, which in the long run would reduce migration pressure.
The US therefore has a vested interest in encouraging immigrants to invest in their home countries rather than simply mailing money back. One way of doing this would be to tax remittances, as President Trump has proposed to do. This would be a tax on the poorest of the poor, however, which doesn’t seem justifiable. A more humane policy would be to give tax credits or other incentives for immigrants who invest in productive businesses in their home countries. But this would be difficult to enforce, as it’s probably not that hard to pass off remittances as business investment.
A third alternative is to have government agencies in both the US and other countries coordinate to help immigrants and their families use their US earnings to make productive investments back home. Not only would this produce more of a return for the US, it would speed economic growth in poor Central American countries, which would eventually reduce the number of migrants trying to get into the US.
Remittances are OK, but there’s no substitute for investment, growth and economic development.
Euro zone stocks surged on Wednesday as investors piled into firms with big dividends on hopes European Central Bank chief nominee Christine Lagarde will maintain the ECB’s dovish stance, while Italian shares jumped over 2% on avoiding a EU sanction threat. The blue-chip eurozone STOXX index
PARIS: Airbus on Wednesday posted stronger-than-expected core second-quarter earnings, led by the switch to efficient new single-aisle jets, and maintained its profit forecast for the year while warning of delivery challenges in the second half. Europe’s largest aerospace group said second-quarter adjusted
Fast-growing insurer FWD is seeking to launch operations in China ahead of any initial public offering (IPO) and plans to bolster its non-life business in Asia, its chief executive said, as a potential shake-up looms in the region’s insurance sector. FWD, controlled by Richard Li, the entrepreneur and son of
ZURICH: ABB is pressing ahead with a review of its underperforming businesses and expects a customer slowdown and China-US trade tensions to mean a turbulent year, its Chairman and interim Chief Executive Peter Voser told Reuters. The Swiss engineering company is in a “heavy-lifting phase”, Voser said, completing the separation
If there is one category of people who have suffered a sledgehammer like blow to their lives because of the coronavirus pandemic, it is workers.
COVID-19 cases are mounting in India at the rate of 90,000 to 100,000 daily. This is the highest number of daily new cases globally, in any country. With 5.6 million infections, India will exceed the US’s 6.9 million cases,
The number of coronavirus cases among refugees and the displaced is surging across the Middle East, humanitarian agencies and the UN have warned, as the first infections were reported among Syrians living in camps in Jordan.
There will be no justice for Breonna Taylor. Kentucky Attorney General Daniel Cameron made sure of that. He failed to make the case that Taylor’s life mattered. So a grand jury in Louisville, Kentucky, did what panels in the police shootings of Michael Brown in Ferguson,