APPLIED MICRO: Abundance from Abroad: Migrant Income and Long-Run Economic Development; Dr Gaurav KHANNA (University of California San Diego)

Abstract

How does income from international migrant labor affect the long-run development of migrant-origin areas? We leverage the 1997 Asian Financial Crisis to identify exogenous and persistent changes in international migrant income across regions of the Philippines, derived from spatial variation in exposure to exchange rate shocks. The initial shock to migrant income is magnified in the long run, leading to substantial increases in income in the domestic economy in migrant-origin areas; increases in population education; better-educated migrants; and increased migration in high-skilled jobs. 77.3% of long-run income gains are actually from domestic (rather than international migrant) income. A simple model yields insights on mechanisms and magnitudes, in particular, that 23.2% of long-run income gains are due to increased educational investments in origin areas. Improved income prospects from international labor migration not only benefit migrants themselves, but also foster long-run economic development in migrant-origin areas.

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