Potential positive consequences of international migration for the development of the domestic economy

Potential concerns with International migration

Widespread international migration of high-skilled labor from the domestic economy to foreign countries is a concern for any nation. The fiscal cost of such migration may be specifically high, particularly so if higher education is subsidized in the nation using taxpayer's money, and those benefitting from such subsidies do not contribute back to the tax system of the nation (Bhagwati and Hamada, 1974). Additionally, the widespread migration of high-skilled labor in the form of professionals such as doctors and academics, deprives the domestic economy of essential services such as healthcare and education, due to a shortage of skilled labor within the country. 

Why International Migration can be a boon in disguise for Developing Economies

As international migration of skilled labor increases, education levels in the domestic economy are also seen to rise. Defoort (2008) finds that the education level of the home workforce increases at a rate similar to that of tertiary-educated migrants from the country, essentially implying over time that the migration is substituted with domestic skilled labor over time. This would mean that in the long run, not all those who choose to increase their education because of the chance they may migrate, actually end up migrating. Hence, providing more opportunities to skilled professionals from the domestic economy to work abroad might not deplete supplies of medical workers at home, but could raise them by increasing the incentives for people in the domestic economy to gain skills and education. Additionally, for nations like India, international migration has had great positive implications for the nation, resulting in the reverse flow in income, investment and expertise from the global Indian diaspora. 

International Migration: A Boon or Bane? 

International migration is a complex policy question that makes any economist or policy-maker think twice. According to Theories of International trade, two nations with unequal resource endowments can enjoy a bilateral increase in economic well-being by freely exchanging capital, goods, and labor (Martin and Richards, 1980). Permitting free exchange, therefore, increases the output available to both nations. However, theory differs from practice in the distinction that countries place greater concern on the welfare of their own citizens, while theory treats the welfare of all equally. International migration benefits migrants and their employers but may force citizens of the foreign country to compete with migrants for jobs, housing, and public goods. Therefore, even if total output in both nations increases, migration is mutually beneficial only if its effects on each country's income distribution are relatively small. Hence, there is no right or wrong answer to the question if international migration is a boon or a bane.