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This paper re-examines the development implications of international migration focusing on two issues: how the costs and benefits of migration change over time, and the significance of South-South migration for development. First, the analysis finds that although greater migration could push down the wages of native workers of advanced countries in the short run, these wages eventually recover. This pattern would be mostly caused by the beneficial effect of additional labor on the real returns on capital and fostering faster capital formation. Additional South-North migration could favor capital income recipients and reduces labor income in host regions in the short run. In contrast, in sending countries, capital owners could experience lower incomes while wages rise. Globally, the welfare gains of new migrants could be expected to exceed the losses of old migrants by a wide margin. The remaining natives in sending countries could enjoy a net increase in remittances as well as an increase in labor income, although income from capital might decline. Second, in a hypothetical scenario with lower South-South migration, the implied losses of remittance income could lead to substantially lower welfare in developing countries. Although the wage differentials among developing countries tend to be smaller relative to their wage differentials with high-income countries, South-South migrants make substantial contributions to remittances.

The six countries of South East Europe (SEE6) are aging fast and catching up with developed economies that are already far advanced in the aging process. Low fertility rates are reducing working-age populations across the SEE6. The adverse SEE6 demographic dynamic is aggravated by emigration. In the absence of any policy and behavioral responses or changes in labor productivity, and where population aging reflects solely declining overall labor force participation rates, aging itself would be expected to negatively impact economic growth. Boosts in productivity are one of the key ways to counterbalance potential negative effects of aging on economic growth. Changes in both individual and business behavior supported by policies that increase quality of human capital and encourage labor force participation can help seize the opportunities and mitigate the adverse effects of an aging population.

This background paper was prepared for the East Asia Pacific aging report. The East Asia and Pacific region grew at an unparalleled rate in the past 50 years. This economic boom is partly attributable to unprecedented demographic changes in East Asia during this period. But demographics are only part of the story. The size of the economic bonus or burden which results from population aging depends on how policy influences labor force participation, savings, human capital accumulation and total factor productivity.