ANN ARBOR — A common fear about international migration is “brain drain,” that when workers leave for opportunities abroad, their home communities lose out. New research finds the opposite: international migration can be a powerful engine of long-run economic development in the places migrants come from.

In “Abundance from Abroad: Migrant Income and Long-Run Economic Development,” published in the American Economic Review, University of Michigan economist Dean Yang and co-authors Gaurav Khanna (UC San Diego), Emir Murathanoglu (Oberlin College), and Caroline Theoharides (Amherst College) — all of whom are U-M economics Ph.D. alumni — show that increases in international migrant income led to broad economic gains in migrants’ home provinces in the Philippines over two decades. What’s more, most of those gains came not from remittances themselves, but from growth in the domestic economy.

“The surprise is that the biggest gains aren’t the money migrants send home — it’s what happens to the local economy over time,” said Yang, a professor in the Department of Economics and the Gerald R. Ford School of Public Policy, and a research professor at the Institute for Social Research’s Population Studies Center. “More than 75% of the long-run income gains we find are domestic. The home economy itself grows.”

The researchers studied what happened after the 1997 Asian Financial Crisis, which sharply shifted exchange rates between the Philippines and the countries where Filipino migrants worked. Because different Philippine provinces had migration ties to different destination countries, the crisis created a natural experiment: some provinces saw large, persistent increases in the value of their migrants’ overseas earnings, while others did not. Tracking outcomes over 20 years, the researchers could isolate the causal effects of migrant income on development at home.

The results were striking. Provinces that experienced larger migrant income gains saw significant increases in both domestic wages and entrepreneurial income, not just in remittance flows. Per capita domestic income rose by 6.7% relative to the pre-crisis average, reflecting broad-based economic growth rather than dependence on money from abroad.

A key driver of these gains was investment in education. The migrant income increases led to higher rates of secondary and college completion in home provinces. About a quarter of the total long-run income gains — both domestic and international — can be traced to these educational investments. Better-educated workers earned more at home, and those who did migrate overseas were able to secure higher-skilled, higher-paying jobs.

“When migration opportunities expand, families invest more in education,” said Yang. “That creates a virtuous cycle: more skilled workers, better jobs both at home and abroad, and more resources flowing back to the community. The fear of brain drain misses these dynamic gains.”

The Philippines is one of the world’s largest sources of migrant labor, with the government actively facilitating overseas employment for its citizens. But the study’s implications extend well beyond one country. Over 88% of developing countries with populations exceeding one million have dedicated government agencies for overseas employment, and 78% have policies promoting remittances.

“Facilitating international migration should be in every developing country’s policy toolkit,” said Yang. “Our evidence says it doesn’t hollow out the home economy — it helps build it up.”

“Abundance from Abroad: Migrant Income and Long-Run Economic Development,” is available now in the American Economic Review. For more on this topic, see additional research from Dean Yang and co-authors on international migration and the effects of migration on economic development via VoxDev.

Contact: Jon Meerdink ([email protected])