Earlier this year, the Trump administration close USAID and cut spending on international aid and development. Development advocates are concerned – and keep worrying — that it would cripple the economies of developing countries and have deadly consequences for some of the poorest people on Earth. The story generated a ton of headlines earlier this year.
But Dean Yang, an economist from University of Michiganargues that “the Trump administration's anti-immigration actions are likely to have an even greater negative impact on the economic development of the world's poor countries” – and this story has received much less attention.
It's not just that migration is one of the best-known mechanisms for helping people escape poverty. Research shows that those who move from poor countries to work in rich countries such as the United States often see four to five times an increase in the amount they can earn, and sometimes much more.
What makes Yang say this is that immigrants in the United States send staggering amounts of money home to their families. These remittances, as they are called, have dwarfed the size official foreign aid The US spends on things like economic development, health care and humanitarian aid.
In fact, the United States was far and away number one source of remittances in the world. According to the International Organization for Migration, which cooperates with the UN, immigrants to the United States sent almost 80 billion dollars to their countries of origin in 2022 (the latest year for which data are available).
In the next issue Planet of Moneyout October 29, we delve into the disruption of these major financial flows in an era of immigration restrictions. While some countries, including Mexico, have already seen significant declines in remittances from the United States in recent months, others are seeing a rather surprising pattern: record growth. Our episode explores the causes and consequences of this surge and dives into the economics of remittances.
However, the recent surge in remittances is likely to be only temporary. Remittances are likely to decline in the near future. big reduction in immigration to the US, and large numbers of immigrants already here are being deported.
And this could have significant macroeconomic consequences for a number of countries, especially in Central America. In countries such as Honduras, Nicaragua, El Salvador and Guatemala, remittances it's overwhelming the share of their economies is between 20% and 27% of each country's GDP. These countries are already politically and economically fragile, and this is the main reason why so many of their citizens immigrated to the United States. This is one reason why Yang believes crackdowns on immigration could have serious consequences in developing countries.
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