Labour market performance and migration flows - European ...

European CommissionOccasional Paper 60, Volume IBougha-Hagbe (2004) and Collyer (2004) argue that real-estate investments are the most commoninvestments among migrants, and that they are not limited to areas of origin, but that they mostlyoccur in areas of the country that offer some attractions for the summer holidays. The relevance ofmigrant-led development in the tourism sector depends on several factors: the size of the migrantcommunity, the legal status of the migrants, the geographical proximity of destination countries tothe country of origin. When the cost of the travel is affordable and the majority of migrants are freeto temporarily leave their host country as they have a legal residence permit, then the developmentof a tourism sector is more likely to occur.Actual migration also increases the demand for the export of those goods – such as food – whichare sold in so-called ethnic shops in destination countries. This occurs if the demand from thediaspora is large enough when compared to internal demand, thus this effect could be relevant forsmall countries with a large expatriate rate.The effects of migration on the sectoral demand for labour are strictly interrelated to the effects thatremittances produce on the consumption pattern of recipient households (see section 3.3).3.2 Return migrantsReturn migrants can be a relevant channel through which consumption patterns are modified, as theybring home consumption styles they have become familiar with in destination countries. They alsobring home the financial resources to purchase the goods and services that they aspire to. This effect isrelevant if there is a large number of migrants who return home in the early phases of their adulthood,as young individuals are more exposed to the influence of newly-imported consumption patterns.Imported goods are likely to be overrepresented in the consumption baskets of the returnees, thusreducing the domestic demand for labour.3.3 RemittancesRemittances can exert an unbalanced effect on the demand for various goods and services, and somesectoral booms – such as in the building sector (Adams, 1991) – can emerge. The development of aparticular sector and the ensuing creation of job opportunities can occur only if remittances increasethe demand for domestic goods. Conversely, "if remittances increase the import of foreign goods, thiswill not stimulate the local economy and a very limited multiplier effect will take place [...] a typicalexample is remittances sent to rural areas where they will be mainly invested in farm production, butalso manufacturing and services activities, therefore benefiting the whole economy" (Stalker, 2000).When remittances leads to an appreciation in the real exchange rate (Amuedo-Dorantes and Pozo,2004), this affects the sectoral composition of production, with resources being shifted from tradedto non-traded sectors, a situation that resembles the so-called Dutch disease. While this strengthensthe uneven sectoral impact of remittances, the appreciation of the real exchange rate that theybrought about also increases the likelihood that their stimulus to private demand leaks out towardsimported goods, dissipating the job creation effect. 77It is interesting to observe that the eventual job-creation effect determined by migrant remittancescan be unevenly distributed across genders; Vargas-Lundius (2004) argues that the receipt ofremittances in origin communities stimulates the creation of jobs – such as in the constructionsector – where men represent a disproportionate share of the workers, so that they can contribute toreinforcing existing gender inequalities in labour-market outcomes such as wage andunemployment rates (see also section 1.1 on this).77 Da Cruz (2004) argues that in the small countries, which are heavily reliant on remittances – such as in the Comoros, hisown case study, remittances contribute to a boom in imports, thus worsening the trade balance.120