# **1. Introduction**

The migration literature has made a case for greater cross-border labor mobility largely based on three factors – the demand for labor in high-income countries, the growing working-age population shares in developing countries, and the wage gap between the two groups of economies. The first two factors are driven by global demographic patterns, which are becoming increasingly diverse across countries (World Bank, 2015a). Many developing countries, especially in Sub-Saharan Africa and South Asia, are expected to see continued growth in the proportion of working-age people for several decades, even as the working-age population shares decline in developed countries and many middle-income countries.<sup>2</sup> Countries with growing proportions of workingage people have the potential to experience a boost to growth since their labor supplies are expected to grow faster than their populations even if employment ratios remain constant, while aging countries with shrinking working-age populations could experience slowdowns to growth.<sup>3</sup> Relaxation of barriers to international labor mobility can lead to higher numbers of migrants, and this greater international migration presents itself as a possible global solution to the challenges presented by aging in many high- and middle-income countries. Aging in these economies could have substantial implications for the global economy, since these economies account for threefourths of the global GDP growth since 2000 (World Bank 2015a). However, since the workingage populations of many developing countries are expected to continue to remain high for many decades, the potential excess labor supply from these economies could be used to meet the rising excess labor demand in economies with shrinking working-age populations. In a detailed metaanalysis of the literature, Clemens (2011) argues that the potential net benefits of reducing barriers to migration are huge and a multiple of the gains from further trade liberalization.

Beyond the global impact, both migrant-sending and receiving-countries can benefit – the former through the impact of potential remittance flows while the latter through the boost to labor supply. Despite the potential benefits, concerns about the impact of more migrants on fiscal balances, demand for public services, domestic wages, security related externalities, and other socioeconomic considerations have challenged more openness to greater international migration.<sup>4</sup> Many of these considerations, however, focus on short-run costs rather than long-run benefits.

> 2 Throughout this paper, references to high-income, middle-income, and low-income countries refer to the incomebased categorization followed by the World Bank Group for fiscal year 2016. “North” will be used to refer to countries or regions traditionally classified for statistical purposes as “developed,” while the term “South” will refer to those classified as “developing”, following the convention in policy-focused work as in United Nations (2013a). This paper will follow a similar convention, where “North” refers to high-income countries, while “South” refers to low- and middle-income countries, as classified by the World Bank Group.

> 3 IMF (2015) also estimates that aging could contribute to a slowdown in potential output in the coming years for many economies with rising shares of people over the age of 65. In contrast Ahmed et al (2016) argues that demographic change can substantially boost economic growth and poverty reduction in Sub-Saharan Africa where working-age population shares are expected to continue growing for several decades.

> 4 See, for examples, Razin, Sadka, and Swagel (2002), Boeri and van Ours (2013), the situation in the USA in Smith and Edmonston (1997), and for Europe in Boeri (2010), Collier (2013) and Zimmermann (2005).

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