Aid and Migration: Substitutes or Complements?

SummaryThis paper investigates the impact of aid on migration and identifies two channels. Bilateral aid influences migration by enhancing the information about labor market conditions in the destination country (attraction effect). Total aid correlates with migration through increasing expenditure financing and hence, wages in countries of origin (push effect). We compute the critical level of income above which emigration and income are substitutes, which is about US $7,300 per capita in PPP 2000 prices, for example, Brazil or Russia. We argue that for countries below this threshold, there is a trade-off between aid and migration policies. A tightening of the migration policy is equivalent to a reduction of the level of aid by about 24%. A comparison of skilled and unskilled migrations shows that the former are more sensitive to the attraction effect than the latter.