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The secret to fighting poverty is New Zealand

In a new World Bank blog post (h/t @poverty_action), economist David McKenzie explains why he thinks facilitating international migration should be at the top of everyone’s list of effective development interventions. Compared to microfinance, conditional cash transfer programs and cash grants to microentrepreneurs, a seasonal migration program in New Zealand produced WAY larger gains in annual income for program beneficiaries.

The good news doesn’t stop there. The usual fears for or about migrants—that they would be vulnerable to poor treatment, or that they would take advantage of the program to over stay their visas—don’t seem have materialized:

In addition to estimating per-capita income gains of 30-40%, we find that participating in the RSE leads to greater subjective well-being, more durable asset purchases, housing improvements, and in Tonga, a large increase in secondary schooling. Moreover, as a recent evaluation by New Zealand’s labor department found, these gains came with minimal displacement of native workers, and overstay rates of less than 1%.

Previously on this blog, Michael Clemens wrote that the development program known as leaving Haiti has pulled far more Haitians out of poverty than anything else that has ever been tried.

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12 Comments

  1. Don Stoll wrote:

    Owen Barder’s blog post from Nov. 30, “Pulling up the ladder” (http://www.owen.org/blog/4220), gives a characteristically acute summary of the arguments for knocking down the barriers to international migration.

    Posted December 10, 2010 at 1:12 am | Permalink
  2. Just Thinking wrote:

    ‘facilitating international migration should be at the top of everyone’s list of effective development interventions.’

    Yes, maybe that’s good for fight poverty but what happens to the country receiving immigrants who don’t want to adapt to social & cultural environment?

    For example here in Spain there’s a lot –a mean a lot– of Islamic immigrants who don’t want to accept democratic rules and want to implant their religion and laws.

    Posted December 10, 2010 at 7:07 am | Permalink
  3. Jacob wrote:

    On helping Haiti… listen to the following podcast. You could turn it into one of those headlines you love, like “Aid wrecks local Haitian economy, donors send $3,000 in aid.”

    http://podcastdownload.npr.org/anon.npr-podcasts/podcast/510289/131713600/npr_131713600.mp3?_kip_ipx=1358011049-1292000069

    Posted December 10, 2010 at 12:16 pm | Permalink
  4. Laura Freschi wrote:

    @Don, thanks for the pointer to Owen’s writeup. I love that he points out that immigration restrictions today are tighter than at any other period in human history. This historical perspective is a really useful corrective for some of the immigration hysteria/fear that always seems to surround this topic in rich countries.

    @Just Thinking, well, I don’t mean to minimize those concerns but I personally think that the economic benefits to the migrants and to the migrant’s home countries, as well as the cultural benefits to recipient countries (I love living in New York City precisely because it is so diverse) far outweigh the costs.

    @Jacob, thanks, I am a big fan of Planet Money.

    Also…Owen deals nicely with the question of WHY the IDev community hasn’t taken up the migration policy agenda more enthusiastically. Clearly, migration as development policy is a hard political sell and a very sensitive issue in the US as well as the UK. Think about the kind of debates provoked by the different interventions on McKenzie’s graph: While microfinance conjures heart-warming images of women with sewing machines earning a better living for their families (safely far away in Bangladesh), for all too many rich-country citizens, immigration threatens to bring the global burden of misery to our doorsteps, endangering Americans’ jobs and diluting American culture…!

    The emotionally-charged tenor of the immigration debate calls out for rigorous evidence on the development impacts of migration programs and policies, so it’s great to see scholars giving attention to this issue.

    Posted December 10, 2010 at 6:03 pm | Permalink
  5. ash wrote:

    The New Zealand economy (which allows relocated people from the places outlined above an increased financial independence) has it’s long term stability rooted in two things: (1) Primary Production; something that has precedence in New Zealand due to a low population density (large tracts of open areas for livestock, cropping and forestry), (2) Tourism; based around NZ’s clean green image – something achieved through the country having a small population. How can you be clean and green with a densely packed population? Economically NZ is a dying power in areas like manufacturing and will continue to wane in these areas unless niche markets are found.

    I have recently moved from NZ (home country) to Asia where I am learning about how I can effectively contribute to social development there. My perception (something that is based only on personal experience and is far from all-encompassing) is that simply relocating people is a plaster and cannot be the long term solution to such issues. If you relocate enough people to NZ you will eventually be simply moving the problem geographically.

    What of the people that are left behind? The developing world has a population several times that of the western world so it is safe to say this solution is not a complete one as the developing world can practically not be “moved west”. However, long term stimulation and improved management in these areas does yield a result; it is simply a longer process, yet if done properly and if it can be replicated then an exponential change may begin over time.

    A holistic fix is going to require long and short term initiatives, perhaps relocation is a good short term initiative in situations like Haiti.

    Posted December 10, 2010 at 11:23 pm | Permalink
  6. Just Thinking wrote:

    @Laura don’t take me wrong. I love cultural mixed environments and I have friends from around the world regardless religion, race, sexual choice, etc. *but* there’s no point in being tolerant with intolerants.

    V.g. Who wants to be tolerant with nazis?

    I agree totally with you when you says ‘the economic benefits to the migrants and to the migrant’s home countries, as well as the cultural benefits to recipient countries’. I just mean we must keep watch about certain kind of fanatic groups because even us could end losing that Freedom we love.

    ————–

    ‘What is dangerous about extremists is not that they are extreme, but that they are intolerant. The evil is not what they say about their cause, but what they say about their opponents.’ (Robert F. Kennedy).

    Posted December 11, 2010 at 5:03 pm | Permalink
  7. Dan wrote:

    @Just Thinking:

    I’m not sure that there are legions of intolerants banging on the gates of the developed world. There’s nothing about other cultures that makes them less tolerant than those in Europe and America. In any case, immigrants are known for keeping their heads down and working hard, aren’t they?

    As Laura points out, the economic case in favour of greater immigration is overwhelming. Political populism borne out of misplaced social exclusivity shouldn’t be allowed to deny poor people the benefits of working abroad.

    I worked in Vanuatu before the RSE scheme began and i’ve been back several times since. The financial benefits to rural island communities previously disconnected from the cash economy have been enormous.

    People are deciding for themselves what to do with the money — for once it isn’t dictated to them by donors or the government. A development intervention that both brings loads of cash and lets people spend it how they want? Surely that’s a winner.

    Posted December 12, 2010 at 1:37 am | Permalink
  8. CLF wrote:

    @Laura

    While this is an interesting study it is a case of taking a very limited example that is itself full of assumptions and then expanding it to make a point that, while genuinely well intentioned, is deeply flawed. Something I fear this blog does far too often. First off I do agree that regulated and safe migration and the better employment and remittances that result from this can be an important piece of the development puzzle. That said here are a few things to add to the debate:

    New Zealand’s geographic location, as well as its demographic distribution (there is an awesome stat about the ratio of sheep to people in NZ), make this a study of limited value. Try thinking through how this sort of program would work in another context?

    -There is no discussion of the tensions that surround internal migration, ie. Hukou system in China, and cultural shifts that occur in rural areas as a result of rapid urbanization. The majority of rural individuals that seek out industrial work in urban areas are doing so to send back remittances and so it would seem warrant consideration.

    -Building from this you mention how nice it is to live in a multicultural city like New York as another pro of migrant workers. While I completely agree that this is a wonderful advantage of such a cosmopolitan city, it is largely unrelated to the above study. You don’t take into consideration the distinction between resettled refugees and asylum seekers, of which there are many in the United States, or the challenges they face in terms of long-term employment and support systems. I am thinking about the large East African populations that now reside in states like Minnesota.

    -You conveniently overlook the well publicized examples where migrant workers have faced serious challenges and resentment. South Africa’s xenophobic attacks and the resulting UN relocation camps are just one example. Another would be to consider for moment the population breakdown of slums, which often hold a large number of migrants seeking the advantages, financial and otherwise, of an urban environment. This population is consistently marginalized and I would argue a much more relevant starting point for the discussion than a study on New Zealand, where slums are not an issue.

    -As “just thinking” demonstrates above there is also the blowback to migrant workers, which is visible everywhere from Spain and France (with huge populations of African/Middle Eastern migrants), to Hong Kong where Filipinos are ridiculed and marginalized.

    I could go on but the real purpose of this response was to broaden the conversation by raising a few of the truly complex issues that surround migrant workers. In the future it would be nice if this blog attempted to SINCERELY engage with both sides of an issue. I have tremendous respect for Professor Easterly, and will continue to read this blog because I think it plays a critical role in analyzing and demystifying development issues.

    Posted December 14, 2010 at 2:41 am | Permalink
  9. Anonymous wrote:

    Laura, it would be really interesting to see a blog post on Australia’s seasonal labour scheme which has the same capacity as NZ’s, however, has so far been mirred in difficulties and complications resulting in approx 50 Pacific Islanders arriving per year. In addition, the NZ Parliament has, this week, recommended they increase their scheme

    Posted December 14, 2010 at 9:21 pm | Permalink
  10. Laura Freschi wrote:

    @ CLF
    I appreciate your attempt to broaden the conversation here by raising several admittedly important issues related to migration.

    However, I think we’re going to have to agree to disagree about 1) what makes a good blog post; 2) the responsibility of someone making an argument to also simultaneously make a bunch of counter-arguments that they don’t agree with; and most importantly 3) whether the laundry list of issues you raise in your comment actually constitutes a coherent counter argument to the main point of the original blog post, which was that the migration program McKenzie studied—and more broadly, migration in general—can have strong, beneficial income effects, without necessarily causing the negative impacts most often feared by opponents of more permissive, yet sensible migration policies.

    @Anonymous
    Thanks for the tip, I agree that would be an interesting post. If you want to pass on any more info about the Australian program, feel free to send an email.

    Posted December 14, 2010 at 10:16 pm | Permalink
  11. Laura Freschi wrote:

    @ash,

    Thanks for sharing your thoughts. Interesting your observation that relocating people is a plaster (aka bandaid in American lingo). It seems to me that it was a pretty permanent and sustainable solution for the 30 million Irish-Americans or the 15 million Italian Americans identified by the 2000 US census. And yet somehow the Irish potato famine was left behind in Ireland and did not migrate along with the immigrants.

    “What of the people left behind?” I think is a good question worth some pondering. Michael Clemens answered it one way in a previous post. He said:

    When I talk about leaving Haiti as a development strategy for Haitians, some thoughtful people argue that this “can’t be the solution for Haiti.” Compared to what we all wish for in Haiti—rapid emergence from poverty for everyone there, in their homeland—leaving Haiti is a terrible solution. But compared to what is actually likely to happen in Haiti, continued poverty for decades at least, leaving Haiti isthe principal solution to poverty. This is the right comparison, not the comparison to a prosperous Haiti that must remain a fantasy for now.

    Another way to think about this question is to ask, what do we care more about, individuals or institutions?

    Of course I completely agree with you that migration is only part of the solution. Our characteristically hyperbolic title aside, no one was arguing otherwise.

    Posted December 14, 2010 at 10:43 pm | Permalink
  12. ash wrote:

    @Laura,
    By calling it a plaster I was referring to the idea’s limited ability to fix the problem as a whole, for the actual people that are relocated it is, as you point out, a long term change. However, 30 million Irish Americans and 15 million Italian Americans moving to an under populated (relatively speaking) country that was still economically developing is a far cry from the 456 million Indians who are below the poverty line. Thus, some can be effectively helped (wonderful), others, due to sheer population, would have to be overlooked – therefore it is an effective solution only in the short term as our global scope for international migration will eventually run out.

    I shouldn’t have said “moving the problem geographically”, I should have said; that you would be creating a new, population based problem, in another geographic area (supposing that you move enough people from the ‘problem country’ to make a significant impact).

    And yes I am more concerned about individuals which is why I agree that this is a great short term tool. I just hope that it does get seen for what it is and not wrongly touted as an all encompassing fix – something which, my limited experience tells me, must be more holistic in nature. But I am sure you agree with me on this…..do you?

    It appears we are supporting the same point from different angles.

    Loving the discussion, not trying to be negative, simply trying to represent ‘another side of the coin’.

    Posted December 20, 2010 at 10:36 pm | Permalink

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    The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

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