International migrants are an important channel for the transmission of technology and knowledge. The so-called “brain drain” associated with better educated citizens of developing countries working in high-income countries is acute in some developing countries. Developing countries benefit, however, from the temporary migration of managers and engineers; the return of well-educated emigrants; and contact with a technologically sophisticated diaspora. Remittances sent by migrants also promote technology diffusion by making investments more affordable.

Recorded remittances to developing countries are estimated to reach $240 billion in 2007. The true size of remittances including unrecorded flows is even larger. A near stagnation in remittance flows to Mexico and a deceleration in other Latin American countries contributed to a slowdown in the rate of growth of remittances. Nevertheless, the growth of remittances to developing countries remains robust because of strong growth in Europe and Asia. The remittance industry is experiencing some positive structural changes with the advent of cell phone and internet-based remittance instruments. The diffusion of these changes, however, is slowed by a lack of clarity on key regulations (including those relating to money laundering and other financial crimes). Remittance costs have fallen, but not far enough, especially in the South-South corridors.

Recorded remittances sent home by migrants from developing countries are expected to reach $199 billion in 2006, up from $188 billion in 2005, and more than double the level in 2001 (table 1). Worldwide flows of remittances, including those to high-income countries, are estimated to have to grown to $268 billion in 2006. This amount, however, reflects only transfers through official channels. Econometric analysis and available household surveys suggest that unrecorded flows through informal channels may add 50 percent or more to recorded flows (see Global Economic Prospects 2006). Including these unrecorded flows, the true size of remittances, is larger than foreign direct investment flows and more than twice as large as official aid received by developing countries.

US Congress is debating the largest overhaul of US immigration law in two decades. This note describes a possible comprehensive approach involving increased control, some legalization and new temporary foreign labor schemes. It points out some implications for developing countries.