The interaction between migration and sending communities: an overview of literature and policy implication for China

Résumé  
The world has never been as dynamic as today with its population crossing borders of 
countries and regions in every corner of the earth. According to the Migration and 
Remittances Factbook 2011 (World Bank, 2011), more than 215 million people (3.2% of the 
world population) lived outside their countries of birth in 2010. While the United States is the 
top receiving country with 20% of the world’s immigrants, Mexico is the top sending country 
with 11.9 million of outflow in 2010. In Qatar, 86.5% of the population was composed of 
immigrants from other countries; whereas in West Bank and Gaza, 68% of the country’s 
population had emigrated.  
While significant population movement is observed internationally, internal migration 
is also reaching unprecedented scale in some developing countries that are currently 
experiencing dramatic economic transformations. In India, the 2001 census showed that the 
number of internal migrants had doubled since 1971, reaching 309 million, i.e. nearly 30% of 
the total population (Bhagat, 2009). In China, 261.4 million people (20% of the population) 
were living and working outside their original place of residence in 2010 (National Bureau of 
Statistics of China, 2011). 
Large-scale population movements raise a number of important socio-economic 
questions: Why do people go miles away? After leaving, what connects a migrant with her 
family left behind? What drives a migrant back? What is the impact of returning? 
In this paper, we propose a short survey of answers that have been given to these 
questions in the migration literature. We focus on two facets of the link between migrants 
and the sending communities: remittances and return migration. Before presenting these two 
                                             
 ① Hui Xu, assistant professor, Business School, Beijing Normal University.   徐慧，北京师范大学经济与工商管理学院，讲师。 
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points, a brief overview of the mechanisms of migration is provided. At the end of the paper, 
we give a policy discussion relating to the internal migration issues in China.  
 
1. Why are people migrating? 
 
The classical work of Lewis (1954) on Economic Development with Unlimited Supplies 
of Labor is considered the seminal work of the modern migration literature. Based on a dual 
economy assumption, the basic mechanism of geographical movement of labor is considered 
to be driven by the demand of a “capitalist” sector (industrial sector/urban economy), which 
offers higher wages than the “subsistence” sector (agricultural sector/rural economy). The key 
assumption of the model is the unlimited supply of labor in the “subsistence” sector with a 
zero marginal product of labor. Therefore any tendency of wage rise in this sector is offset by 
the increasing labor provision. Ranis and Fei’s (1961) perfect-market neoclassical specification 
extended the Lewis model by arguing that once the redundant labor supply disappears, wages 
will converge between the two sectors as the result of labor migration and the dual economy 
will finally converge to a unified one1. 
Observing a continuing migration despite chronic problems of urban unemployment, 
Todaro (1969) proposes an expected-income model to explain rural-urban migration in a 
developing country context. In this model, the migration decision making is based on the 
consideration of discounted future streams of urban-rural expected income and the migration 
costs. The key point which makes Todaro’s (1969) model a milestone work is the inclusion of 
the potential unemployment possibility in urban regions into an individual migrant’s mobility 
decision. The model is therefore able to explain the continuing rural-urban migration 
phenomenon despite high and increasing urban unemployment in developing countries. 
These models have been influential in explaining the basic mechanism of rural-urban internal 
migration as well as international migration between developing countries and developed 
countries. Nevertheless, they assume the homogeneity of migrants and therefore fail to 
answer a fundamental question of migration: why do some individuals migrate while others 
do not? (Taylor & Martin, 2001). Mincer (1974) and Becker (1975) provide a microeconomic 
ground on which to test the determinants of migration by integrating previous migration 
theories into human capital framework. Their human capital migration theory opens the door 
for many testable hypotheses (Taylor & Martin, 2001), such as a negative association between 
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distances and costs, a positive relationship between higher return of specific human capital 
and an inflow of such human capital into the region, etc. 
From the 1980s until today, two theoretical streams with different settings have 
dominated understanding of the mechanisms of migration. The first stream, known as life
cycle utility theory, is based on an individual’s decision-making framework, while the second, 
the New Economics of Labor Migration (NELM), is rooted in the family unit as the decision 
making agent.  
The life-cycle utility (Djajic & Milbourne, 1988; Dustmann, 1995; Mesnard, 2004) 
considers that the migrant is a rational individual with a goal of pursuing life-cycle utility 
maximization with given budget and liquidity constraints. As such, migration is a decision that 
belongs to this life plan. The theory is pioneering in integrating individual migration into an 
inter-temporal framework, and also in modifying the traditional understanding of permanent 
migration to include temporary migration as well. While previous theories focus on an 
individual level of analysis, NELM (Stark & Bloom, 1985; Stark and Taylor, 1989; Katz and Stark, 
1986) has made a fundamental contribution in shifting the focus of migration theory from 
individual independence (optimization against nature) to mutual interdependence 
(optimization against one another) (Stark & Bloom, 1985). In the NELM framework, migration 
decisions are considered to be taken by a family unit as a whole rather than by an isolated 
individual. This joint-household model is more appropriate to understand the migration 
determinants since the continuing interaction between migrants and their families left behind 
are observed (Taylor & Martin, 2001). This theory opens an even broader vision to 
understanding the determinants of labor migration. In particular, it provides the fundamental 
basis to understanding a central outcome of human migration - that is, remittances -- as an 
intra-family link across space and over time after the emigration of family members. The 
integration of migrants’ and household’s remittance behavior with migration decision-making 
is therefore considered to be the most distinguishing contribution of NELM (Massey et al., 
1993). More recently, Dustmann et al. (2011) propose a new model of migration decision
making, in which migration is considered as an individual’s rational choice of working location 
regarding human capital acquisition and return. The idea is that migrations are decisions that 
respond to where human capital can be acquired more efficiently, and where the return to 
human capital is the highest. As such, a person may move to a country where her skills grow 
fast and then apply these skills in a different country where these skills have a high price. 
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2. Remittances - a tie and therefore an impact? 
 
The geographical mobility of human beings is accompanied by an astonishing 
magnitude of counter-flow of money transferred back to the sending communities. Though 
migrants are physically absent, remittances become a key tie linking them with their places of 
origin. According to the Migration and Remittances Factbook 2011(World Bank, 2011), 
worldwide remittance flows are estimated to have exceeded $440 billion in 2010, with 74% 
flowing into developing countries. However, the true size of these flows, including unrecorded 
flows through formal and informal channels, is believed to be significantly larger. 
Why do people remit? What does the money mean for receivers left behind? And what 
are the social and economic consequences for remittance receivers as well as their 
communities? 
 
2.1 The mechanism of remittances 
Various theoretical models have been developed to explain the motives of remittances. 
A comprehensive literature review on the microeconomics of remittances can be found in 
Rapoport & Docquier (2005) with the following motives being listed: altruism, exchange, 
strategic reason, insurance, investment, and inheritance. Basically, all these motives suggest 
an interaction between migrants (remitters) and the family left behind (receivers). Sending 
remittances may be a purely altruistic decision for the purpose to increase the welfare of left
behind family members by partly sacrificing one’s own standard of living: the utility of the 
relevant others is included in one’s own utility function. This altruistic motive is considered to 
be the most common motive fremitting (Rapoport & Docquier, 2005). The theory predicts that 
an altruistic motive for remitting will respond to a proportional increase of transfer to the left
behind family as migrant’s own income increases, and the transfer cannot increase with the 
income of his or her family of origin. In a case study of Botswana, Stark & Lucas (1988) find 
some consistency with a purely altruistic theory. Migrants are found to have a strong desire 
to alleviate special hardships imposed on their family; explaining why a higher amount of 
remittances is sent during a disaster such as a drought (Stark & Lucas, 1988). 
As mentioned above, NELM considers migration as an intra-family arrangement. 
Remittances are therefore considered as the core element of the delicate informal mutual 
contractual agreement between the parties (Stark & Lucas, 1988). Remitting money to the 
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family could be considered as a repayment for both the investments in migrant’s human 
capital before migration and for the family support covering migration cost. On the other hand, 
a coinsurance relationship may exist between the migrant and the origin household. This 
underlines a mutual support in coping with various risks that may happen on either side during 
moments of hardship, as migrants may encounter a risk to income in the destination area, and 
the left-behind family may also incur unanticipated economic shocks. An advantage to a 
coinsurance relationship is that it is self-enforcing between close family members (Lucas & 
Stark, 1985). In this context, the migrant is not only driven by altruism as a motive, but also by 
his or her own well being, especially in the case of an anticipated return. This rather complex 
motivation is called “tempered altruism or enlightened self-interest” in Lucas & Stark’s 
seminal work (1985). Inheritance is also considered as an element of the implicit contractual 
relationship between the migrant and the family. Sending remittances may be a strategy for 
migrants to secure family inheritance, including land (de la Briere et al., 2002; Hoddinott, 
1994). 
Many empirical studies have tested these theories. Evidence for the coinsurance, 
education repayment and inheritance aspects is found in the case of Botswana (Lucas & Stark, 
1985). In the case of Mexico, Amuedo-Dorantes & Pozo (2006) find that migrants remit more 
when facing greater income risk, which suggests that migrants are likely to be risk-averse 
economic agents and remittances purchase “family-provided insurance”. In the case of 
Western Kenya, Hoddinott (1994) finds evidence for the assertion that migrants remit in 
anticipation of future inheritance. The theoretical models introduced above clarified some 
critical mechanisms of remittance behavior although, in reality, the decision to remit may be 
a mixture of the above motives. As Rapoport & Docquier (2005, p.35) note, “it is not only that 
different individuals may be heterogeneous in their motivations to remit, but also that 
different motivations to remit may coexist within the same individual”. 
The theoretical models introduced above clarified some critical mechanisms of 
remittance behavior although, in reality, the decision to remit may be a mixture of the above 
motives. As Rapoport & Docquier (2005, p.35) note, “it is not only that different individuals 
may be heterogeneous in their motivations to remit, but also that different motivations to 
remit may coexist within the same individual” . 
 
 
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2.2 The impact of remittances 
Whatever the motives for sending remittances are, the world of receivers is 
substantially influenced by remittances. As more and more people are implicated in the 
movement of population across the globe, the role of remittances in international 
development has attracted a significant attention among academic researchers in the past. It 
is also worth mentioning that in the literature, the definition of remittances can be broader 
than the usage intended here: remittances not only include the interpersonal transfer 
between migrants and the family left behind as a result of migration, they may also include 
savings accumulated by the migrant during migration and repatriated upon return. Empirical 
studies are the main focus of the research stream on this aspect, and can be grouped into 
several categories.  
 
Impact on consumption or investment at the household level  
Members of households who receive remittances are directly impacted agents. 
Research interests focus on how remittances are used at the household level. The main 
findings suggest two key channels for the use of remittances: consumption and investment. 
Using a large household survey from Guatemala, Adam & Cuecuecha (2010) studies the impact 
of internal and international remittances on the marginal spending behavior of households on 
both consumption and investment goods. He finds that households receiving either internal 
or international remittances increase their investment in education and housing, whereas 
receiving international remittances decreases the marginal consumption on food. In an earlier 
paper, Adam (1991) studies the uses of international remittances in Egypt by comparing 74 
migrant households with 74 non-migrant households in terms of expenditure behavior, and 
finds that remittances play an important role in housing spending and investment rather than 
personal consumption. Regarding consumption, Quisumbing et al. (2008) find in the case of 
the Philippines that remittances have a significant impact on housing, consumer durables, 
consumption on clothing, and alcohol and tobacco, as well as education. Though the above 
findings highlight a positive impact of remittances on the left-behind households, some 
studies have expressed concerns about the role of remittances. For example, Chami et al. 
(2003) argue that because remittance transfers usually take place under conditions of 
asymmetric information and economic uncertainty, there exists a significant moral hazard 
problem. Gubert (2000) also finds “moral hazard” evidence from the Kayes area in Western 
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Mali, such that the more insurance is provided by the migrants, the less incentive their families 
have to work, and therefore, migrants’ families are found to be no better off than non
migrants’ families in terms of agricultural technology adoption. 
 
Impact on inequality at the community level 
The growth effects of remittances cannot be dissociated from their distributive effects 
(Rapoport & Docquier, 2005). An important strand of literature has focused on the impact of 
remittances on inequality at origin, as the transfer of money and goods by migrants to their 
communities of origin can have an important impact on the distribution of household income 
(Barham & Boucher, 1998). 
In the literature, the impact of remittances on inequality is highly debated, and there 
is little consensus on whether it is positive or negative. Some studies support that remittances 
have a negative impact on inequality. For example, Lipton’s (1980) study on internal 
remittances in rural India and Adam’s (1989) study on international remittances in Egypt both 
find that remittances worsen inequality. Some other studies hold a positive view towards the 
distributive impact of remittances (Stark et al., 1986; Taylor, 1999). For example, Taylor (1999) 
shows that remittances have an equalizing effect on income distribution in Mexico. In addition, 
some studies find that the distributive impact varies across time. For example, based on 1988 
household survey data collected in Mexico, Jones (1998) finds that interfamilial inequalities 
first decrease and then increase as a place’s migration experience deepens. This is consistent 
with the argument of Stark et al. (1986) that the impact of migrant remittances on rural 
income distribution by size appears to depend critically on a village's migration history. In the 
same paper, their empirical tests on both international remittances resulting from migration 
to the United States and internal remittances in Mexico support their ideas. 
Nevertheless, it is also worth mentioning that the findings on this topic are closely 
linked to whether remittances are treated as an exogenous inflow or as a substitute for home 
earnings. For example, income inequality was found to be smaller using the second method 
of potential substitute in the case study of the Philippines by Rodriguez (1998). Barham & 
Boucher (1998) have clearly explained how these methodological differences can result in 
different findings. Briefly, when treated as an exogenous transfer, the economic question is 
how remittances, in total or on the margin, affect the observed income distribution in the 
receiving community. When treated as a potential substitute for home earnings, the economic 
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question becomes how the observed income distribution compares to a counterfactual 
scenario without migration and remittances but including an imputation for home earnings of 
erstwhile migrants. According to Barham & Boucher (1998), the latter treatment is a more 
interesting economic question, since it compares income distributions in the community with 
and without migration and remittances. 
 
3. Return to return migration 
 
3.1 Who are the return migrants? 
“Failure” or “success” 
Whether return migration is a result of a “success” or a “failure” in destination areas 
is a highly debated issue in the literature. There are basically two opposing views. On the one 
hand, neoclassical economics considers that return migration is an unsuccessful result of work 
experience in destination areas. The logic is that migration is considered as a response to a 
higher (expected) wage in receiving regions (Lewis, 1956; Todaro, 1969). Therefore return 
migration only occurs when migrants fail to gain the expected benefits, either because of 
under- or unemployment, or because the psychic costs of moving are higher than anticipated 
(Constant & Massey, 2002). On the other hand, NELM holds a positive view of return migration. 
Under this framework, migration is seen as an intentional, well-organized family plan 
consisting of two parts. First, remittances sent by migrants help diversify family income and 
solve liquidity constraint problems in the absence of efficient markets in home regions. 
Second, return migration is the result of fulfillment of goals, and the return of the individual 
to the family.  
 
Selection  
A complementary issue of the “success” or “failure” story of return migration lies in 
the selection question (Borjas, 1987; Borjas, 1989; Borjas & Bratsberg, 1996). Borjas & 
Bratsberg’s (1996) seminal work suggests that the pool of migrants, as well as return migrants, 
is not random. According to them, a return migrant experiences a double selection: while 
migration is a process of self-election in the first place, return migration is a second self
selection, reinforcing the selection at the first stage. The basic idea has two variations: when 
the migrant workers are the most highly qualified (best) workers as compared to the average 
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level in the source country, then return migrant workers are the worst of the best. In this 
scenario, those who remain in the foreign country are the best of the best. In the second 
scenario, migrants are the lowest qualified workers (worst), implying that return migrant 
workers are the best out of the group of worst workers, with migrants remaining in the host 
country being the worst of the group of worst workers. Therefore, the skill composition of the 
return migrant flow depends on the type of selection that generated the immigrant flow in 
the first place. The empirical study of Ramos (1992) confirms the predictive power of the 
theoretical work of Borjas (1987, 1989) and Borjas & Bratsberg (1996). Ramos (1992) 
compares the education levels of three groups of persons: Puerto Rican-born non-migrants, 
Puerto Rican-born permanent immigrants in the United States, and Puerto Rican-born return 
migrants from the United States. The results show that immigrants in the United States are 
less educated than the non-migrants in Puerto Rico, and the return migrants from the United 
States.  
 
3.2 Economic performance after return 
While the selection theory highlights the origin sorting in terms of human capital, it 
ignores the dynamic changes involved during the whole process of migration. That said, the 
migration process may change the original composition of skill. Migrants may upgrade their 
skills by learning on the job and subsequently import the newly acquired human capital to 
their source country (Iara, 2006). Dustmann et al. (2011) even argue that migration is a 
strategy to acquire skills where they can be acquired more efficiently, and to sell these skills 
where their return is the highest. As such, while evaluating the role of return migrants on 
home communities, it is necessary and important to incorporate the changes they may have 
experienced during migration as well as the repatriated changes that they bring back. A 
growing literature explores this issue and tends to support the hypothesis of a higher 
economic performance of return migrants after return, in terms of occupational choice and 
economic earnings. As some studies argue, return migrants bring back not only financial 
capital but also human capital accumulated during migration in a more developed area 
(Gmelch, 1980; Miracle & Berry, 1970; Murphy, 2002). For example, a higher propensity of 
returnees becomes self-employed upon return in many countries (Ilahi, 1999; McCormick & 
Wahba, 2001; Mesnard, 2004; Piracha & Vadean, 2010). Regarding earnings, Reinhold and 
Thom (2009) find that migration experience in the US is positively related to an individual’s 
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wages upon return to Mexico, and return to migration experience is significantly higher than 
return to domestic working experience. Iara (2006) has investigated earnings differences 
between young males from Central and Eastern Europe with and without Western European 
work-related experience and found increased earnings capability for those with Western 
European work experience and a premium of around one-third of stayers’ earnings. Another 
interesting finding is from the Hungarian case, for which Co et al. (2000) find positive returns 
to women’s foreign work experience from member countries of the Organization for 
Economic Cooperation and Development (OECD) but no such gains for women who returned 
from non-OECD countries. 
From an individual point of view, these studies suggest that migration is a process of 
enhancement of the individual human and physical capital, and therefore return migrants 
tend to get higher return in source regions as a result of their upgraded skills. From a 
development point of view, return migration is also a potential “brain gain” for home regions. 
As Dustmann et al. (2011, p. 66) argue, “there is always a potential gain for the developing 
countries if their citizens can apply their skills where they receive the highest rewards”. Mayr 
& Peri (2008) notice that in the United States, 20% to 30% of highly educated immigrants 
return home when they are still productive, especially to source countries like Eastern Europe 
and Asia, and they become very important contributors to their home economies. Taiwan is a 
good example of an economy that has derived great benefits from attracting back highly 
skilled overseas Taiwanese (IOM, 2005). Another classical example is India, once a country 
suffering the most from “brain drain”, but now benefitting from return experts, especially in 
the software sector, previously “lost” to the United States (Hunger, 2004). 
 
4. Discussion and policy implication for China  
 
No matter how far away, individuals remain connected to their past and their origin. 
This paper has documented the strength of the ties between migrants and their sending 
communities during and after migration. During the process of migration, remittances are a 
key link between migrants and their source region. These remittances, whether international 
or internal, have been shown to be closely connected with both trustful and reciprocal 
behavior of those in the source region who are the recipients, although in various ways. 
Consider that migration duration is composed of numerous possible decision-making 
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moments; migrants are attached to their source communities throughout this process by 
taking family needs into consideration when choosing whether “to return” or “to stay”. The 
source region gains from return migration. Return migrants demonstrate high economic 
performance with a strong tendency to pursue entrepreneurial activities. Their past migration 
experiences matter considerably in this occupational choice. 
A key lesson that can be drawn from the existing studies is that the interaction 
between migrants and their sending region does not stop, and, in fact, as soon as migration 
occurs, various changes affect the sending community. It is nevertheless difficult to ascertain 
whether that all of these changes accompanying migration are favorable for local 
development.  
For our understanding of development, it is important to account for such 
interpersonal and interfamilial interactions since these are strongly linked with trust. 
Nevertheless, since the mechanisms at stake in the relationship between remittances and 
trust could be much more complex, a clear identification of the causal relationship cannot be 
fully achieved. Moreover, though sending and receiving remittances is based mainly on 
personal willingness, government intervention is still necessary to some extent. For example, 
the success and the amount of remitting depend largely on the procedures for sending and 
receiving remittances, as well as their cost. As an example, in China, despite the wide 
availability of remittance service providers, people who live in poorer and remote localities 
are experiencing difficulties in obtaining access to remittance service providers (Murphy, 
2009). Therefore, special attention could be paid to how remittances can reach receivers more 
safely, easily and at lower cost. 
The question is therefore whether there is any desirable model for achieving both 
economic and social development for the sending communities. In the case of China, the 
phenomenon of children left behind is one cause pulling migrants back home (Démurger&Xu, 
2015), and the reason for such a widespread phenomenon is closely related to the hukou 
system, which is tied in turn to the education system in China. Can relaxing these institutional 
settings help solve the social problems related to left-behind children? Or should one 
encourage migrants to return? The two policy orientations can result in different trends of 
internal population movement in China. In the first case, more rural-to-urban out-migration 
and permanent settlement in the destination areas would be generated, while in the second 
case, more counter flow of urban-to-rural return migration would be observed.  
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Relaxing the institutional barriers essentially suggests a reform of the hukou system. 
In the long run, one prior policy suggestion is to phase out the hukou system. The hukou no 
longer serves as a severe tool to control interior population mobility; nevertheless, it is directly 
linked to different rights of public and social welfare, such as social security, housing, health 
care, employment, education, etc. Therefore, it is a key remaining barrier to the integration 
of migrants into the urban system. Up to now, it has produced two crucial consequences for 
the society as a whole: first, a widespread spatial separation between migrants and their 
family members left behind; second, stratification into a dual society with migrants being 
considered as “second-class” citizens in urban areas. Dismantling the hukou system is 
therefore a must for long-term development. In the short term, given that the hukou system 
cannot disappear at once, some transitory measures could be taken. One policy suggestion is 
that social welfare, including the education system, should be separated from the hukou 
system. Park (2008, p. 60) proposes it be “hukou blind”. The advantage would be to give 
everyone equal rights, whatever their standing in terms of hukou. For example, in terms of 
the college entrance exam system, children should be allowed to take entrance exams in 
whatever residential place they have attended high school. Simultaneously, there is a need to 
reconsider the current public finance system in which the budget allocation for education is 
based on local governments. Local governments basically take into consideration the local 
hukou population for the education system, and exclude those non-local hukou groups. 
One natural outcome of a more relaxed policy would be higher inter-regional 
population mobility. It would also lead more migrants to settle permanently in urban 
destinations, and more migrant children to be enrolled in urban schools. One further concern 
that arises is whether children would be better off in the destination areas. For example, in 
the international migration case, Dustmann (2003) argues that the future of a female child 
would be better in the home country. Concerning China, there is a tendency for inhospitality 
by urban residents towards migrants and their children. For example, rural migrants are being 
increasingly discriminated against by the urban population and migrants’ children are looked 
down upon by local children (Garcia, 2004). Woronov (2009) reveals that prejudice is 
prevalent among urban residents, and thus a psychological obstacle is set up between urban 
residents and migrants. Further upward mobility is especially difficult for poorer and less 
educated rural migrants who find it hard to enter the primary urban labor market (Garcia, 
2004). The situation can be even worse in largest cities where the extremely high prices of 
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housing stop migrants earning relatively lower salaries from even dreaming of reaching a level 
of living equivalent to urban residents. 
Another concern is that while policy reforms can relax the institutional constraint, the 
economic constraint may be even more prominent. This means migrants may still have to 
leave their family at home because of high urban living costs and their relatively low earnings 
as compared to urban residents. For example, Démurger et al. (2009) show that urban 
residents earned 1.3 times as much as rural migrants in 2002. Research also finds that, despite 
a smaller living space, rural migrants pay a much higher price for housing than do permanent 
residents (Jiang, 2006). 
A complementary way to solve the “left-behind” children problem is to encourage 
return migration. Though not initially an emphasis, this dissertation has found that return 
migration depends significantly on the economic development of the sending region. A bad 
situation pushes people to leave; whereas a sound environment pulls migrants back and even 
keeps potential out-flow from occurring. As a result, a development policy could focus on 
improving the economic situation in the sending regions in order to attract return migration. 
The rationale is that as more economic opportunities are created, local people would no 
longer need to depend on migration as a way of making a living. Staying at home rather than 
migrating could thus accomplish both economic success and family unification. 
This is a long-lasting development project in which the central government plays an 
important role. Due to large regional economic disparities, the policy orientation should focus 
on resource allocation and redistribution to less developed areas. For example, providing 
more education resources to less developed areas would have long-term benefits. The lack of 
education is a leading contributor to rural poverty (Park, 2008, p. 60). Even in the urban labor 
market, Démurger et al. (2009) find that pre-market differences (especially lower education 
attainment in rural areas) rather than on-market discrimination explain earnings differences 
between migrants and urban residents. Policy makers may also consider providing supportive 
investment policies and favorable investment conditions in less developed areas, so that more 
and more enterprises would be attracted to invest in these areas, and therefore more 
economic opportunities would be created. 
Significantly, return migrants themselves are also an important source of rural 
development to consider. Return migrants can contribute better to local development by 
repatriating their physical and human capital accumulated during migration. The repatriated 
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savings can play an important role in solving capital constraints for various productive 
investments and set up entrepreneurial activities in the context of the imperfect rural credit 
market. They are “renewed” human capital embodied with both a “new” and an “old” part. 
While the “old” part is their origin, the “new” part is what they have integrated during the 
process of migration in the destination areas. If there are also “spill-over” effects from return 
migrants to the local community, then the potential positive impact can be even greater. 
Hence, return migrants can play a key role in the development of less developed areas. 
Such a role highlights the importance of both the possibility of “acquisition” during 
migration and the “transferability” after return. The first indicates the degree of contribution 
that the return migrants can make after return. For urban authorities, it is therefore important 
to create equal learning and working opportunities for migrants in destination areas. As such, 
they can have a better chance to acquire the useful skills and knowledge that they wish to 
acquire. “Transferability” refers to the extent to which the migrant resources can be efficiently 
used for local economic development. When the gap between urban and rural settings is too 
wide, migrants may have difficulty in settling into a position in rural areas where their human 
capital acquired in urban areas can be used efficiently and therefore lack a better return. Again, 
local government could play an essential role here. A long-term development plan may be 
carried out to ensure adequate use of region’s own human resources of return migrants in 
local development. 
One model of development that could be considered is to develop towns or small cities 
around rural areas, McKensy’s “townisation” (2009). It refers to localized urbanization 
gathering rural industries and commercial activities. This is a way to offer more economic 
opportunities for people from nearby villages in a geographic area and to give return migrants 
a platform for skill and knowledge transfer as well as private investment in various industrial 
and commercial activities. 
 
 
 
 
 
 
 
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