International migration has expanded rapidly over the past two decades, outpacing global population growth. A large share of migrants come from rural areas, which also receive about 40% of worldwide remittance inflows. Migration is a complex phenomenon, shaped by economic conditions and compounded by shocks such as extreme weather or conflict. Whatever the motivation, moving abroad can become an important strategy to sustain livelihoods and build resilience—though it often occurs through irregular (undocumented) channels, particularly among households facing food insecurity.
Among the key economic drivers of migration are agricultural distortions (market frictions stemming from inefficient regulations and policy interventions, information gaps that favor insiders, transaction costs, and other market imperfections). These can limit opportunities in rural economies and influence who stays and who leaves.
A recent study by researchers at IFPRI, Universidad de San Andrés (Buenos Aires), and the International Monetary Fund (IMF) develops a quantitative model to examine how agricultural distortions shape migration decisions in developing countries and what the resulting patterns mean for productivity and welfare at home, focusing on Guatemala as a case study. We find that agricultural distortions reduce productivity and increase pressures to migrate, especially among the most productive farmers, suggesting that policies addressing these distortions, including improved infrastructure, better financial access, and stronger institutions, can help limit migration.
Guatemala provides a revealing setting, with various features reflecting agricultural distortions and strong incentives to seek opportunities abroad. Agriculture employs a large share of the labor force (mostly informally) but contributes little to the gross domestic product (GDP). Land markets are highly concentrated and segmented, and weak governance and institutions further constrain productivity. At the same time, cross-border migration, especially from rural areas, has risen steadily in the 21st century (Figure 1), making Guatemala one of the world’s leading recipients of remittances as of 2020 (over $18 billion in 2024). Most migrants head to the United States.
Figure 1
In the modeling exercise, a household member chooses among three options: working in agriculture, working in non-agriculture, or emigrating. Agricultural activities are spread across multiple rural locations, while non-agricultural work is concentrated in urban areas. Rural areas differ in their degree of agricultural distortions, and individuals vary in their agricultural and non-agricultural skills. The model is calibrated using detailed micro- and macro-level data and enriched with diverse subnational information.
Main findings
The model identifies two main channels through which distortions affect migration and productivity. First, higher agricultural distortions reduce the returns to ability in farming, limiting how much the most productive farmers can benefit from their skills and giving them stronger incentives to seek better opportunities elsewhere. As a result, higher distortions change who emigrates: they increase the likelihood that more productive individuals migrate while discouraging less productive ones. This migration channel reduces average productivity at home. Second, distortions directly misallocate labor and land across sectors and regions, lowering overall productivity and household incomes in both agriculture and non-agriculture. This income decline strengthens incentives to migrate from both rural and urban areas: a productivity channel that amplifies emigration pressures.
Quantitatively, the model reproduces the heterogeneity in agricultural distortions observed in the data, showing that the most distorted regions are also the least developed. Counterfactual exercises suggest that reducing distortions to the level of the most efficient department in each region would overall lower the share of Guatemalan emigrants by 2.3 percentage points, mainly among more productive workers (Figure 2). This decline is roughly equivalent to a 35% reduction in the number of Guatemalans currently living in the United States. The same scenario would raise aggregate agricultural productivity by 30% and median household welfare by 4.5%.
Figure 2
A closer look across the income distribution shows that reducing agricultural distortions generates much larger welfare gains for poorer households. The 10th percentile gains more than twice as much as the 90th percentile across all regions (Figure 3). These effects are strongest in the Dry Corridor-Izabal and Western Highlands-Verapaces-Center regions, which are less developed than the Pacifico–Bocacosta region, indicating that lowering distortions delivers the greatest benefits to low-income households in lagging areas.
Figure 3
Key insights
Overall, the study shows that agricultural distortions play a significant role in shaping both local productivity and emigration decisions. Reducing these distortions can directly and indirectly help retain productive workers in rural communities while enhancing agricultural efficiency and household welfare.
An analysis at the subnational level further reveals that regions with higher agricultural distortions tend to be more isolated and have lower financial access and a weaker government presence. These findings underscore the importance of strengthening regional connectivity, easing financial constraints, and expanding the reach of public institutions as effective ways to reduce distortions, improve local well-being, and lessen migration pressures.
Addressing these challenges requires coordinated actions over different time horizons. Long-term investments (such as improving infrastructure and strengthening institutions) demand substantial resources but are essential for lasting change. In the short term, policies that expand financial inclusion, increase market transparency, and support cooperatives and producer associations can more quickly mitigate agricultural distortions. Reviewing existing regulations and market interventions can also help improve resource allocation and efficiency within the sector.
While the study focuses on Guatemala, the lessons apply more broadly across Central America and Mexico, where reducing rural distortions could help boost productivity and curb migration pressures.
Manuel A. Hernandez is a Senior Research Fellow with IFPRI’s Markets, Trade, and Institutions (MTI) Unit; Danilo Trupkin is an Associate Professor of Economics at Universidad de San Andrés; Braulio Britos is an Economist in the Research Department of the International Monetary Fund (IMF). This post is based on research that is not yet peer-reviewed. Opinions are the authors’.
This work was supported the CGIAR Science Programs on Food Frontiers and Security and Scaling for Impact.
Reference:
Britos, Braulio, Hernandez, M. A, Trupkin, D. (2025). Agricultural Distortions and International Migration. IMF Working Paper No. 25/233. https://doi.org/10.5089/9798229026314.001
