S.Carret & J.Cui Development Workshop 1

EMIGRANTS AND INSTITUTIONSby Xiaoyang Li and John McHale

September 2009

Stéphanie Carret&

Jinjie Cui (Eric)

Faculty of Economic ScienceUniversity of Warsaw

26th November, 2009

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The Planning for today

1. Review of the paper: main ideas2. Analysis of illustrative graphs3. Other views on the subject4. What questions can we raise?

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Review of the paper: Dataset

« Impact of skilled emigration on any given measure of institutional quality is clearmy an empirical question given these many channels of influence »

World Bank data on emigrants stocks, used by Docquier and Marfouk in 2005: surveys from all OCDE countries on the level of educational attainment of migrants Emigration stocks data for 195 countries in 2000

Barro-Lee measures of domestic human capital World Bank governance indicator

Data measures 6 dimensions: Voice & accountability, Political Stability (which account for political institutions); Government effectiveness, Regulatory Quality, Rule of law and Control of Corruption (which account for economic institutions)

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Review of the paper: main ideas The main question is to examine through which channels

internationally mobile human capital can influence domestic institutionnal development, through economic & political institutions Essential for the development of the country

The authors make a test in order to see the influence of emigrant human capital, among the domestic human capital They also try to avoid the reverse causal effect by lagging

values during their testing Use of other variables for changing institutions on top of

emigration GDP per capita, trade openness, Catholic & Muslim affiliations,

ethno linguistic separations, country’s grography: used as controls

Strong link between geography and emigration They find out that larger emigrant capital stocks enhance

the quality of political institutions but lower the economic ones

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Causal channels for skilled emigrants and institutions

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Causal channels for skilled emigrants and institutions (2) Absence channels

According to Hirschman, emigration is depriving the « geographical unit that is left behind…of many of its more activitst residents, including potential leaders, reformers or revolutionaries », thus « weakens voice »

Safety valve: release pressure for democratic reform Example of Greece, Portugal and Spain in the 1960’s, and 1970’s

Prospect Channel If there’s a threat of too much «exits », the remaining elites have a

bargaining power; governments can have different reactions East/West Germany in the 1950,s : first, « safety valve » relief,

then the Wall and authoritarian regime imposed Ireland in the 1950’s: increase of rural emigrants => decisive turn

in economic policy: it initiated a series of reform If big prospect for emigration: there is brain gain (investment in

HC) if some people investing end up staying

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Diaspora channel « Loyalty » connection (Hirschmann): links of emigrated national

with the home country Trade, invest, remit, share infoand participate in domestic

politics Those ethnic networks influence the shape of political and economic

evolution and represent a source of economic advantage Role of Czech and Slovak Americans in creation of Czechoslovakia BUT pb of diaspora nationalism in the receiving country (and

amplified violence in home country) Return channel

Source of supply and demand for better institutions Increased productivity & knowledge abroad: transformative

effects Spillovers of Latin America technocrats in their home countries Destabilizing force: energy for change BUT troubles with natives

Causal channels for skilled emigrants and institutions (3)

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Analysis of illustrative graphs (1)

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Analysis of illustrative graphs (2)

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Analysis of illustrative graphs (3)

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Analysis of illustrative graphs (4)

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Analysis of illustrative graphs (5)

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Another view - Brain drain & economic growth: human capital, another condition for growth

« Brain drain and economic growth: theory and evidence », by M.Beine, F.Docquier, H.Rapoport, in Journal of Development Economics, 2001

Focused on the impact of migration prospects on human capital formation and growth in a small, open developing economy 2 growth effects: ex ante « brain effect », ex post « drain effect » Beneficial Brain Drain emerges when the Brain effect dominates

Average level of human capital is higher in an open to migrations economy than a closed one (because increasing human capital is more valued abroad than in the home country: incentive to invest)

Concept related to modern theories of endogenous growth, where the link between education, migration and growth is renewed

Migration prospects play an important role in education decisions Impact of selective immigration policies in the host countries

Which impacts on growth in the source country?

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What questions can we raiseDebate If international labour migration can influence

institutionnal patterns in the home country What about the economic development (the paper says

economic institutions are not as impacted as the political ones)

Let’s talk remittances impact To enlarge the debate quickly talked about in

the paper: what about the influence of institutions on migration? The case of the Philippines: from the 70’s, government

promoted capital mobility of its citizens Can you think of other cases?

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Source:

Paper: “Emigrants and Institutions”, by X.Li and J.McHale, Sept. 2009

Internet:Scholar Google

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Questions

?

Thank you.