S.Carret & J.CuiDevelopment Workshop1 EMIGRANTS AND INSTITUTIONS by Xiaoyang Li and John McHale September 2009 Stéphanie Carret & Jinjie Cui (Eric) Faculty of Economic Science University of Warsaw 26th November, 2009

S.Carret & J.CuiDevelopment Workshop2 The Planning for today 1. Review of the paper: main ideas 2. Analysis of illustrative graphs 3. Other views on the subject 4. What questions can we raise?

S.Carret & J.CuiDevelopment Workshop3 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)

S.Carret & J.CuiDevelopment Workshop4 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

S.Carret & J.CuiDevelopment Workshop5 Causal channels for skilled emigrants and institutions

S.Carret & J.CuiDevelopment Workshop6 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

S.Carret & J.CuiDevelopment Workshop7 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)

S.Carret & J.CuiDevelopment Workshop8 Analysis of illustrative graphs (1)

S.Carret & J.CuiDevelopment Workshop9 Analysis of illustrative graphs (2)

S.Carret & J.CuiDevelopment Workshop10 Analysis of illustrative graphs (3)

S.Carret & J.CuiDevelopment Workshop11 Analysis of illustrative graphs (4)

S.Carret & J.CuiDevelopment Workshop12 Analysis of illustrative graphs (5)

S.Carret & J.CuiDevelopment Workshop13 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?

S.Carret & J.CuiDevelopment Workshop14 What questions can we raise Debate 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?

S.Carret & J.CuiDevelopment Workshop15 Source: Paper: “Emigrants and Institutions”, by X.Li and J.McHale, Sept Internet: Scholar Google

S.Carret & J.CuiDevelopment Workshop16 Questions ? Thank you.