Does corruption promote emigration?

How corruption reduces a country’s attractiveness

Various push and pull factors related to demographic change, globalization, political conflict, institutions, and climate change have increased migration pressures both within and across borders. Pull factors for labor migration include the attraction of higher wages, better living conditions, and networks in destination countries. Among the push factors are poverty, unemployment, inequality, and corruption [1], [4].

Corruption is a result of poor public institutions. A study investigating the connection between political institutions and corruption during 1984–1999 for countries in Latin America and Eastern Europe finds that parliamentary systems, higher levels of democracy, political stability, and freedom of the press are all associated with lower levels of corruption [5]. Furthermore, one study exploring the relationships among institutional quality, the shadow economy, and corruption finds that for 98 developed and developing countries across the world during 1999–2002, an improvement in institutional quality reduces the size of the shadow economy directly and lowers corruption both directly and indirectly [6].

A study examining the effect of corruption on growth under different political regimes during 1960–2000 in African, Latin American, and Scandinavian countries finds that low levels of corruption can promote economic growth while high levels of corruption can slow economic growth [7]. Hence, there seems to be a (low) level of corruption that maximizes growth—“a growth-maximizing level of corruption.” However, the type of political regime is found to be important for the relationship between corruption and growth. There is a nonlinear relationship between corruption and growth in countries that are politically free (this means that—at least at low levels of corruption—an increase in corruption does not necessarily result in a decrease in growth), as opposed to those that are not politically free (here corruption might have no effect at all). A growth-maximizing (low) level of corruption is observed for countries that are politically free. But in African and Latin American countries with well-developed institutions, corruption has a clear and significant negative impact on growth, while in countries with poor institutions corruption has no effect on growth [8]. In the latter case, corruption might substitute for missing institutions and hence have no effect on growth. Another study finds that for 54 developed and developing countries during 1994–1997 the adverse effects of corruption are lower in countries with less well developed institutions [9]. In these countries, corruption might not be the most important factor in determining attractiveness, as developing better institutions should be higher up on the policy agenda.

Besides growth, corruption also affects other variables that determine a country’s attractiveness. Corruption can increase emigration by directly harming workers. It also has indirect effects on emigration that operate through multiple channels. For example, corruption means that jobs are distributed as a result of political connections rather than merit. This favoritism reduces the returns to human capital investment and increases the rate of unemployment, lowering the returns to human capital, making it less attractive for workers to stay in a country. By lowering the returns to education, corruption can slow growth and become a push factor for emigration [2].

Corruption has also been found to change the size and composition of public expenditures, shifting them away from vital sectors such as health and education [10], toward sectors that involve greater secrecy and less transparency, such as defense. Corruption can also negatively affect the provision of health and education services, by increasing the cost and lowering the quality of these services [11].

Thus, corruption can lower the stock of human capital and reduce the returns to education by slowing growth, generating unemployment and underemployment, increasing inequality, and reducing welfare [2]. In general, it can be said that corrupt countries provide their citizens with poorer working and living conditions, creating incentives for people, especially well-educated workers, to migrate to less corrupt countries [1].

Corruption and the emigration of highly-skilled workers

The literature investigating the direct influence of corruption on emigration is sparse. One study for 111 countries during 1985–2000 examines the influence of corruption on emigration by dividing migrants into two groups, skilled migrants and average migrants. It finds that corruption acts as a push factor for emigration, particularly for skilled migrants, by eroding the quality of people’s working and living conditions and lowering the returns to education [2]. Because highly-educated workers demand higher pay for higher skills (skill premiums), corruption has three to four times the effect on skilled migrants as on average migrants.

Additionally, if the inequality generated by corruption leads to an increase in progressive tax rates, this could act as a disincentive for those with higher educational qualifications [2]. Also, if jobs are granted on the basis of political connections rather than merit, those with higher levels of educational attainment will lose motivation for work and may decide to emigrate to countries that are less corrupt [1].

Another study that investigates how corruption affects the inflows and outflows of migrants for a group of eight highly developed countries during 1990–2000 shows that corruption is detrimental for both migrant inflows and outflows [12]. The relationship between corruption and net migration is illustrated in Figure 1 and Figure 2 which compare corruption (as measured by the International Country Risk Guide index) with net migration flows for a selection of major economies. The figures show that corruption leads to the emigration of highly-skilled nationals and reduces the immigration of high-skilled foreign workers, thus leading to a net shortage of high-skilled workers. Moreover, the findings indicate that the negative net migration flow in corrupt countries is driven mainly by the negative effect of corruption on immigration and not by the increase in the emigration rate of high-skilled workers.

This consequence of corruption has adverse effects in the long term, as it leads to a continuous decline in a country’s human capital stock, which in turn leads to lower productivity and economic growth and a general deterioration in economic conditions.

Corruption and the emigration of low- and medium-skilled workers

Some of the latest studies build on the earlier literature by arguing that corruption affects not only the migration decisions of highly-skilled and highly-educated workers but also the decisions of those with low and medium skills and education. Higher levels of unemployment and inequality generated by corruption can induce those with low and medium skills and education to emigrate. In addition, low-skilled, low-income workers may end up paying a larger share of their income as bribes, a discouragement to remaining in a country where corruption is high.

Similarly, corrupt governments tend to spend less on the provision of essential services such as education and health that benefit low-income groups most. Therefore, deteriorating living conditions could also increase emigration rates among workers with medium and low levels of skills and education [3].

Empirical evidence for a relationship between corruption and migration by low- and medium-skilled workers is mixed, however. Whereas most studies find a strong positive effect of corruption on migration by high-skilled workers, the effect on average migration is much weaker and not robust, i.e. it depends on the specification, the methods, and/or the data used, for instance [2]. There is some recent evidence, however, that corruption also influences the decision to emigrate of workers with lower skills and education [1].

Accordingly, higher levels of corruption in a country raise the emigration rates of the low- and medium-skilled labor force, at least until a certain level of corruption is reached, after which the effect is reversed (discussed in more detail in the following section). However, this initially positive relationship between corruption and low- and medium-skilled migration vanishes or becomes negative if inequality in a country is high. This suggests that corruption in more unequal countries may prevent less-skilled and lower-paid workers from emigrating to richer and less corrupt countries with better employment perspectives and living conditions [1].

This causes additional disadvantages to the home country as low- and medium-skilled migrants contribute positively to GDP growth in the home country, helping reduce poverty and income inequality by sending back (remitting) part of their income to family members in the home country. The better educated a migrant is, the lower are the remittances, and thus the home country would benefit more from low- and medium-skilled migrants than from highly-educated migrants [4].

Nonlinear relationship between corruption and emigration

Other factors determining emigration

Besides corruption, many other factors influence emigration decisions and are briefly mentioned here. A country’s level of development as measured by per capita income has a significant effect on the emigration rates of all three skill and education groups. A higher per capita income reduces the incentive to emigrate of workers with high levels of education, while it increases the incentive of those with low and medium levels of education by increasing their ability to finance their emigration [1].

A study that did not differentiate workers by educational attainment finds that the relationship between per capita income and emigration is nonlinear, with rising emigration as income rises from low levels and falling emigration after a certain level of income is reached [13]. Also, when the government devotes a larger share of GDP to education, emigration rates fall for people with low and medium levels of education, likely because these groups stand to gain the most from the government provision of these services. Finally, higher quality institutions act as a deterrent to the emigration of high- and medium-skilled workers [1].