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December 18, 2015

Does corruption promote emigration?

Opinion image

Corruption is a driving force of emigration; this is especially true for highly skilled workers, but is present within other groups of workers too. Knowing whether corruption leads to higher emigration rates—and among which groups—is important, because most labor migration is from developing to developed countries. If corruption leads to highly skilled and highly educated workers leaving developing countries, it can result in a shortage of skilled labor in these developing economies and slower economic growth.

My research has found this “brain drain” to be present in many cases. In turn, this leads to a higher unemployment rate within the sending country, lowering the returns to human capital and encouraging further immigration. Furthermore, corruption shifts public spending from health and education to sectors with less transparency in spending, putting the entire population at risk and disadvantaging lower-skilled workers, thus encouraging them to immigrate too.

I examine the relationship between corruption and emigration in my IZA World of Labor article, Does corruption promote emigration? As most studies do not differentiate workers by education and skill level, I find that these studies detect a non-linear relationship in which immigration declines as corruption begins to rise, but then increases once corruption has reached a certain threshold, exhibiting a u-shaped pattern. Conversely, the most recent empirical studies find a reversal of this non-linear relationship between corruption and emigration for low- and medium-skilled workers. In these instances, the emigration rate rises at initial levels of corruption and then declines after corruption has reached a certain threshold, exhibiting an inverted u-shaped pattern.

For highly skilled and highly educated workers, however, recent studies—including mine—find a linear relationship between corruption and emigration. As corruption increases, so does the emigration rate for these particular workers. Because of the many undesirable consequences of corruption, including those to the economy, labor market, and population, governments should work to reduce it. To do so, I offer these three policy recommendations:

(1) The first is to take Switzerland as an example, where corruption is extremely low, mostly because of its strong institutions of direct democracy and fiscal federalism. Both institutions provide participatory budgeting and allow citizens a much greater influence over determining how municipal and cantonal budgets are developed, which in turn leads to greater transparency and lower corruption.

(2) A second way of reducing corruption and to prevent a brain-drain is to create incentives (high salaries, good governance of law, etcetera) for high skilled and highly educated workers. This would encourage more of these skilled workers to stay in their home country, where they can contribute to economic growth and consequently encourage other high-skilled workers from other countries to immigrate to their country.

(3) Corruption can also be reduced by allocating more funds to education to boost the skill levels of low- and medium-skilled workers, which would improve the human capital stock of the country. Lower corruption combined with better education leads to better labor market outcomes as jobs are determined on the basis of merit rather than personal and political connections. As a consequence this will accelerate economic growth, improving the well-being of everybody and further reducing incentives to emigrate.

It is important for policymakers to prioritize reducing corruption in developing nations to prevent large-scale emigration of the high skilled and highly educated members of their labor forces. Empirical research suggests that the policies above have proven successful techniques for reducing corruption and the “brain drain,” and would be good starting points.

Read Friedrich Schneider’s article Does corruption promote emigration? 

Read more of our migration articles.

Please note:
We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.