Does international migration impact economic institutions at home?

Abstract

This paper investigates and exploits the exogenous variation in the number of a country's migrants abroad driven by regional and global trade integration to estimate the impact of international migration on economic institutions at home. While the significance of the country's geographical orientation in cross-border migration is well-documented, time-invariant geographic variables are eliminated by panel models with fixed-effects. Exploiting the time-varying joint effect of geography and trade on international migration that allows to account for both endogeneity and unobserved heterogeneity, this study finds evidence of adverse impacts of international migration on the home-country's economic institutions, with large negative estimates for the countries that are grappling with weak political institutions. The results are robust to alternative model specifications and estimation methods. In addition, this paper offers no empirical support for the recent claims that the effect of emigration on institutional quality is destination-specific.