International emigration and economic complexity: Evidence from the dynamic GMM panel VAR approach

Abstract

For over a decade, developing nations have used foreign direct investment and trade to access advanced economies’ technology and knowledge. However, the role of emigrants in promoting the productive capacity of their home countries through the diffusion of knowledge and novel technologies has been relatively overlooked. The present study investigated the relationship between emigration stock and productive knowledge embedded in their origin economy, as measured by the Economic Complexity Index (ECI). The study applied a GMM Panel Vector Autoregressive (PVAR) technique to 86 non-high-income countries between 1995 and 2020. In principle, the PVAR model findings indicated that international emigrants promoted the level of technology and knowledge in their home countries. Further causality analyses revealed that within all countries, there was unidirectional causality from emigration to the ECI. However, a bidirectional relationship existed between the two variables in countries with low education levels. Developing countries should consider the opportunities emigrants offer when planning their development strategies.