Return Migration, Self‐selection and Entrepreneurship
| Date | 01 October 2017 |
| Author | Pedro C. Vicente,Tara McIndoe‐Calder,Catia Batista |
| DOI | http://doi.org/10.1111/obes.12176 |
| Published date | 01 October 2017 |
797
©2017 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd.
OXFORD BULLETIN OF ECONOMICSAND STATISTICS, 79, 5 (2017) 0305–9049
doi: 10.1111/obes.12176
Return Migration, Self-selection and
Entrepreneurship*
Catia Batista,†Tara McIndoe-Calder,‡ and Pedro C. Vicente§
†Nova School of Business and Economics, Universidade Nova de Lisboa, CReAM, IZA and
NOVAFRICA, (e-mail: catia.batista@novasbe.pt)
‡Central Bank of Ireland, (e-mail: tara.mcindoecalder@centralbank.ie)
§Nova School of Business and Economics, Universidade Nova de Lisboa, BREAD,
CSAE-University of Oxford, and NOVAFRICA, (e-mail: pedro.vicente@novasbe.pt)
Abstract
Are return migrants more entrepreneurial? Existing literature has not addressed how esti-
mating the impact of return migration on entrepreneurship is affected by double unobserv-
able migrant self-selection, both at the initial outward migration and at the final inward
return migration stages. This paper exploits exogenous variation provided by the civil war
and the incidence of agricultural plagues in Mozambique, as well as social unrest and other
shocks in migrant destination countries. The results lend support to overall negative unob-
servable return migrant self-selection, which results in an under-estimation of the effects
of return migration on entrepreneurial outcomes when using a ‘na¨
ive’ estimator that does
not control for self-selection at both the initial migration and at the final return migration
stages.
I. Introduction
International emigration has been traditionally regarded as detrimental to the origin coun-
tries of migrants. Most concerns relate to the type of ‘brain drain’ issues originallyproposed
by Gruber and Scott (1966) and Bhagwati and Hamada (1974), and refer to the loss of the
most educated nationals of a country, which causes the disappearance of a critical mass in
production, research, public services (notably health and education) and political institu-
JEL Classification numbers: F22, L26, O15.
*Wethank the editor, James Fenske, and two anonymous referees for helpful suggestions that improved the paper.
We also thank Randy Akee, Ron Davies, Elaine Liu, David McKenzie, Cormac O’Grada, Monica Parra, Matloob
Piracha, Panu Poutvaara,Jackie Wahba, Karl Whelan, and other participants in seminars and conferences at the 2010
MIT NEUDC Meetings; 2011 NORFACE/CReAM Conference on International Migration; 2011 Oxford CSAE
Conference; 2011 Mexico City World Bank/IZA Conference on Employment and Development; Nova University
of Lisbon, Trinity College Dublin and University College Dublin for useful comments. We thank Julia Seither for
providing us with data and comments on agricultural shocks in Mozambique. We wish to acknowledge financial
support from the DfID – Department for International Development (UK), in the context of the International Growth
Centre, from the Department of Economics and IIIS at Trinity College Dublin, and from Nova Forum at Nova
University of Lisbon. IRB approvalfor the fieldwork on which this paper is based was provided by the University of
Oxford.
798 Bulletin
tions. This negative effect would be compounded by the presence of positive production
externalities or complementarities between human capital and other factors of production.
In addition, fiscal losses would occur in the form of foregone tax revenue when educated
nationals leave the country.
The effects of international migration on the economic development of migrant sender
countries have, however, lately attracted renewed and considerable interest. In fact, recent
studies have emphasized that emigration seems to havea positive impact on the educational
attainment of both migrants and non-migrants, as well as on the demand for improved
political institutions and on community engagement in the home country, as well as on
international trade and FDI between the origin and destination countries of migrants.1
It can be argued that an additional channel through which migration may directlybenefit
home countries is through the return of migrants, who can bring new productive skills
(such as education or managerial capacity) acquired abroad, as well as financial resources
provided by past remittances and accumulated savings.
While there are currently no systematic data on worldwide return migration, recent
literature has focused on the international movements of students - the growing ‘brain
circulation’ phenomenon.2UNESCO (2011) numbers show that the stock of foreign ter-
tiary students in countries for which data are available was greater than 3 million in 2009,
which doubles the corresponding number in 1999. Rosenzweig (2007) moreover argues
that the proportion of foreign students who remain in the United States as permanent immi-
grants is only around 20% for the average sending country, which leaves a large room for
‘brain circulation’, i.e. the return of educated migrants to their origin country.In a different
line of research, Gibson and McKenzie (2014) study New Zealand’s Recognized Seasonal
Employer program, a temporary migration programme that targets mainly unskilled work-
ers. They accordingly find that migrants who return home tend to acquire human capital
while abroad.
Despite the recent intensified interest regarding both the development impact of inter-
national migration for migrant countries of origin, and the temporary nature of some inter-
national migratory movements, there has only been limited research on the entrepreneurial
effects of return migration – a literature discussed towards the end of this section. Most
importantly, the existing literature evaluating the entrepreneurial impact of return migra-
tion has not taken into account the role of unobservable migrant self-selection, both at the
initial migration and at the return migration stages, which this paper shows to be a serious
impediment to a causal estimation of this impact.3
1See, for instance, Batista et al. (2012), Batista and Vicente(2011), Batista et al. (2016), Beine et al. (2008, 2011),
Docquier et al. (2016), Gallego and Mendola (2013), Kugler and Rapoport (2007) and Javorcik et al. (2011).
2Rosenzweig (2007) and Nyarko (2011) focus on the magnitude and effects of “brain circulation” fromAsia and
Ghana, respectively.
3Migrant self-selection on observable characteristics, notably education, has been a central topic of research since
Borjas (1987) seminal work, notably followed by Borjas and Bratsberg (1996) for return migration and Chiquiar
and Hanson (2002) emphasizing the importance of migration costs. More recent work has focused on migrant self-
selection based on unobservable characteristics of migrants. See, for instance, Coulon and Piracha (2005), Batista
(2008), Akee (2010) and Bertoli et al. (2013) using instrumental variable techniques, and McKenzie et al. (2010),
using quasi-experimental evidence. Note, however, that all these articles control for self-selection, using income data
only.An exception is the work by Fairlie and Woodruff (2007, 2010) that examine in detail patterns of observable
self-selection of Mexican migrants and their self-employment decisions.
©2017 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd
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