Skilled Migration and Remittances: Theoretical and Empirical Analyses

Author

Dambar Uprety Uprety, Southern Illinois University CarbondaleFollow

Date of Award

5-1-2016

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Lahiri, Sajal

Second Advisor

Sylwester, Kevin

Abstract

This dissertation investigates the impact of skilled migrants' remittances and import tariffs of migrant-sending countries on skilled migration. The first chapter builds a model that predicts the positive association between emigration of skilled individuals and the proportion of remittances from them by considering heterogeneity of workers in skills. There are inter--industry and migration thresholds of skill in migrant sending countries. Both of these skill thresholds lower with remittances from skilled migrants. This is because of the rising wage gap effects. Remittance outflows from developed countries depress the demand for differentiated goods which in turn lowers the demand for workers in this sector. This leads to lowering the demand for skilled workers and thus wages of the marginal workers increases. Just opposite happens in migrant-sending countries and so wage gap increases, which pulls skilled workers from developing countries and therefore, emigration of such workers increases. The second chapter builds a model that predicts the complementarity between skilled migration and import tariffs levied by migrant sending countries. Migration skill threshold increases with the increase in tariffs thereby reducing skilled migration. However, the inter-industry skill threshold moves left with the rise in tariffs causing to expand differentiated sector in the developing country. On the contrary, the differentiated sector in the developed country shrinks. Expansion of differentiated sector in the migrant sending country and shrinking of such sector in the migrant-receiving country lowers the skilled migration from the developing to the developed country. The third chapter empirically tests the validity of the prediction of the first chapter. Using a panel data of 133 developing countries as migrant source countries and seven five-year windows between 1980 and 2010, we find that inflows of remittances are positively associated with subsequent stocks of highly educated migrants living in OECD countries. We find little association between remittance inflows and subsequent changes in stocks of less educated migrants.