The Impacts of Economic Freedom and Institutional Quality on Migration from African Countries

• Author: Tadesse Soka Gignarta,Dinkneh Gebre Borojo,ZhenZhong Guan
• DOI: http://doi.org/10.1111/saje.12254
• Published date: 01 September 2020
• Date: 01 September 2020

South African Journal of Economics Vol. 88:3 September 2020

doi: 10.1111/saje.12254

242

© 2020 Economic Society of South Africa

THE IMPACTS OF ECONOMIC FREEDOM AND

INSTITUTIONAL QUALITY ON MIGRATION FROM

AFRICAN COUNTRIES

TADESSE SOKA GIGNARTA†,* , ZHENZHONG GUAN† AND DINKNEH GEBRE BOROJO†

Abstract

The previous empirical literature suggests that socio-economic conditions and demographic

pressures are triggering factors of migration from Africa. We propose that economic freedom

and institutional quality indicators of African countries are also important determinants of out-

migration from Africa. Hence, we investigate the effect of economic freedom and institutional

quality on migration flow from 44 African countries to major migration destination countries.

Aggregate indicators are derived for the quality of institutions and economic freedom using

principal component analysis. Controlling for source and destination countries' income levels,

population size, cultural, historical and physical distance, our findings provide evidence that

migration flow from Africa is significantly determined by the institutional quality and economic

freedom indicators in African countries. Our results are strongly robust to different econometric

techniques used to control for sample selection bias, zero-valued observations and endogeneity

concern. Hence, improving institutional quality and maintaining economic freedom in African

countries matters significantly to control out-migration from Africa.

JEL Classification: J6, J69

Keywords: Migration flow, institutional quality, economic freedom, gravity model, Africa

1. INTRODUCTION

International migration from African countries has been growing dramatically in re-

cent years (Naude, 2010). More specifically, compared to other regions of the world,

migration from African countries to OECD member countries has received extensive

attention. Furthermore, there are also beliefs that migration from African countries to

OECD member European countries will accelerate, as sub-Saharan Africa has probably

a higher potential for immigration into the European countries than any other region

of the World (Kohnert, 2007). As a result, Africa is often seen as a continent of mass

displacement and migration, losing skilled manpower that can be a development engine

to the continent (Flahaux and de Haas, 2016). For example, over the past three decades,

about 33% of the African academic workforce migrated to developed countries (Kohnert,

2007). The migration of skilled manpower (the brain drain) from Sub-Saharan Africa is

* Corresponding author: Tadesse Soka Gignarta, School of Economics and Management,

Southwest Jiaotong University, No.111, Section 1, North Erthuan Road, 610031, Chengdu,

China. E-mail: tade.soka@yahoo.com

† School of Economics and Management, Southwest Jiaotong University

South African Journal

of Economics

243South African Journal of Economics Vol. 88:3 September 2020

© 2020 Economic Society of South Africa

also higher than in most other regions of the world (Lucas, 2006). In addition, unskilled

migration from African countries is considerable.

According to the existing literature, out-migration from Africa can be reflected by dif-

ferent socio-economic and demographic factors. Some literature such as Naude (2010)

and Lucas (2006) disclose that international migration from African countries is caused

by a lack of job opportunities, extreme poverty, political instability and violent conflict.

However, some other empirical studies argue that armed conflict and extreme poverty

may not be the major cause of international migration from Africa because about 86%

of international migration within Africa is not primarily related to conflict (Flahaux and

de Haas, 2016). Furthermore, some scholars discuss that migration from Africa can be

determined by social processes that drive mobility, such as family union, better work or

study (Bakewell & Jόnsson, 2011; Bakewell & Bonfiglio, 2013).

On top of socio-economic and demographic factors, we propose that institutional

quality and economic freedom can also determine migration flow from African countries.

Studies by Bertocchi and Strozzi (2008) and Bergh et al. (2015) show that migration

decisions are made over a long horizon. These studies disclose individuals’ to migrate and

not to migrate depends more on expectations about their future income than on current

income. That is, their migration decision depends on their potential economic gains in

the future. If their future economic gain increases, the opportunity cost of migration

increases, discouraging out-migration. In turn, institutional quality is a prerequisite for

faster economic growth and countries’ future development that maintain improvement

in future economic gain for individuals. Hence, institutions can affect the migration

decision of individuals (Bergh et al., 2015). In addition, economic freedom promotes

economic security and economic opportunities that result in the ability of countries to

convert individual talent into the economic success that will reduce the people’s desire

to migrate (Meierrieks and Renner, 2017). That is, in countries where governments have

actively discouraged market participants by fostering a hostile business environment and

imposing high taxes and burdensome regulation, potential entrepreneurs will be discour-

aged that might trigger out-migration.

Institutional quality and economic freedom and migration nexus of African countries

is an under-researched area. We argue that institutional quality and economic freedom

of African countries are essential determinants of migration from Africa on the top of

other socio-economic and demographic fundamentals. Therefore, the primary aim of

this paper is to empirically examine the effect of institutional quality and economic free-

dom of African countries on migration flow from African countries to OECD member

countries. We are interested in institutional quality and economic freedom indicators of

African countries. Hence, we control for the Worldwide Governance Indicators (WGI)

such as the rule of law, government effectiveness, absence of violence and instability,

regulatory quality and control of corruption in migrants’ origin countries to our model

as a proxy for institutional quality. Furthermore, we include economic freedom index

indicators (regulatory efficiency, government size, the rule of law and open market) as

indicators of economic freedom of African countries. Our results disclose that migration

flow from African countries is significantly determined by the institutional quality and

economic freedom indicators in African countries.