Article

The Diaspora and economic development in Africa

Authors:
  • Formerly African Development Bank Group, Abidjan
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Abstract

While the dominant collective belief asserts that brain drain is detrimental to the development of small economies, new studies hold the reverse view. This paper aims at studying the role of the Diaspora in the economic development of low-income countries with particular focus on African countries. It analyzes both the overall effect and the specific effect of emigration according to the level of education of emigrants. While the empirical results for all developing countries fail to establish an unambiguous relationship between the Diaspora and economic development, those concerning African countries establish a clear and unambiguous relationship. The African Diaspora, especially the high-skilled Diaspora, contributes positively, significantly and robustly to the improvement of income in Africa. These findings challenge the dominant collective belief. Improvements in human capital, total factor productivity and democracy are effective transmission channels of this impact. In addition, while high-skilled emigrants have an overall greater impact on economic development and democracy, those with a low level of education contribute more to remittances to Africa.

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... The extant literature on intra-African migration as well as migration from Africa to destinations outside the continent has focused predominantly on the receipt of mostly cash remittances. This has served as the litmus test for whether migration has potential developmental implications at diverse spatial levels -micro level on individuals and families left behind, meso level on migrant origin communities, and macro level on national economies (Gnimassoun and Anyanwu, 2019;McAuliffe and Triandafyllidou, 2021). While narratives on the micro-and meso-level effects might be relatively evident, macro-level claims are more spurious because of the many confounding factors that ultimately determine national development. ...
... As a percentage of gross domestic product (GDP), Somalia, South Sudan, Lesotho, the Gambia, and Cabo Verde have the highest dependency on remittance income. While the physical absence of migrants from the country of origin could be argued to amount to a loss of positive externalities (Gnimassoun and Anyanwu, 2019), there is a narrative on an incentive effect, which occurs ex-ante of emigration itself. This narrative suggests that families are motivated to invest in the education of their children in the hope of future emigration. ...
... These have included corruption and swindling of state resources, incompetent leadership, connivance with foreign agents to loot state resources, and gross abuse of human rights. This notwithstanding, using the gravity-based Two-Stage Least Squares (2SLS) estimation strategy, Gnimassoun and Anyanwu (2019) examined the impact of the African diaspora on democracy in Africa. They examined variables such as political rights by examining the functioning of institutions through electoral processes, political pluralism and participation, and functioning of government. ...
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Globally, narratives about the nexus between migration and development have gained prominence among academics, policymakers, development practitioners, as well as social partners. However, the historical and contextual factors that have shaped the patterns of migration flows within and from the African continent have been poorly conceptualized and theorized. The components of migration that have the propensity to lead to self-improvement and development such as the sending of cash, social, and political remittances; skills and knowledge transfers; and diaspora-origin country engagements, need to be examined as a composite in order to fully appreciate the developmental potential of migration within the African context. Using thematic and content analysis of relevant extant literature, we examine the contextual factors that characterize the nexus between migration and self-improvement/development in Africa. Our analyses are situated within an Africa-centered conceptualization of development and migration. We argue that the development impacts of migration vary across different regions in Africa depending on the contextual factors that shape such migrations. Migration spurs self-improvement and development just as self-improvement and development facilitate migration.
... Several studies have demonstrated how Diaspora communities contribute to the development of their home countriesparticularly by building physical capital and productivity and ultimately boosting employment, living standards, and economic growth in their countries of origin (Mitra 2016). For example, Gnimassoun and Anyanwu (2019) found that Africa's African Diaspora significantly and robustly improves real per capita income. Espinosa (2016) presents Diaspora philanthropy as the new development aid. ...
... Thus, Diaspora giving must be enabled and controlled by mechanisms, structures, policies, and rules established by national and subnational authorities (Sidel 2021). Studies and experiences from countries such as China, the Philippines, South Korea, Israel, India and Mexico have exposed the importance of having structures that allow the deployment of remittances to national development (Babis et al. 2021;Gnimassoun and Anyanwu 2019;Shaul Bar Nissim 2019;Singh and Koiri 2018). In Nigeria, Alechenu (2021) stresses that the Central Bank of Nigeria has established a well-functional mechanism and incentives that augment the free flow of remittances to the country. ...
Chapter
In this chapter, the authors explore the trends, challenges and opportunities presented by Diaspora philanthropy in rural infrastructure development. It is noted that Diaspora contributions through remittances have become a source of development for several countries. Despite research showing that Diaspora philanthropy fosters social change and drives development in countries of origin, the authors point out that few studies have examined the relationship between Diaspora philanthropy and rural infrastructure development (such as in Zimbabwe). The chapter contributes to the growing literature on Diaspora pilanthropy using Zimbabwe as a reference country. A purely qualitative approach has been adopted, employing document analysis and literature review as techniques for data collection. The findings highlight the trend in which there has been an increase in infrastructure projects supported by Diaspora philanthropy since 2015. In addition, it was found that Diaspora philanthropy can provide tremendous opportunities for developing rural infrastructure, despite the high cost of remittances, legal and policy gaps and government mistrust. Developing countries such as Zimbabwe, where Diaspora remittances are critical to economic growth, benefit from Diaspora philanthropy supporting rural infrastructure development. Finally, it is recommended that Zimbabwe accelerates efforts to revise its Diaspora policy, enact legislation that allows citizens abroad to support rural infrastructure projects, and reduce remittance costs.
... Such nuances have considerable importance for human and social capital, for both individuals and firms, and complicate the interpretation of common IB constructs such as cultural and psychic distance. 13 Empirical studies provide evidence that the diaspora is beneficial to the economic development of African countries (Gnimassoun & Anyanwu, 2019). Remittances (some US $45 billion in 2021, according to World Bank data) are the most tangible manifestation of this impact. ...
... However, the diaspora's contributions extend well beyond remittances, ranging from increased trade and FDI links, better access to foreign capital markets, and substantial infusion of human capital, skills, and technology (Clemens, 2011). Africa's diaspora has been instrumental in the dissemination of social and institutional norms conducive to development and has had important ramifications for local cultures and social dynamics (Gnimassoun & Anyanwu, 2019). Just as the African Union officially encourages the participation of the diaspora in African economies, individual African governments actively factor the diaspora into their domestic development programs (Lituchy, 2019;Plaza & Ratha, 2011). ...
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Unlabelled: Africa is rising, but IB scholars have largely failed to take notice. We argue that this is a missed opportunity. Not only is Africa a dynamic and distinctive region, but its rise presents a number of puzzles for international business (IB) research, with phenomena that seem to challenge fundamental assumptions underlying IB theories. In order to unravel these puzzles and better explain business dynamics on the continent, we contend that there is a need for IB theorizing to place greater emphasis on the role of people, to balance IB's traditional emphasis on institutions, location-specific assets, and other macro-level attributes. We explore how this conceptual shift presents new avenues for inquiry into issues that are of importance for IB but have received limited attention to date. Such issues include entrepreneurial human capital, social networks, institutional co-evolution, and the informal economy. As such, we argue that, while extant theories in IB inform explanations and predictions regarding business activity across the continent, Africa's diverse and distinctive characteristics offer the potential to serve as a context for testing and developing generalizable, cutting-edge IB theory. Supplementary information: The online version contains supplementary material available at 10.1057/s41267-022-00581-z.
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... Cette réallocation des travailleurs des activités traditionnelles en faveur de nouvelles activités les plus productives, qualifiée de transformation structurelle peut profiter des effets de l ' émigration afin de soutenir le développement économique durable. Pour corroborer l ' importance des flux migratoires au développement des pays de départ, Okey (2019) a révélé l ' influence positive de l ' émigration sur le développement industriel en Afrique et Gnimassoun et Anyanwu (2019) ont montré que l ' émigration contribue au développement économique en Afrique. ...
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... L'option diaspora peut être considérée comme une « industrie de la croissance » (Klijn, 2008) dans la mesure où elle attribue aux diasporas une diversité de potentiels sur les plans économique et financier (Awang, 2013 ;Gnimassoun & Anyanwu, 2019), politique (Böcü & Baser, 2022 ;Koslowski, 2004), humanitaire et social (Brinkerhoff, 2004 ;Lubkemann, 2008), culturel et civique (Sørensen, 2007) ainsi que technique, technologique et industriel (Kuznetsov, 2010 ;Wescott & Brinkerhoff, 2006). Depuis le début des années 2000, de nombreux pays en développement, notamment les pays africains, mettent en place des politiques visant à capter les ressources et à attirer les investissements de leurs diasporas. ...
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... Second, as mentoring can help to integrate migrants into host countries' labor markets, this in turn can have international impacts on home countries (McKenzie and Yang 2015). Indeed, temporary as well as permanent migration impacts the development of home countries, through raised income and reduced poverty, that come notably through remittances (Cantore and Calì 2015; Gnimassoun and Anyanwu 2019). ...
... Entrepreneurs are notable contributing diaspora group to the positive economic development in Africa (Gnimassoun & Anyanwu, 2019). According to Newland and Tanaka (2011), emigrants and their descendants are uniquely positioned to identify investment opportunities from their countries of origin and to exploit them by taking advantage of their ties in two systems. ...
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Despite the broad studies by researchers on Diasporan’s diverse support to the continent of Africa, little is known about the perspective and contributions of Diasporan Entrepreneurs. Overall, available findings tend to suggest that diasporan support to Africa mainly comes through financial, cultural, intellectual, social, and political capital. This qualitative multiple case study explores the perspective of 10 successful NYC-based Nigerian American owners about management skills and practices required to overcome transnational barriers and succeed with startup small business initiatives. Interview data were collected through semi-structured interviews, while David McClelland’s Need for achievement theory underpinned the study and served as a theoretical reference. The 4 key findings emerging from the thematic analysis of interviews data included: (a) Resilience/genuine commitment, (b) Financial/Resources management, (c) Human capital/business knowledge, and (d) Organization/Creative Problem-solving skills. Findings may contribute to positive social change as diaspora owners may use the knowledge for improving business skills, and success, which could lead to the creation of jobs and improvement in the standard of living. The Findings may also positively impact relatives, and local communities in Nigeria, as the diaspora flow of investments and remittances may increase. The result may also contribute to improving small business management skills in Africa.
... Adopting the model of economic development by Gnimassoun and Anyanwu (2014) and applying the technique of Bare, et al. (2022) in incorporating the interaction between debt and investment in the economic development model for the Nigerian economy, the study employs a time series analysis of the relationship between debt and economic development spanning 1981 to 2020. The explanatory variable of interest (Debt) is decomposed into domestic debt and external debt to show their relative effects via investments on economic development. ...
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This study examines the direct and indirect links of debt-economic development nexus against the backdrop of the worrisome growing dimensions of both domestic and foreign debt of Nigeria's economy. Employing Fully Modified Ordinary Least squares technique which is proven to be robust for endogeneity and heterogeneity concerns in regression and utilizing time series data spanning 1980 to 2021 in Nigeria, the study found; (1) the links between debt and economic development in Nigeria are both direct and indirect (2) exploring the direct linkage, both components of total debt (domestic and foreign) negatively influences economic development in Nigeria (3) domestic investment mediates debt-economic development relations in Nigeria in different ways depending on the sources of the debt. Increasing domestic debt positively influences economic development via enhancement of domestic investment while increasing foreign debt negatively affect economic development via the reduction in domestic investment in Nigeria (4) population growth also undermines the positive effect of domestic investment on economic development in Nigeria. From the results, the continuous fiscal deficit financing which has been mostly from foreign debt accumulation to consummate recurrent expenditure continues to undermine the attempt by Nigeria to meeting the sustainable development goals. Therefore, prudence in the management of debt and the efficient allocation of debt to capital expenditures, productive and vulnerable sectors of the economy would be needed to reap the gains of debt on economic development in Nigeria.
... Since the early 2000s, an increasing number of African governments have developed public policies aimed at capturing resources and attracting investments from their diaspora (Chacko & Gebre, 2012;Mohamoud, 2010;Ratha et al., 2011). Countries that have experienced economic and technological growth in recent years have made the diaspora option a strategic priority, thereby positively impacting real per capita income, human capital, total factor productivity, and democracy, especially in Africa (Awang, 2013;Brinkerhoff, 2012;Gnimassoun & Anyanwu, 2019;Patterson, 2006;Sørensen, 2007). According to the World Bank, officially recorded remittances to sub-Saharan Africa were worth 49 billion USD in 2021 (World Bank & KNOMAD, 2022). ...
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... It is argued in the literature that economic performance increases the stock of human capital investment, which in turn increases labour productivity and wages via rise in youth employment (Anyanwu, 1998(Anyanwu, , 2005. The dynamic panel model of equation 2 can be explicitly expanded in the following format: ...
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Labour engagement, underutilization and unemployment has dominated discourse in development literature in developing economies. It tangentially dictates the direction of migration, gross domestic output and in some cases, youth restiveness. This study investigated the unique relationship between investment in human capital proxied by spending in education and health and its effects on youth employment outcomes in Sub-Saharan Africa (SSA). Annual data spanning 1995–2017 were obtained from 40 SSA countries comprising 920 macro panel observations. The bootstrap-based bias correction for the panel fixed effects estimation technique was employed to improve on the analytical corrections. Findings suggest that human capital investment comprising private and government health expenditures, primary, secondary and tertiary education expenditures were found to have varying significant impact on youth employment in SSA. The policy implication is that to reverse the perennial problem of youth unemployment in SSA would require serial consistent disproportionate investment more in education than in health.
... A 10% increase in remittance flows translates into a 1% reduction in per capita poverty levels in sub-Saharan Africa (Gupta et al., 2007). According to Gnimassoun and Anyanwu (2019), the diaspora contributes positively and significantly to economic development in Africa and this effect increases with the level of education of emigrants. Also, Amega (2018) found that migrant remittances significantly improve education and health in sub-Saharan Africa. ...
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... The fewer studies on migrant entrepreneurship in South Africa focus on the "informal economy" or marginal sectors of the economy (Kalitanyi and Visser, 2010;Crush andRamachandran, 2014, 2017;Crush et al., 2015). This study focuses on entrepreneurs involved in the formal sectors of the economy. ...
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This study focuses on the challenges faced by Zimbabwean migrant entrepreneurs in South Africa involved in agro-processing, transport, logistics, information technology, transport, education, accounting, and remittances among others. These challenges stem from the limits that temporary residence permits. These include delays in the adjudication of residence permits renewals which threaten the viability of migrant-owned businesses, access to finance, conditions of the temporary protected statuses of Zimbabwean permits xenophobia, and their experience with affirmative action laws. Based on data gathered through interviews in Cape Town, this study concludes that migrant entrepreneurs remain in positions of vulnerability and contribute disproportionately to the economy of South Africa because of the limitation of residence visas.
... Borjas (1995:5) confirms that poor countries 'benefit from immigration'. Gnimassoun and Anyanwu (2019:3) state that the roles played by the diaspora, although small, 'contribute positively, significantly and robustly to the improvement of real per capita income in Africa'. ...
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... On the other hand, the number of out-migrants with low education levels is much higher, thus contributing more remittances to Africa. Furthermore, Gnimassoun and Anyanwu (2019) claim that the highly skilled African diaspora contributes positively, significantly and robustly to the improvement of economic development and democracy in Africa. However, in the end, it would be important that many of the out-migrated African scholars return to Africa with their advanced skills to enhance the developmental potential of Africa and enhance brain circulation (Chand 2019). ...
... On the other hand, the number of out-migrants with low education levels is much higher, thus contributing more remittances to Africa. Furthermore, Gnimassoun and Anyanwu (2019) claim that the highly skilled African diaspora contributes positively, significantly and robustly to the improvement of economic development and democracy in Africa. However, in the end, it would be important that many of the out-migrated African scholars return to Africa with their advanced skills to enhance the developmental potential of Africa and enhance brain circulation (Chand 2019). ...
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... However, this highlights that migration can have significant effects on the country's incomes, social, economic and demographic well-being, but also on the redistribution of incomes. These assumptions are in line with previous studies (Uprety, 2019;Gnimassoun & Anyanwu, 2019). ...
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... to do this specifically within the work organisations (Anyanwu, 1998). ...
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PIP It is often argued that labor migration has an adverse effect upon the source country. However, Mountford and Stark et al. in 1997, challenged that position and demonstrated the possibility of a brain drain with a brain gain. These researchers emphasized the incentives for human capital formation in the source country. Higher returns to skill in a foreign country impinge upon human capital formation at home. This paper rests upon the same economic grounds and focuses upon the dynamic consequences of labor emigration upon human capital formation and economic growth. It contributes to the international migration literature and the human capital and growth literature. Emigration to a higher returns to skill country provides an incentive to invest in human capital. The level of human capital formation in the source country can therefore be positively correlated with the probability of emigration. A surge in emigration can lead the source country out of an underdevelopment trap. The implications of the model for the convergence controversy are discussed.
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