Brain Drain and External Imbalances in Sub-Saharan Africa - Research Paper

The persistent nature of external deficits in sub-Saharan Africa (SSA) is a major concern. This paper examines the extent to which migration from SSA to OECD countries affects the dynamics of external balances in SSA countries. Based on panel regressions and gravity-based 2SLS estimation strategies on data from 46 SSA countries over the period 1990-2014, we establish that emigration — particularly of highly-skilled people — contributes to the persistence of external deficits in SSA countries. While emigration globally has a negative impact on the current account, only high-skilled emigration has a significant and robust impact. These findings are corroborated by the fact that highly-skilled individuals emigrate with their saving potential as suggested by the life-cycle theory. In addition, while remittances to home countries can help to compensate this negative effect of brain drain, our results show that highly-skilled emigrant’s contribution to remittances is less important compared to that of low-skilled emigrants. Therefore, policy makers in SSA countries should implement policies to attract more remittances, particularly from highly-skilled emigrants, in order to reduce their external imbalances or external financing needs.