Brain Drain and External Imbalances in sub-Saharan Africa
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 sub-Sharan (SSA) countries should implement policies to attract more remittances, particularly from highly skilled emigrants, to reduce their external imbalances or external financing needs.