A Bias-Corrected Method Of Moments Approach To Examining The Influence Of Remittances And Institutions On Migration In Selected Sub-Saharan African Countries

Abstract

This study examined the effects of remittances and institutional quality on migration in thirty-four (34) sub-Saharan countries. Panel data analysis, specifically Bias Corrected Method of Moments (BC-MM) with random effects and robust standard errors, was used for analysis. The reason for using this method is that that the BC-MM estimators are more efficient that GMM estimators in terms of correctly sized tests, and in tackling the Nickell bias that occurs in small samples and situations where T is small. The results of the analysis indicated that the effect of personal remittances on net migration is non-linear, that is, personal remittances has positive effect on net migration initially, and then, at the turning point, it has a negative effect on net migration. Institutional quality has a negative significant effect on net migration. Moreover, the influence of inflation on net migration is inconclusive. Unemployment has a positive significant effect on net migration. However, the interaction term of personal remittances and institutional quality has a positive and significant influence on net migration. Hence, this study recommends that policy makers should create enabling channels for the receiving remittances from abroad, provide incentives, and create enabling environment for investment. Governments should strengthen their institutions by enforcing law and order. The study is unique because it utilized the Bias-corrected method of moments (BC-MM, which is superior to GMM in terms of overcoming nickel bias and handling small samples with small T. The study included marginal effects analysis and threshold analysis.