by Eugen Dimant

Lab Fellow Eugen Dimant discusses his exciting new paper on the impact of migration flows on institutional quality and corruption in this new blog post.1

Among the countries with the highest levels of corruption (according to the International Country Risk Guide), several countries exhibit substantial numbers of emigrants. One may speculate that persistent corruption in a country makes corrupt behavior a general attitude among citizens, and emigrants from a corruption-ridden country may carry some of this attitude to their destination countries. That is, once substantial inflows of migrants from more corrupt countries into less corrupt countries is observed, will we see—sooner or later—increasing levels of corruption in the destination countries as well? Or, rather, will we see no significant (or even an opposite) effect on destination countries’ levels of corruption because it is mostly honest citizens that flee their corrupted home countries, or because the institutions of destination countries are impervious to corruption?

Anecdotal evidence from several branches of organized crime exemplifies the problem under consideration. In the late 19th century, thousands of members of the Cosa Nostra migrated from Sicily to the United States, where they started their criminal activities. In 1980, the Mariel boatlift became infamous for Fidel Castro forcing boat owners who were allowed to bring relatives from Cuba to the U.S. to also carry back prisoners of Cuban jails. Consequently, many of the 125,000 refugees that landed in Florida had a criminal record, arguably affecting criminal and corrupt behavior in Florida. At the same time, the civil war in Lebanon in the 1980s made thousands of members of the Miri-Clan flee the country and head toward Europe. They settled mainly in larger German towns, where they soon became involved in criminal activities, allegedly including drug and arms trafficking, kidnapping and prostitution.2 Similarly, mainly driven by contrasting attitudes and behavior patterns, Chinese immigration to Thailand and Indonesia triggered criminal activities over the last decades.3

The previous examples point at two different issues that require closer inspection. First, the channels through which corruption might migrate, and second, the impact that (selective) migration has on the development of corruption in the destination country. However, there is a third issue, namely endogeneity, which needs to be considered. Our previous reasoning implicitly assumes that destination-countries’ levels of corruption change as a consequence of inflows of migrants. However, the reasoning might also go the other way round. We use econometric techniques to cope with this issue in order to elicit the actual effect.

Our aim is to investigate the underlying effects in detail, and segregate them in distinct channels through which corruption may migrate and thus possibly exert adverse effects on the targeted society in the short and medium term.

Theoretical Considerations

There are many reasons why individuals may want to leave their home countries and move abroad. These can be divided into push and pull factors. There certainly are a lot of those factors and the following represent just a small example:

Push factors : poverty, unemployment, weak institutional frameworks, civil war, terrorism, corruption 4

: poverty, unemployment, weak institutional frameworks, civil war, terrorism, corruption Pull factors: better career opportunities, higher income prospects, strong institutional frameworks, better social values and norms

So the question is why we would (or would not) expect migration to affect the level of corruption in the destination country. At first glance, there appear to be several arguments why there ought to be no such effect. Firstly, migrants tend to assimilate (at least) in economic terms—although at different speeds—in the target country. One may also reasonably speculate that this is true in even more general terms, for example, assimilation might occur on a wide range of individual behaviors. This leads us to our first hypothesis:

Hypothesis H1: The general effect of immigration on the host country’s level of corruption is insignificant.

The previously mentioned push factors affect both honest and dishonest people. They drive people out of a corrupt country and matter not only for a small positive selection of honest people, but also to the corruptible average individual. The assimilation assumption might be difficult to justify if persistent cultural and social beliefs prevail. Corruption in a country might be the outcome of the (historical) development of institutions, policies, and markets. If, in the evolution of this institutional setting, corrupt behavior has become a cultural norm and belief, it will be internal to the individual. When individuals migrate, their beliefs and values can be expected to move with them, although their external (corrupt) environment remains behind. Bearing these characteristics in mind, it should also be clear that successful criminal behavior in a new and unknown environment does not only require a criminal mind, but also an opportunity. Consequently, it might take some time after entering the destination country to comprehensively adapt to the new environment, and to find ways and means for successful corruption. Full effects of immigrants’ corrupt behavior may become visible in the target country only after some period of time, leading to the second hypothesis:

Hypothesis H2: The effect on the destination country’s level of corruption, related to immigration from a more corrupt sending country to a less corrupt destination country, is positive. However, it might take some time before the effect becomes noticeable.



Empirical Results

Overall, the results indicate (i) no significant impact of general migration on corruption in the short or medium term (which is in line with our hypothesis H1) and (ii) that immigration from highly corrupt countries boosts the corruption level in the host country, thus supporting our hypothesis H2. According to our estimations, we find a significant and positive effect of selected migration on host countries’ corruption levels. An increase in the migration stock of one hundred migrants per one thousand citizens affects corruption significantly, increasing the corruption value by 0.99 points (out of 7). This is a raise of 14.1% of the maximum scale. Noticeably, while we initially observe an escalating effect of selective migration on corruption levels, the results are indicative of an assimilation process over time.

Conclusions

Independent of the econometric methodology applied, we consistently find:

(i) General migration has an insignificant effect on the destination country’s corruption level.

(ii) Immigration from corruption-ridden countries boosts corruption in the destination country.

Hence, the international legislators’ fear (as expressed in recent agreements by the G20 group) that immigration may cause a problematic inflow of corruption appears to be justified. Policy-makers will therefore have to take precautions to avoid this problem. However, the optimal response is not obvious. One possibility could be to restrict immigration by only selecting immigrants originating from non-corrupt countries. Alternatively, very careful checks ad personam could be conducted. The downside of this policy is that it could seriously restrict the inflow of migrants, which might not be optimal given that most OECD countries face a severe aging problem and are in need of immigration to keep their social security systems sustainable. An arguably better strategy could be to immunize the domestic population against a corrupt attitude brought into the country by some immigrants and thus preserve the state’s purposeful functionality. One way to achieve this is through better educating the domestic population of the detrimental effects brought about by corruption. This would both raise their awareness and yield a critical state of mind.

1. Eugen Dimant, Tim Krieger, and Margarete Redlin, “A Crook is a Crook . . . But is He Still a Crook Abroad? On the Effect of Immigration on Destination-Country Corruption,” CESifo Working Papers, No. 5032 (2014) (to appear in the German Economic Review).

2. Beate Krafft-Schöning, Blutsbande: Wie au seiner arabischen Großfamilie in Deutschland der berüchtigte “Miri-Clan” wurde. Eine Insiderin berichtet [German Edition] (Riva, 2013).

3. Thomas Sowell, Migrations and Cultures: A World View (Basic Books, 1997).

4. See Eugen Dimant, Tim Krieger, and Daniel Meierrieks, “The Effect of Corruption on Migration, 1985-2000,” Applied Economics Letters 20.13 (2013): 1270-1274.