Leveraging the Caribbean Diaspora for Development: The Role of Network Effects

Abstract

This paper argues that it is likely that skilled migration will continue to be encouraged by the OECD countries and developing countries like those of the Caribbean must seek to benefit from such migration. This paper builds on a formal model developed by Dos Santos and Postel-Vinay (J Popul Econ 16(1):161–175, 2003) assuming free migration from the Caribbean to countries abroad and examines the impact of diaspora network effects on future migration flows. Their model assumes that there is a sending and a receiving country for migrants and that the sending country has a lower level of development relative to the receiving country (possibly an advanced developing country). Because the receiving country is technologically advanced, migrants who locate there acquire advanced skills by participating in that economy. However because migrants continue to interact with the sending country, they can help to improve conditions there through a variety of interactions and this also affects the rate of emigration as the sending country becomes more developed. Dos Santos and Postel-Vinay (J Popul Econ 16(1):161–175, 2003) capture such effects through return migration. We add to this model the effect of diaspora networks as an additional mechanism and critical layer of interaction between sending and receiving country. We conclude that diaspora network effects can help to stem the long run migration of highly skilled persons, by way of closing the technological gap between the Caribbean and a typically advanced migrant receiving economy, but this will depend on improving local conditions for those at home and those who may wish to return or collaborate through networks. If it is true that migrants do transfer advanced skills to their country of origin then returning migrants in the local labour market should be paid above what is received by local residents, a so called wage premium. We specified and tested an earnings function to determine if returning migrants, who are employed in the local labour market, receive such a premium. The results suggest that returning migrants in Jamaica do receive a premium of 15%. It is reasonable to infer that this may be due to their superior labour market skills.