International Migration and Managerial Human Capital in Developing Economies

Abstract

This dissertation contains three self-contained essays in the field of development economics that studies various aspects of international migration and managerial skill development in developing economies. Chapter I studies the effectiveness of temporary international labor migration as a shock-coping tool, using migration responses to typhoons from the Philippines as a case study. Chapter II studies the impacts of international migrant income on economic outcomes at migrant-origins. Chapter III studies the productivity impacts and within-firm allocation of a managerial soft skills training via a randomized controlled trial in a large ready-made garment firm in India.

Chapter I documents how international labor migration is used to cope with negative shocks, highlighting the role of search frictions and international macroeconomic conditions in shaping the migration response. Using administrative data on the universe of temporary migrant contracts from the Philippines, I show that typhoons increase international migration from affected municipalities. However, overseas wages of new migrant cohorts fall. The wage drop is driven by migrants leaving for low-wage countries and occupations, despite typhoon driven migrants being positively selected in terms of education. These patterns are consistent with congestion and search frictions in overseas contract markets: typhoons lower reservation wages and incentivize migrants to leave for lower paying overseas jobs. Strong international migrant demand dampens this response: typhoons lead to a larger migration increase without a proportionally large wage drop. As a result, the total migrant earnings response doubles when moving from median to 75th percentile migrant demand conditions. Similarly, households in typhoon affected regions receive more remittances when international migrant demand is high. These results suggest policies that increase the availability of overseas jobs in the wake of disasters can lead to substantial shock-coping gains.

Chapter II asks how does income from international migrant labor affect the long-run development of migrant-origin areas? We leverage the 1997 Asian Financial Crisis to identify exogenous and persistent changes in international migrant income across regions of the Philippines, derived from spatial variation in exposure to exchange rate shocks. The initial shock to migrant income is magnified in the long run, leading to substantial increases in income in the domestic economy in migrant-origin areas; increases in population education; better-educated migrants; and increased migration in high-skilled jobs. 77% of long-run income gains are actually from domestic (rather than international migrant) income. We empirically demonstrate that these findings are not confounded by potential trade impacts of the same exchange rate shocks. A simple model yields insights on mechanisms and magnitudes, in particular, that 23.2% of long-run income gains are due to increased educational investments in origin areas. Improved income prospects from international labor migration not only benefit migrants themselves, but also foster long-run economic development in migrant-origin areas.

Chapter III studies the allocation and impacts of soft skills training for production line supervisors. We first asked middle managers to recommend members of their supervisory team for training, then randomized treatment within these recommendation rankings. Highly recommended supervisors experienced no productivity gains, while less-recommended supervisors’ productivity increased by 12%. Consistent with the fact that team member turnover is costly to middle managers, these managers prioritized supervisor retention over productivity impacts. Treated supervisors were 14% less likely to quit; this gain was driven by highly recommended supervisors. Misallocation of training can help explain the persistence of low managerial quality in firms.