MIGRATION, HUMAN CAPITAL FORMATION AND ECONOMIC GROWTH IN NIGERIA

Abstract

Labour moves across countries in a bid to earn better returns. This has motivated labour into accumulating human capital in order to enhance employment potentials. Human capital makes production more efficient, thereby increases economic growth. While there are studies on the effect of migration on human capital formation (HCF) in Sub-saharan Africa, there is dearth of empirical enquiry on Nigeria. This was designed to examine the effect of migration on Nigeria’s human capital formation and economic growth.

Two log-linear time series models, one predicated on the new economics of labour migration (NELM) framework and the other, an exogenous growth model, were estimated. The specified NELM equation considered migration probabilities as an incentive to build additional skills. The model established the effect of migration (measured by net migration rate and labour migration stock), cost of acquiring additional skills and other control variables (population and access to education) on human capital formation. The exogenous growth model captured the effects of migration, human capital formation, public spending on education, remittances and access to education on economic growth. The stationarity conditions of the variables were ascertained using the Augmented Dickey Fuller test. The Ordinary Least Squares (OLS) technique was applied to a distributed lag specification covering the period 1980 to 2011. Long run relationship among the variables was established employing the Johansen cointegration technique. Data for the estimates were collected from the World Bank (World Development Indicators) and Immigration Statistics Yearbooks. Six member countries of the Organisation for Economic Cooperation and Development (OECD) namely, Canada, United Kingdom, United States, Denmark, Italy and Sweden, to which Nigerians have migrated, were considered on account of data availability.

Net migration rates impacted positively on human capital formation (0.48), indicating that about 50 per cent probability of migrating provided an incentive to build skills. Labour migration stock had a positive incentive effect on HCF (0.38), significant at the 10.0% level. All the other variables were significant at the 5.0% level. There was a positive relationship between HCF and cost of acquiring additional skills (0.24), implying that additional expenses on skill formation yielded positive returns. Human capital increased in the same direction as population. However, access to education had no significant impact on HCF. Further, the exogenous model revealed that economic growth responded negatively to migration rates (-0.13) and HCF (-0.10). While the NELM model showed that skills responded positively to migration opportunities, in the exogenous model, a larger proportion of those who had accumulated human capital migrated, depleting economic growth. Economic growth responded positively to labour migration stock with an elasticity of 0.11, suggesting a net gain in output resulting from migration. It indicated that the growth estimates were sensitive to the measurement of migration by rates and/or stock.

Migration had incentive effects on human capital formation between 1980-2011. Labour migration stock had a positive impact on output. Nigeria should strive to retain potential migrants who have acquired higher skills in fostering economic growth. Keywords: Nigerian migrants, Human capital formation, Migration stock, Employment potentials Word count: 486