Social and economic effects of return migration to Egypt

Simone Bertoli, Francesca Marchetta, 4 October 2013

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A number of demographic, social, and economic factors constitute 'irresistible forces' that are contributing to the rise of the scale of international migration (Pritchett, 2006). The economic literature has not yet fully explored the wise array of effects this phenomenon can have on migrants’ countries of origin. When migration is predominantly temporary in nature, returnees represent a natural focal point of the analysis, as moving across borders can reshape the behaviour and the choices made by the migrants once they return home. The time spent in another country exposes them to the cultural and social norms that prevail at the destination, and foreign labour-market experience can give them the opportunity to accumulate financial resources that can be invested in economic activities upon return.

The economic literature has established that savings accumulated abroad allow returnees to overcome credit constraints that hinder productive investment (McCormick and Wahba, 2001). This can partially explain why returnees have a significantly higher propensity to engage in entrepreneurial activity (Wahba and Zenou, 2012).

Born to be alive?

For the occupational choices of returnees to create new employment opportunities in the domestic labour market, they must keep their enterprises alive over time. The relationship between the probability of survival of an entrepreneurial activity and the past migration experiences of an entrepreneur is a prior, ambiguous. Returnees might draw on the savings accumulated abroad to cope with transitory negative demand shocks, but they may also have better alternative employment opportunities than stayers, which could increase incentive to revise their occupational choice.

Marchetta (2012) draws on a panel survey conducted in Egypt in 1998 and 2006 to analyse the relationship between the survival of an entrepreneurial activity and the migration status of the entrepreneur. The analytical challenge of non-random selection in unobservables of returnees is dealt with using fluctuations in the real price of oil, as in Wahba and Zenou (2012). This generates an exogenous source of variation in the individual probability to migrate, since Egyptian migrants typically move towards neighbouring oil producing countries.

The analysis – which employs a bivariate probit – reveals that entrepreneurial activities by Egyptian returnees enjoy a probability of survival that is 35 percentage points higher than the corresponding estimated probability for stayers (between 1998 and 2006). This suggests that the entrepreneurial activities run by returnees are born to be alive, and could open up new employment opportunities in the local labour market.

Bringing it all back home

The choice of occupation does not represent the only domain in which Egyptian returnees differ from stayers. The linguistic and religious proximity between Egypt and destination countries of most migrants actually hides relevant differences in the social and cultural norms across borders, which are reflected in sharp differences in the number of children per woman across various Arab countries.

In the 1970s Egypt had the lowest level of fertility in the Arab world, as long-standing concerns about unsustainable population growth had already led the Grand Mufti to release a fatwa in 1937 stating that the use of birth control techniques is consistent with the Islamic religion. Attitudes towards fertility and about the general role of women in society tend to be more conservative in other Arab countries, where women have a large number of children. Fargues (2007) argues that returnees can bring back home fertility norms that are closer to the ones they entered in contact with at destination, and this transfer of fertility norms could in turn have reduced the speed of demographic transition in Egypt.

In our recent paper we rely on the 2006 wave of data – which contains a complete record of live births for women aged 15 to 49 – to provide an econometric test of Fargues’ hypothesis. We use a Poisson model where the dependent variable is represented by the cumulated fertility of each married couple, estimating this with a two-stage residual inclusion estimator to tackle the threat to identification posed by the endogeneity of the migration decision. We still rely on the real oil price as an instrument, and we adopt an explicit optimisation criterion to select the age at which each male individual in our sample is matched to the corresponding oil price.

Our econometric analysis reveals that the married couples where the husband is a returnee from an Arab country has a significantly higher number of children. This result is robust to the instrumentation of migration status, and it is not driven by the positive wealth effect produced by migration. We also provide evidence that the wives of returnees have a higher probability of being active on the labour market, thus increasing the opportunity cost of child rearing. This appears to be connected to the employment options in family-run economic activities that the occupation choices of their husbands open up for them. The evidence that we provide is consistent with the hypothesis put forward by Fargues (2007), and suggests that return migrants can be a relevant channel through which cultural values and norms spread across political borders.

Concluding remarks

The evidence presented in these two papers suggest that return migration may not be an unmitigated blessing for Egypt; its positive economic effects are matched by the introduction of conservative cultural norms that increase fertility levels.

References

Bertoli, S and F Marchetta (2013), “Bringing It All Back Home - Return migration and fertility choices”, World Development

Fargues, P (2007), “The Demographic Benefit of International Migration: Hypothesis and Application to Middle Eastern and North African Contexts”, in International Migration, Economic Development and Policy, ed. by Ç. Özden, and M. Schiff, pp. 161-182. Washington: The World Bank.

Marchetta, F (2012), “Migration and the Survival of Entrepreneurial Activities in Egypt", World Development, 40(10), 1999-2013.

McCormick, B and J Wahba (2001), “Overseas work experience, savings and entrepreneurship amongst returnees to LDCs”, Scottish Journal of Political Economy, 48 (2), 164-178.

Pritchett, L (2006), Let Their People Come, Washington DC: Center for Global Development.

Wahba, J and Y Zenou (2012), “Out of Sight, Out of Mind: Migration, Entrepreneurship and Social Capital”, Regional Science and Urban Economics, 42, 890-903.

Topics: Migration
Tags: entrepreneurship, fertility, migration

Assistant Professor at the CERDI, University of Auvergne
Assistant Professor at CERDI, University of Auvergne

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