Migration and Institutional Development

This paper argues that migration could trigger institutional development in the sending country. It is shown that the existence of rent-seeking institutions not only hinders the adoption of a more efficient technology, it also reinforces itself; while the possibility of migrating to a more advanced economy could trigger both institutional change and adoption of the more efficient technology in the sending country. Moreover, the institution-enhancement effect of migration becomes more likely as the difference in the rewards to productive activities in the two economies becomes greater. Some preliminary historical evidences are also presented.