Wednesday, September 24, 2008
Monday, August 11, 2008
The perception of corruption
The perception of corruption
Natalia Melgar (UdelaR), Máximo Rossi (UdelaR) and Tom W. Smith (
Abstract
In this paper we analyze the foundations of corruption perception. Even when we employ the concept of corruption in several areas and its connotations vary widely depending on societies and people, it is possibly to find some elements in common which are connected with the misuse of public office with the purpose of making private gains. This paper focuses on this wide concept of corruption. We use data from the module on Citizenship of the 2004 International Social Survey Program (ISSP). Ordered probit models were estimated in order to study the impact of independent variables on the perception of corruption. We conclude that there are significant socio-demographic variables: gender, marital status, religiosity, education and sector of employment, among others. Additionally, we find that country of residence matters and that there are similar results among countries with common characteristics.
Key words: corruption, microeconomic behavior, comparative research, public opinion, ISSP
JEL Classification: D73, K42, O57
Introduction
We employ the concept of corruption in several areas and its connotations vary widely depending not only on societies but also on people. Corruption is interpreted as cultural phenomena. Although there are very different definitions, it is possible to find some elements in common which are connected with the misuse of public office with the purpose of making private gains. This paper focuses on this wide concept of corruption.
The data source is the module on Citizenship of the 2004 International Social Survey Program (ISSP). The survey asks respondents (approximately 1.000 per country) their opinions on a great variety of issues, including international trade, migration, corruption, politics or religion. In addition, it includes demographic and socio-economic data, such as: age, gender, education and others.
Ordered probit models were estimated in order to study the impact of these variables on corruption perception. We conclude that there are socio-demographic variables which are significant at determining corruption perception, variables such us: religion, age, the level of education, the sector of employment, among others. Additionally, in all cases the country of residence has a significant impact on corruption perception and we found some clear pattern of behavior taking into account
economics as well as political characteristics.
The structure of the paper is as follows. The first section is theoretical in nature, and draws on the definition of corruption. Section two is devoted to the existing and well-developed theory on the subject (causes of corruption). In section three we analyze corruption as multidimensional phenomena. Section four sketches the main features of the econometric methods applied in this analysis, the data source and the description of variables. The fifth section deals with results. Finally, the conclusions are presented in section six.
1. Corruption: concept and general view
We employ the concept of corruption in several areas and its connotations vary widely depending not only on societies but also on people. Corruption is interpreted as cultural phenomena. In effect, social rules may differ among cultures; while in one society an action could be accepted as normal in another one the same action could be a corrupt action.
The first problem of any comparative research on corruption is arriving at a definition which lends itself to cross-cultural and cross-national research. As we mentioned, this paper focuses on a wide concept of corruption: the misuse of public office with the purpose of making private gains; this definition incorporates the notions of wrongly getting an advantage, pecuniary or otherwise, in violation of official duty and the rights of others. Although all people have a definition of behavior labeled as corrupt, there might be cultural differences in the way "wrongfully" is defined by people. Consequently, there is need for a balance between the generalizations of this concept and the capability of explaining it in a specific historical context and culture in which it occurs.
In economic terms, there are several ways to define corruption. For example, Werlin (1973) characterizes corruption as the use of public office for private needs and Blackburn et al. (2004) consider public sector corruption as the illegal, or unauthorized, profiteering by officials who exploit their positions to make personal gains. To emphasize governmental corruption, Shleifer et al. (1993), define it as the sale of state assets by civil servants in order to make gains.
Pope (2000) asserts that corruption can take place where there is a combination of opportunity and inclination. He explains that corruption can be initiated from either side of the transaction: a bribe being offered to an official, or the official requesting an illicit payment. Those offering bribes may do so either because they want something they are not entitled to, and bribe the official to bend the rules, or because they believe that the official will not give them their entitlements without some
inducements being offered. On the other hand, officials may refuse to serve clients unless a bribe is paid. In this case, it is possible to differ between small bribes practiced by civil servants and the great corruption of high public officials involving large and hidden bribes in overseas bank accounts.
2. Corruption and the perception of corruption: its causes
In general terms, the perception of corruption has favored the growth of institutional instability and the persistent deterioration of the relationships among individuals, institutions and States. The loss of political legitimacy that many governments have experienced, the polarization of power and bureaucratic inefficiency are some of the political consequences of corruption. Moreover, the perception of economic corruption would have a devastating effect because it generates a “culture of distrust” towards some institutions.
In the following section, we examine previous studies in this field. In particular, we emphasize the micro foundations of corruption at individual and country level.
2.1. Objective aspects
According to Rose-Ackerman (2001), there are six categories that capture the most important incentives for corruption: 1) the bureaucracy may be charged with allocating a scarce benefit to many individuals and firms using legal criteria other than willingness to pay, 2) civil servants may have little incentive to do their jobs well, given their pay scales and the level of internal monitoring, 3) private firms and individuals seek to reduce the costs imposed on them by governments (taxes, customs duties and others regulations), 4) governments frequently transfer large financial benefits to private firms through procurement contracts, privatizations, and the award of concessions, 5) the judiciary has the power to impose costs and transfer resources between litigants and 6) elected politicians can accept illegal payoffs both to fund their campaigns and to enrich themselves.
Taking into account cost-benefits analysis, Cábelková (2001) studies the incentives to take corrupt actions and he holds that this problem is affected by individual perception about the level of corruption and the authority’s level of tolerance. This perception may affect both the demand and supply of corrupt actions.
From a microeconomic point of view, corruption could be seen as a price and the analysis focuses on modeling its functional form. In that sense, two academic approaches could be mentioned.
In the first approach, corruption is interpreted as a tax. The staring point is the premise that rules are asymmetric and costly. Therefore, people may find it profitable to bribe and corruption would be a consequence of the high cost of legality. The rules and the laws modify the decision making process because they have costs and benefits. The fulfillment of a rule supposes a benefit and a certain cost. The cost of the rule could be seen as the time and information needed to fulfill them and it is a function of the lost in time and the information; both elements are costly (Ghersi, 2006).
Therefore, if individuals need a lot of time or information to fulfill a rule, the probability of behaving in accordance with the law decreases. To bribe or not to bribe? The decision depends on the difference between the expected benefit and cost. The costs associated with a bribe are three-fold. First, the social cost. Second, the money cost of the bribe itself which could be seen as an opportunity cost. Finally, the penalties levied for violations. In the last case, the role of the government matters because the amount of the expected costs depends on individual’s perception about the intensity of the actions to avoid corruption (it depends on the enforcement, the likelihood of being caught and prosecuted, and the severity of the punishment if convicted).
Until now, we are analyzing corruption without ethical considerations, later on we will consider the subjective factors that influence the decision making process. When we ignore those subjective elements, the most relevant conclusion is that the cost of legality is inversely proportional to an individual’s income. A higher income makes easier the access to information. Consequently, rules and laws have asymmetric effects, which distort individual behavior (Ghersi, 2006).
Moreover, You et al. (2005) show that income inequality is a significant determinant of corruption. With the increased inequality, the rich, as a class or as interest group, can use lobbying, political contributions or bribery to influence law-implementing processes (bureaucratic corruption) and to buy favorable interpretations of the law (judicial corruption).
Therefore, corruption could be interpreted as a tax; people may pay an illegal and informal tax which allow them to avoid a rule, a penalty etc. Moreover, we could distinguish between a bribe to gain an unfair advantage and a bribe to get something that should have been given without the bribe. In line with this argument, Posner (1999) argues the blackmail and the bribe are similar since the blackmailer and the bribed official receive a payment in exchange for not applying the law. In
this case, the analysis consists of identifying to the bribe as an informal coercion that officials are capable of applying to citizens in exchange for a “favor”. This payment reflects the cost of the legality, which is positively correlated with the demand of bribes (Ghersi, 2006).
The second approach holds that corruption is insurance. Given an asymmetric and costly institutional context, people buy this insurance when they bribe a government employee to protect themselves against costly rules. A person is risk-neutral if utility changes are strictly proportional to changes in income. On the other hand, in the case of risk-averters (risk-lovers), changes in utility are less (more) than proportional (Svetozar, 1985). Therefore, people’s attitudes towards bribes
vary depending on their risk preferences; risk averters would be more likely to pay an insurance premium (a bribe) than risk-lovers.
Regarding democracy, some previous studies analyzed the link between corruption and political systems. In general, it was found that democratic systems tend to reduce corruption. For example, Montinola et al. (2002) find that political competition matters; one mechanism through which it reduces corruption is the re-election imperative, which lowers the demand for bribes. Political competition is posited to reduce corruption in two additional ways. First, the freedom of information
and association characteristic of democracies helps monitoring of public officials, thereby limiting their opportunities for corrupt behavior. Secondly, the possible turnover of power in democracies implies that politicians cannot always credibly promise that particular laws and regulations will continue in the future. This minimizes the size of bribes that rent-seekers are willing to pay.
Additionally, Rose-Ackerman (2001) focuses on honesty and trust as they affect the functioning of the democracies and markets. She argues that large democracies govern themselves through political representatives, bureaucrats, judges, etc and because elected representatives cannot be perfectly controlled by voters, the electorate must have some level of trust in those it elects. The more they can be trusted to fulfill their roles willingly, the fewer the resources needed to monitor and
discipline them, and the more discretion they can be given. In line with Montinola et al. (2002), Rose-Ackerman asserts that a competitive electoral process can give politicians an incentive to reveal the untrustworthy behavior of their opponents and to be trustworthy themselves.
As there are proofs regarding this relationship (Rose-Ackerman, 2001 and Montinola et al., 2002), we will focus on the satisfaction with the democratic system rather than the democracy itself.
2.2. Subjective aspects
Given the mentioned objective aspects, when the fulfillment of a rule implies high costs, decisions will vary among individuals depending on their values and moral views, which modify the perception of the expected costs and expected benefits. Ceteris Paribus, to bribe would not mean the same to people depending on their values. While a person could be against bribery regardless of the perceived level of corruption someone else views could depend on the existing level of corruption.
Moreover, the formation of individual perceptions about the level of corruption is affected by the access to information and the capability to analyze this information. Personal experience has a significant role; it depends on the interaction among the citizen and corrupt civil servants. Obviously, there are additional sources of information about corruption such as the media (radio, TV, written press) or information from relatives and friends.
Additionally, You et al. (2005) argue that income inequality also influences corruption perception and habituates norms about corruption in the following way: if inequality is high, “the rich are likely to believe that corruption is an acceptable way of preserving their societal position as this behavior goes unpunished and social networks of corruption expand” and people will more easily justify their corrupt activities as inequality increases”.
As Cábelková (2001) indicates, the perception of corruption may influence the level of corruption in two opposite ways. When people perceive that the level of corruption is high it is likely that: 1) citizens think that a bribe is needed and 2) government employees do not consider that a bribe is improper. Hereby, a bribe is thought to be necessary and it seems unlikely that this bribe would not be accepted. In turn, government employees could consider this activity as risk-free and with low probability of detection. Therefore, corruption increases. On the other hand, when the perception of corruption is high, the government may take greater actions in order to reduce corruption. Therefore, corruption could decrease.
3. Corruption as multicultural phenomena: some insights
According to Nelken et al. (1996) the understanding of corruption could be extended by using concepts of criminology and sociology. They hold that even if corrupt agreements are often in breach of the criminal law, we must still ask whether corruption is deviant or simply normal in some groups or some countries. But comparison should not be confined to seeking out what there is in common but also in understanding the many relevant differences in political and legal cultures.
Maingot (1994) states that that there are several fallacies regarding the concept of corruption. The most frequent of them stems from the tendency towards personalization: e.g., believing that one thoroughly corrupt individual is the cause of it all. At a more general level, personalization responds to a natural and widespread, prurient interest in what people do, rather than to abstract notions of how society functions. Regarding religious beliefs, the author argues that it is also a plausible
proposition that in Judeo-Christian societies, personalizing the problem of corruption responds to the propensity to see both redemption and punishment in individual, not systemic, terms.
Another fallacy to be avoided is that of odious moral comparisons of whole cultures. North Americans, for example, have long tended to view
culturally, i.e., the belief that one can teach other societies specific approaches to probity in public office. Second, a specific fallacy which is the opposite of the previous one: the notion that it is impossible to pass judgment about probity and corruption on other cultures.
Different cultures are perfectly capable of making the necessary "translation of codes" to form very similar judgments about corruption. It is this shared understanding that justifies attempts to formulate theories of corrupt behavior and the mechanisms for combating it.
Maingot (1994) classifies the theories that explain corrupt behavior at different levels. Firstly, those that are premised on cultural behavior: cultural explanations are very common in
would mean that Latin American officials are corrupt because there exists a bifurcated moral sense in which corrupt behavior, while in office, is not only not condemned but, on the contrary, is actually approved. The second theory is that of differential association: e.g., because of their intimate, smallgroup interaction and association with deviants, individuals engage in similar behavior. One often hears that because the big fish are "biting," one should naturally expect the smaller fry to "bite" also.
Secondly, there are theoretical schools which emphasize social conflict or social strain explanations. According to Maingot (1994), this approach tends to be popular among more radical interpreters of the Latin American and
Finally, there are theories which emphasize individual choice and focuses on the individual as a rational actor, one who makes utilitarian choices in a particular social and economic context. This theory focuses on the individual who, in contemplation of a corrupt act, is able to weigh rationally his moral scruples, fear of official sanctions and public disapproval on the one hand against the potential material gains and psychological gratifications provided by the act on the other.
Evidently, while the desire for gain might be strong, the legal and moral context is subject to change and, thus, is able to alter the outcome of the calculation. This approach combines rational actor theory with more economic theories. Therefore, it enables us to understand why so many officials still opt for honesty even in the face of powerful, almost all-encompassing, pressures towards deviance and corruption. In that sense, Maingot (1994) argues that elements such as moral sentiments and fear of public disapproval must carry a powerful counter weight.
Nelken et al. (1996) state that rather than regarding corruption and anti-corruption as independent phenomena, it is more useful to examine how corruption and concern about corruption grows and falls. They added that those engaged in corrupt agreements tend to overreach themselves and bring about the collapse of these exchanges: a) through ever increasing competition amongst those seeking clients, b) through the eventual fight back by those excluded and c) above all, once
investigations get started, because of the scramble –in the prisoner’s dilemma logic– to be the first to confess once they know or believe that trust in mutual silence has been broken. The authors found evidence that how anti-corruption campaigns form part of the cycle of corruption and its response itself varies by culture. They mention that the attack on corruption is seen by sociologist as an attempt to re-legitimate the rulers and/or specific political actors or criminal justice agencies.
But both corruption and anti-corruption can serve to undermine or extend the legitimacy of politicians, parties, and the State. Within criminology, the analysis of corruption is most closely associated with the study of state crime, white-collar and organized crime, and its regulation.
Therefore, there is much to be gained from examining corruption in a comparative perspective. The search for common factors has thrown up a number of causes of corruption. Even countries with similar legal and political arrangements can have intriguing differences in their definitions of where private interest interferes with public performance. There are important but less acknowledged differences amongst countries in their toleration of open political lobbying by businesspeople.
On the other hand, public opinion polls show an increasing perception of corruption and the media increasingly reports such stories, as they do those of the growth of fraud. But given low visibility of the behavior and modest enforcement, it is easy to produce an artificial “control wave” which may not correspond to any underlying behavioral change (Nelken et al., 1996).
4. Data source and methodology
4.1. The survey
As mentioned, the data source is the module on Citizenship of the 2004 International Social Survey Program (ISSP). The survey asks respondents their opinions on a great variety of issues, including international trade, migration, politics, taxes and corruption, as well as demographic and socioeconomic information, such as age, gender, education, religiosity and others.
The question used in the survey to identify respondent’s perception of corruption is:
Taking into account your experience,
how widespread do you think corruption is in the public service in your country?
4.2. Ordered probit models
The model aims at determining how different individual characteristics affect the formation of opinions towards corruption among government employees. In this respect, ordered probit models were estimated.
The dependent variable seeks to grasp citizen’s perception of corruption and it is defined as follow: Corruption = (Taking into account your experience, how widespread do you think corruption is in the public service in your country?) =
0 if respondent answers “hardly anyone”, 1 if respondent indicates “a small number”, 2 if respondent says “a moderate number”, 3 if respondent indicates “a lot of people” and 4 if respondent answers “almost everyone”. Countries abbreviations are in table 2 and the description of the variables is included in table 3.
The phenomenon to model is discrete, the unobserved or latent variable is y* (perception of corruption) which is related to the independent observed variables (xi).
5. Results
The model includes dummy variables representing individual characteristics and in order to capture fixed effects per country we include dummy variables reflecting country of residence. We found that gender is significant and the result indicates that women are more likely to perceive a higher level of corruption than men.
Secondly, it was found that the variables reflecting individual’s age are not significant; this result implies that there are no significant differences among youngest people, middle-aged people and the oldest group.
Thirdly, we found that marital status matters. While those people who are married or (live as married) tend to perceive a lower level of corruption than other people, the opposite is true for those who are divorced.
Moreover, as it was expected, the level of education has a relevant role in determining the perception of corruption. It was found that people who have completed at least secondary education are more likely to perceive a lower level of corruption. It is known that the perceived level of corruption could be very different from the actual level; therefore, this result could imply that access to information and the capability to process this information matter: more educated people have more information about the actual level of corruption and better capabilities to process the information and this fact influences on the formation of the perception of corruption.
Regarding religion and religiosity the model confirms our hypothesis. Firstly, there are no significant differences among religious groups (Roman Catholic, Protestant and others) and the same happens if we compare people who identifies with some religious group and atheists. On the other hand, the degree of religiosity (measured by weekly attendance to religious services) does influence the perception of corruption; it decreases the probability of perceiving a high level of
corruption.
Taking into account the place of residence, we found that there is no significant difference among people living in urban areas and others.
Concerning labor market, we found a significant difference among people who are self-employed and other people. Specifically, self-employed people tend to perceive a higher level of corruption. It might be possible that self-employed people are exposed to more incidents of corruption. The opposite is true in the case of people who work full-time; those people tend to perceive a lower level of corruption.
Additionally, the sector of employment is a determinant of corruption perception. Those who are working in a private enterprise are more likely to perceive a higher level of corruption than those who are employed in the public sector. On the other hand, it is worth noting that there is no significant difference among people who are unemployed and those who are employed. The same happens among: a) those who are retired and other people and b) those people who belong to a
union and other people.
Connected with democracy, we found that those who have a favorable opinion on democracy are more likely to perceive a lower level of corruption.
It is worth noting that all country dummies are significant. This result might mean that there are significant cultural and political differences that influence the perception of corruption. While most of them show a positive sign, there is a small group of countries that register a negative sign. We will explain this result differences later.
We calculate the marginal effects and their standard errors after estimation. Rather than reporting coefficients, tables 5.1 and 5.2 report the discrete change in the probability for each significant dummy variable. The marginal effects are nonlinear functions of the estimated parameters, so they cannot generally be inferred directly from the parameter estimates.
As could be seen in table 5.1, the probability of perceiving the highest level of corruption, for the whole sample, is 5.63%. This table also reports the change in this probability when the dummies variables considered turn from 0 to 1.
Firstly, taking into account respondent’s gender we found that the probability of perceiving the highest level of corruption increases 0.5 percent points (pp) when we consider a woman instead of a man.
Regarding marital status, if we take into account married people this probability decreases 0.4 pp. On the other hand, this probability increases 0.7 pp when we change to divorced people. Moreover, when we consider the third or fourth levels of education, the change in the probability is also relevant. It decreases 1.0 and 2.8 pp, respectively.
If the person attends to religious services once a week or more frequently, the decrease in the mentioned probability is 0.5 pp.
Additionally, the probability of perceiving the highest level of corruption also increases if the person is working in a private enterprise (1.1 pp) or if the person is self-employed (1.6 pp). However, to work full time reduces this probability in 0.4 pp
Finally, we also find that the perception of the performance of democratic institutions have the most significant impact on corruption perception; when we change from someone who believes that the state of democracy in his/her country is not satisfactory to someone who has a favorable opinion, the probability reduces 7.0 pp. This is the biggest changes in the probability.
Table 5.2 summarizes the information about the change in the probability of perceiving the highest level of corruption for each country variable.
The average change in the probability is 15.5 pp,
Moreover, the table shows that all Latin American countries are situated in the first half of the table; the change is higher than the average. In this group of countries,
Something similar happens in the case of Asia, with the exemption of
On the contrary, in the case of EU the majority of countries are found in the second half of the table, with lower changes in the mentioned probability than both the average and the median changes.
As mentioned, our sample included 37 countries and only in eight cases the probability reduces:
Taking into account country size (measured by the population) we found that, in general, smaller countries are at the bottom of the table (
Regarding others characteristics such as whether the country was a colony or official language, we do not found a clear pattern of behavior.
6. Conclusions
We found that some individual characteristics have a significant effect on the probability of perceiving the highest level of corruption: gender, marital status and the level of education. When partial effects were calculated, it was found that the probability increases when we consider a woman instead of a man and when we change from people who are not married to those who are. On the other hand, this probability increases when we change to divorced people. Finally, when we
consider the two highest levels of education, the change in the probability is, as expected,
significant and negative.
Regarding religion and religiosity we found that the degree of religiosity does influence the perception of corruption; it decreases the probability. On the contrary, there is no significant difference among religious groups and atheists and other people.
Additionally, it was found that some economic variables also matter. Those who are working in a private enterprise and those who are self-employed are more likely to perceive a higher level of corruption and the opposite was found for those who work full-time. On the contrary, to be unemployed, to belong to a union or to be retired were not significant.
With respect to democracy, it was found that those who have a favorable opinion on the way that democracy works in his/her country, are more likely to perceive a lower level of corruption.
Taking into account fixed effects, as expected, all country dummies were significant. Regarding countries ranking, we found that all Latin American countries showed changes which are higher than the average and the same is true for ex-Socialist states and the majority of East Asian countries.
The highest changes in the analyzed probability were found in Latin American countries:
Similarly, all eight of the ex-Socialist states are in the top half of the table. The model also shows that in the case of the former Socialist states of Eastern Europe (
Moreover, almost all East Asian countries are found in the first half of the table with the exception of
Finally, only in eight countries we found a negative change, in general, they are small, rich and belong to the EU (
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Monday, August 04, 2008
And What About the Family Back Home? International Migration and Happiness
And What About the Family Back Home? International Migration and Happiness
Fernando Borraz, Susan Pozo, Maximo Rossi
ABSTRACT
In this study we use data on subjective well being and migration in Cuenca, one of the
Ecuador's largest cities. We examine the impact of migration on the happiness of the
family left behind. We use the propensity score matching estimator to take into account
the endogeneity of migration. Our results indicate that migration reduces the happiness of
those left behind. We also find that the monetary inflows (remittances) that accompany
migration do not increase happiness levels among recipients. These results suggest that
the family left behind cannot be compensated, for the increase in unhappiness that it
sustains on account of the emigration of loved ones, with remittances from abroad.
JEL Codes: A12, F22, I31.
Keywords: Happiness, migration, remittances.
A. Introduction
International migration can be motivated by a number of factors. Some migrate in
order to escape dire poverty. Others go into exile in search of religious or political
freedoms. Some move to invest in education, others to join relatives abroad, and still
others in pursuit of adventure and new opportunities. While a great deal of research has
analyzed the short-run and long-run outcomes for those that move to new areas (e.g.
Borjas, 2002; Chiswick, 2002; Smith, 2003; Card, 2005) in this paper we turn out focus
to the family left behind. In particular we consider whether the international migration of
one or more family members serves to increase or decrease the level of "happiness" of
household members who remain in the home community.
There are a number of reasons for expecting that migration and its potential byproducts
will continue to touch ever increasing numbers of individuals in the world. First
of all, the incidence of international migration has been rising. In 1970, about 2.2 percent
of the world’s population lived in a country other than their country of birth. In contrast,
by 2000, the foreign born accounted for close to 3 percent of the world’s population
(International Organization for Migration 2005, p. 379). A second reason for expecting
rising impacts of migration is due to the observation that emigration impacts more than
those moving to another country. Barriers to migration often make it difficult for whole
families to migrate. Therefore the incidence of migration-impacted households can
change with public policy which ultimately accentuates family separations and
dislocations. Massey (2006) has noted that increased enforcement at the US/Mexico
border implemented to stem illegal immigration has had the unintended effect of
extending the stay of unauthorized immigrants who would normally periodically return
home. Longer stays by unauthorized immigrant are likely to lead to longer-lasting and
permanent family separations. A third reason for expecting migration to touch larger
portions of the world population stems from policy shifts in immigration legislation
toward preferences for skill labor migration at the expense of family reunification. If
legislation continues to be developed along these lines, it follows that a larger circle of
individuals will be affected by migration due to longer-run family separations. Finally,
continued rapid technological progress of the sort observed in the more recent decades is
likely to continue, further reducing transportation and communication costs, easing travel
and facilitating international migration (UNDP, 1999).
Given the expectation of greater family dislocations via migration, what are our
priors on the impact of migration on happiness? We hypothesize that migration reduces
happiness levels of the family left behind. The emigration of a household member is
likely to directly cause disruptions in the household since the absent household member
may have been contributing to the household via market or house work. Thus, in addition
to discomfort stemming from the absence of loved ones, household and monetary
responsibilities now need to be assumed by other family members. The reallocation of
household chores and market work is likely to be costly for the remaining family
members, reducing happiness levels.
In this paper we also explore a second mechanism by which migration may
impact the household. Many immigrants remit money home. In fact, the raison d'etre
for migration in the first case is often couched in terms of obtaining opportunities to remit
money home. These monetary inflows, which many migrant households4 eventually
enjoy, may compensate in whole or in part for the losses felt on account of the absent
household member. In sum, we therefore seek to explore two questions. In the first we
ask whether migration decreases the level of happiness of the family back home. Next
we explore whether the monetary by-products (remittances) that often follow migration
increase the happiness levels of those households.
In order to examine the impact of migration on the happiness of the family left
behind we exploit information contained in the Discrimination and Economic Outcomes
Survey undertaken in Ecuador in 2006 under the auspices of the Inter-American
Development Bank.5 The survey contains information from 665 households: 480 in
Cuenca and 185 in San Fernando. In this paper we only include households residing in
Cuenca. Cuenca is the third largest city in Ecuador with nearly a half million inhabitants
while San Fernando is a very small town with approximately 3,000 inhabitants6. If the
household does claim a migrant member, limited information on that migration is
collected. Furthermore, information concerning the receipt of remittances is collected of
all households as is a question that assesses the "happiness" of the survey respondent.
B. Literature and Measurement Concerns
To what extent is it possible to discern "happiness" from surveys such as the one
in question? Di Tella and MacCulloch (2005) note that other social scientists including
psychologists have relied upon happiness data much like the data included in the
Discrimination and Economic Outcomes Survey that we are working with. They claim
that: “….well-being data pass what psychologists sometimes call validation exercises.
Pavot (1991), for example, finds that respondents who report that they are very happy
tend to smile more, an act that arguably is correlated with true internal happiness”.
Layard (2005) further rationalizes the use of happiness data by noting research in
neuroscience (Davidson, 2000) which have found that different regions in the brain are
associated with positive and negative affects. Thus when people describe their feelings
there is some biological basis and their claims are not purely subjective. Furthermore,
self-reported happiness is correlated with others' assessments of happiness. As such,
many argue that happiness can be measured and can be compared between individuals
and over time. In our case, respondents happiness are assessed by way of asking whether
they are "very satisfied," "fairly satisfied," "not satisfied," or "very unsatisfied" with their
life. With this information we construct a happiness dummy variable equal to "1" if the
house head is very satisfied or fairly satisfied with their life and "0" otherwise.
The literature on happiness suggests that a number of demographic, cultural and
economic factors play a role in individual's happiness. A review of the empirical
literature appears to concur with common expectations regarding the relationship
between personal variables and happiness. For example, separated individuals and
divorced individuals are found to be less happy (Clark and Oswald, 1994; Blanchard and
Oswald, 2000) and the degree of happiness is found to be "U-shaped" with respect to age
(Blanchflower and Oswald, 2000). Happiness decreases with age but eventually rises as
individuals get older. In contrast, education and happiness are found to be "inverse Ushaped.
More education increases happiness, but only up to a certain point. That is,
education can be "too much of a good thing," since beyond a certain point, additional
levels of education are found to contribute negatively to happiness levels (Hartlog et al.,
1997).
Other variables are found to have less obvious and sometimes even
counterintuitive impacts on happiness. For example, absolute income levels do not seem
to be important as determinants of happiness (Easterlin, 1974; Blanchflower and Oswald,
2000; Rayo and Becker, 2007). Relative income or wage standing, instead appear to
affect happiness levels (Frank, 1985; Easterlin, 2001, Miles et al., 2005). Interestingly,
self-employment is found to increase happiness for individuals in developed economies,
while having the opposite effect for individuals residing in developing economies
(Graham et al., 2001).
A number of other variables have been found to affect happiness, but with less
robust findings. For example, while it has been reported that women are happier than
men, the reported happiness among women is found to be declining over time. And while
religious denomination does not appear to impact happiness, religiosity, measured by
attendance at religious ceremonies, seems to be correlated with greater levels of
happiness (e.g. Blanchflower and Oswald 2000).
Our intent is to contribute to this literature by assessing the impact of migration
on happiness. To this end one might consider estimating a regression of the following
form:
Happiness for the head of household i (Hi) is presumed to depend on vectors of
household (Fi) and personal head of household (Pi) variables8. Following the literature
on happiness, the vector Fi includes absolute (or relative) per capita income and
household wealth. Personal (Pi) variables that are presumed to affect happiness are
gender, age and employment status. We would augment the standard happiness equation
to include one or a vector of migration related variables Mi, (whether there is a migrant in
the household j, whether the household j enjoys the receipt of remittances from abroad)
which may, in turn, have important impacts on happiness. Finally, εi is the unobserved
heterogeneity for the household i.
While (1) may seem a reasonable specification, it may not be appropriate if we
cannot justify that all right hand side variables in equation (1) are exogenous -- that there
is no correlation between the right hand side variables and the error term. This proves
problematic for the following reasons. Consider, for example, a very simple migration
variable -- a dummy variable assuming the value "1" for households that claim that one
of its members is a migrant and "0" otherwise. Correlation between the migration
dummy variable and the error term might very well exist on account of reverse causality.
While we are presuming that migration impacts happiness (e.g. family remaining behind
miss the migrant and their former contributions to the family and therefore are less
happy), it is also conceivable that happiness affects migration. For example, a very
unhappy household head may "drive family away" thereby prompting out-migration.
In addition to endogeneity originating from reverse causality, unobserved
heterogeneity may also play a role. Migrant households are not likely to be randomly
selected from the population, but we may not be able to observe and control for that
selection. For example, it may be that migrants tend to originate from households willing
to indulge in risk-taking behavior. But risk attitudes may also play a role in determining
happiness. If we cannot control for risk attitudes on the right hand side of (1) the
migration variable and error term will be correlated and our inferences regarding
migration and happiness will be biased.
Non-migration regressors in equation (1) may also suffer from endogeneity. One
obvious candidate is income. Positive work attitudes may very well be a factor in
determining income, but work attitudes are also likely to affect happiness. If we do not
observe and therefore control for work attitudes, this will be reflected in the error term
which will now be correlated with income, biasing the coefficient on income and
incorrectly assessing income's impact on happiness.
A common solution for endogeneity is to find instruments for the endogenous
variables in question. By finding variables that are correlated with the endogenous right
hand side variable yet not related to the dependent variable, we can purge the equation of
endogeneity and thereby obtain consistent estimates that reliably describe how the right
hand side variables affect happiness. In many cases, however, good instruments are
difficult to obtain. Furthermore, once we find good candidates, diagnostic tests of the
suitability of instruments are sometimes of questionable reliability, making it difficult to
justify their use. While we might venture to use instrumental variables to correct for one
endogenous regressor, we feel less confident about finding and justifying instruments for
all the regressors in equation (1) that are likely to be endogenous. For this reason we
seek an alternative technique to assess the impact of migration and migration related
variables on happiness.
D. Conclusions
In this paper we set out to study the impact of migration and remittances on the
happiness of the family left behind. We exploit the results of a survey conducted in
Cuenca, Ecuador in 2006 that collects information on both migration of family members
and on the receipt of remittances. In addition the survey asks a question about the level
of happiness experienced by the respondent, the household head. This allows us to check
for the impacts of migration and migration related variables on happiness.
17
As in any study of happiness, the primary challenge is to correct for endogeneity.
A large number of variables are likely to affect the "happiness" of individuals, but it is
also the case that happiness is likely to impact on many variables of interest. Given
selectivity in terms of who migrates, unobserved heterogeneity is also likely to
complicate the assessment of migration on happiness. Dealing with this endogeneity is
essential if we are to obtain credible and reliable results. In our case we choose to deal
with the endogeneity of happiness by using matching methods. To assess the impact of
migration on happiness we first estimated a propensity score for migration. These scores
were then used to find matched controls for those observations that were "treated" with
migration. We found that the matched controls were more happy than the treated. In
other words we were able to infer, in this case, that families with migrants are less happy.
Migration reduces the happiness of those left behind. In a second experiment we test to
see the impact of remittance recipiency on happiness. Are families who receive
remittances happier?
In conjunction, the two experiments suggest that remittances, the monetary
inflows that often accompany migration, cannot compensate for the absence of household
members through migration. This is interesting because it is often claimed that the raison
d'etra of international migration from developing to developed economies is the
acquisition of additional monetary resources from abroad for family back home to enjoy.
But it does not appear that these transfers can be used to raise the happiness levels of the
family left behind. As such one cannot compensate the family left behind for the absence
of loved ones with remittances from abroad.