Governance quality and net migration flows

This paper shows that governance quality promotes positive net inflows of high-skilled migrants. Home and foreign institutions influence both inflows and outflows, thus determining the net flows of college graduate migrants. Therefore, institutions can affect human capital through migration flows. Our empirical strategy is based on a random utility model from which we derive the net balance of migrants and an exclusion restriction to control for the selection of migrants. We test the predictions of the model using comprehensive matrices of migration by education level and a synthetic indicator of governance quality. We account for endogeneity concerns by means of an instrumental strategy and we disentangle the effect of the quality of domestic and foreign institutions on both inflows and outflows.