Rent-seeking, Income Inequality and Brain Drain: An Empirical Investigation for the MENA Region

The Middle East and North Africa region witnessed a key challenge with the rise in the level of brain drain to high-income developed countries. Political tensions, anti-freedom policies, and socioeconomic conditions are among the incentives which result in emigration of the highly skilled. Among socioeconomic conditions, income inequality is a key variable. The originality of this article is to highlight that, for Middle East and North Africa countries, income inequalities at home, and particularly the nature of inequalities, will channel high-skilled emigration towards developed countries. The most talented workers are also sensitive to the nature of inequalities in the country of origin. The latter is affected by the nature of institutions. However, the nature of talent has a different impact on high-skilled emigration. This paper argues that unproductive inequalities at home driven by rent-seeking institutions are negatively related to high-skilled emigration. That is, higher inequalities at home lead to less high-skilled emigration. Using data from the World Bank World Development Indicators and from the Economic Freedom Index from the Fraser Institute, the current study tests this hypothesis by relying on panel data of migrants originating from nine Middle East and North Africa countries, of which their work destination is 20 developed countries for the period between 1995–2020. Two econometric techniques, ordinary least squares and two-way fixed effects, were used. The results show that when income inequalities are conditioned by rent-seeking institutions, there is a negative relationship between inequalities and high-skilled emigration, suggesting that unproductive inequalities reduce emigration. Institutional reforms are thus needed to affect allocation of talents towards more productive careers, the latter being the main driver of entrepreneurship and economic growth.