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Does return migration affect entrepreneurship? This question has important implications for the debate on the economic development effects of migration for origin countries. The existing literature has, however, not addressed how the estimation of the impact of return migration on entrepreneurship is affected by double unobservable migrant self-selection, both at the initial outward migration and at the final inward return migration stages. This paper uses a representative household survey conducted in Mozambique in order to address this research question. [The authors] exploit variation provided by displacement caused by civil war in Mozambique, as well as social unrest and other shocks in migrant destination countries.

The results lend support to negative unobservable self-selection at both and each of the initial and return stages of migration, which results in an under-estimation of the effects of return migration on entrepreneurial outcomes when using a 'naive' estimator not controlling for self-selection. Indeed, 'naive' estimates point to a 13 [percentage point] increase in the probability of owning a business when there is a return migrant in the household relative to non-migrants only, whereas excluding the double effect of unobservable self-selection, this effect becomes significantly larger - between 24 [percentage points] and 29 [percentage points], depending on the method of estimation and source of variation used.

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Does emigration really drain human capital accumulation in origin countries? This paper explores a unique household survey purposely designed and conducted to answer this research question. We analyze the case of Cape Verde, a country with allegedly the highest ‘brain drain’ in Africa, despite a marked record of income and human capital growth in recent decades. Our micro data enables us to propose the first explicit test of ‘brain gain’ arguments according to which the prospects of own future migration can positively impact educational attainment. According to our results, a 10 [percentage points] increase in the probability of own future migration may improve the average probability of completing intermediate secondary schooling by eight [percentage points] for individuals who do not migrate before age 16. Strikingly, this same 10 [percentage points] increase may raise the probability of completing intermediate secondary schooling by 11 [percentage points] for an individual whose parents were both non migrants when the educational decision was made. Our findings are robust to the choice of instruments and econometric model. Overall, we find that there may be substantial human capital gains from lowering migration barriers.

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