The Role of Political Stability, Labor Market and Education on Migration: The Empirical Evidence from Sri Lanka

Abstract

This study employs annual data from Sri Lanka over the period of 1990 – 2018 in order to investigate the impact of political instability and the existence of violence, unemployment rate, wage differential and level of education on migration. ADF unit root test confirmed that none of the variables are I(2), which allows us to examine the long run relationship between the variables using Autoregressive Distributed Lag (ARDL) Bound testing method. AIC is suggested to adapt ARDL (1, 0, 0, 2, 0) model among the top 20 models. ARDL Bound testing approach identified the cointegrating relationship between the variables. The results of both ARDL Bound test and the ARDL version of ECM detected that unemployment rate, political instability and the existence of violence/terrorism and level of education have a positive and significant impact on net migration whereas wage differential do not have significant impact on it even though it affect the net migration negatively both in the long run and in the short run respectively. Also, the coefficients of long run results and the Wald test confirm that the impact of unemployment rate is higher than wage differential, political instability and level of education on net migration in the long run. The result of CUSUM test of selected ARDL model discloses that the estimated model is stable and this model passes the all the diagnostic test. Moreover, Granger causality test identified a causal relationship that stemming from unemployment to net migration, wage differential to net migration, political instability to net migration and level of education to net migration. These findings could be useful to policy makers when they formulating and implementing the policy related to labor markets and good governance.