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America’s Best Aid Program? Impacts of Green Card Lottery on Ethiopian Households – Guest post by Teferi Mergo

Last year 14 million people around the world applied for the 50,000 green cards available through the U.S. Diversity Visa lottery, commonly known as the Green Card lottery. This program is lauded by some as the “only lawful shot at the American dream” that most people will ever have, but remains hugely controversial, with the House Judiciary committee voting in July this year to abolish it, with chairman Lamar Smith (R-TX) claiming it is an “invitation for fraud and a jackpot for terrorists”. But could this policy be one of the most successful foreign aid policies used by the United States?

Although international migration can yield large benefits to individual migrants from poor countries, the net impact of migration on the source countries is unclear. In particular, when migrants move away their remaining family members lose a share of their income, as well as in-kind contributions to household production, including the care of elderly parents and younger siblings. These losses can be particularly large if the most productive members of a family are most likely to emigrate.   To the extent that there are important externalities from human capital, and migrants tend to be relatively young and better-educated, emigration can also create wider social costs -- the so-called “brain drain” phenomenon.

Since migrants are typically positively selected (Chiswick, 1999Chiquiar and Hanson, 2005; McKenzie etal, 2006), non-experimental estimates of the effects of emigration may be biased if there are concerns with the identifying assumptions. Two recent studies on the impacts of emigration on sending families have tried to substantially address the causality issues in different ways. Yang (2008) evaluates the effects of remittances made by Filipino migrants on the well-being of their families, exploiting the depreciation of the Philippine peso as an exogenous source of variation in the amount of money sent home by migrants. Gibson, et al (2011) study winners of what is known as the Pacific Access Category (PAC), a migration lottery which allowed for some Tongan households to migrate to New Zealand annually. Interestingly, Yang argues that remittances have positive effects on family members who remain at home, while the latter find no evidence of such an effect; they find negative overall effects in the short-run of international migration on families left behind.;

The Green Card Lottery in Ethiopia

In my job market paper, I add to the literature by focusing on migrants from an extremely poor country – Ethiopia – who are randomly assigned the possibility of migration through the United States’ Diversity Visa lottery. My analysis is based on a specially designed survey (which I conducted) of households of previous DV lottery winners and lottery participants in Addis Ababa – the Ethiopian capital.   I use comparisons between the lottery winners and the (non-winning) participants to infer the causal effects of having a family member migrate to the U.S. Ideally, I would have liked to obtain a complete enumeration of the entire set of successful and unsuccessful DV applicants, from which one can select random samples of winners and losers. However, I was able to get only a complete listing of lottery winners from Addis-Ababa for the years 2006 through 2010. It is not possible to obtain a comparable list of DV lottery applicants from which to identify lottery losers. Fortunately, given the overwhelming popularity of the DV lottery, the low threshold requirements needed to enter it, and the length of time the lottery has been in operation, around 50% of Addis’ households are conservatively estimated to have played the lottery at one time or another, thus allowing me to draw a representative sample of the control group from the city, using a procedure that breaks the city into several logical enumeration areas (EA). I used a simple lottery in conjunction with a set of screening questions to select samples of the control and lottery non-playing households from a randomly chosen subset of these EAs. Since lottery winners are unevenly distributed, I picked a random sample of lottery winners from the various sub-districts (Kebelles), after stratifying the complete list of the winners by their Kebelles.

Impacts on those left behind

The study finds that having a family member win the lottery and migrate has significant positive effects on several dimensions of the remaining family’s standard of living. Families of DV migrants spend about 30% more on food, are thus better fed and have higher body mass indexes. Moreover, families of winners possess more and better quality consumer durables, which include personal computers, modern cooking stoves, household furniture and home entertainment appliances. Having a family member who won the DV lottery also gives families access to improved sources of drinking water and sanitation facilities. Winners’ families, however, have about the same savings and physical capital accumulation as other families. Most of the positive effects of emigration appear to be on the consumption side of the family budget.

The conclusion that international migration has no impacts on savings and the general business environment in Ethiopia should be considered tentative. The claims I am making in my paper are simply that, when migrants are young adults and the staying family members are their parents and other dependent siblings, migration has no measurable direct impact on savings and investment behavior and practices of the latter. There may be other channels (e.g. return migration) through which migration may be affecting these key variables. After accumulating sufficient physical, human and social capital, earlier migrants could be returning to their countries of origin, thus positively affecting the general business environment in sending areas.

A final interesting conclusion is that participants in the DV lottery (both winners and losers) have substantially higher outcomes than non-participants, suggesting that Ethiopian DV migrants are indeed positively selected. Non-participants have lower food spending, lower variety and value of durables they own, and less access to clean drinking water and convenient sanitation facilities. They are also the least likely to use banking facilities and save. Interestingly, however, lottery non-participants spend more on leisure activities.

The study contributes to the ongoing effort to more fully understand the effects of international migration. In particular, the finding that the benefits of emigration to sending families come principally in the form of increased consumption of goods and services is illuminating. By demonstrating that labor market integration can help sending households and regions in tangible ways, the paper might also help create some space for policy makers in aid-fatigued and migrant-recipient nations to pursue creative liberal migration policies, such as the DV lottery. 

Teferi Mergo is a job market candidate from University of California, Berkeley. For additional information, please visit his personal website here.