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Fitting Kwame the cabbie into the brain drain equation

The following post is by Yaw Nyarko, a Professor of Economics at NYU and founding director of Africa House.

Not too long ago I got in a cab in New York with a Ghanaian taxi driver named Kwame. He remembered picking me up several years ago. What a memory he has. Anyway, he told me he has four children: one is a doctor and the two youngest are in private school. He said his kids were doing exceptionally well, and he is paying for elite schooling from his taxi driver salary.

Aid Watch has blogged about a paper I co-authored which argues four ways the benefits of brain drain could outweigh the costs to African countries. Kwame made those arguments real to me. I wondered again why we rarely consider the gains to the migrants themselves when talking about the African brain drain.

Kwame said he was glad to see me, but he nearly died this year. “Died?” I asked, not sure I heard him clearly through all the Manhattan traffic. Yes, he explained, he got malaria while in Ghana; it was cerebral malaria which was not properly treated. Clearly, this was one brain drainer who still went back to his home country and cared about public services there.

I was going to dinner with the Minister of Health for Ghana that same evening. I thought to myself that I should tell the Minister that Kwame believes something should be done about the open sewers in the country and there should be more insecticide spraying as was done in the Nkrumah era.

I got out of the taxi and left a huge tip. I felt very proud of Kwame as I thought of his four children educated off his taxi earnings. I also reminded myself to redo the calculations on the pluses and minuses of the brain drain to account for the Kwame’s.

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14 Comments

  1. Ehui wrote:

    Professor Nyarko, what do you think about the theory that the Kwame’s who drive taxi’s and are in other relatively unskilled jobs contribute even more (in remittances) than the Kofi’s who are doctors and engineers? Do you think this applies to Ghana as well or does the extended family structure make this irrelevant?

    Posted July 12, 2010 at 1:23 am | Permalink
  2. Ryan wrote:

    For those who have returned to Liberia after fleeing to the U.S., many find themselves vaulted up the career ladder to positions of high responsibility. The graduate degrees they earned and work experience they gained in the U.S. or elsewhere give them a substantial advantage over those who never left.

    It seems like Kwame may be interested in returning. Is the Ghanaian government paying enough attention to the barriers preventing him from going back? If he knew his malaria could be reliably treated, would he move back?

    Posted July 12, 2010 at 6:12 am | Permalink
  3. Yaw Nyarko wrote:

    Hello Ehui, great to hear from you. Yes, it is indeed commendable that the unskilled Kwame’s send so much in remittances. I am unsure about the theory that they send more than the skilled – early papers by R. Faini suggested this; more recent surveys by Bollard et. al. suggest that the unskilled remit more often, but the skilled remit larger amounts. It is a standard income effect. The unskilled should be commended for remitting so much from so little. The extended family at work, as you say!

    Posted July 12, 2010 at 6:13 pm | Permalink
  4. Yaw Nyarko wrote:

    Hello Ryan, yes, a lot of the returned migrants are doing very well in Africa – I am in Ghana now and I am a witness to a lot of such examples. No, unfortunately I do not see that much being done by the government of Ghana to encourage return. I will certainly ask Kwame about his return decision, and your question about Malaria treatment, which by the way, is very good in many Ghanaian hospitals.

    Posted July 12, 2010 at 6:27 pm | Permalink
  5. Ehui wrote:

    Professor Nyarko, whatever happened to the Diaspora Initiative under the Ministry of Tourism in Ghana? Or was that just another white political elephant?

    Posted July 12, 2010 at 8:48 pm | Permalink
  6. Ken Smith wrote:

    I know this represents the American dream but fees for UK independent school would be in excess of £10000 a year , £200 per week. At an estimate of £5 per hour , it would take 40hrs driving to earn this for one child’s fee with the entire earnings going on this. I guess the maths works by working much much more than 40hrs per week but I’m not sure it’s particularly safe for Kwame or his passengers to have him driving so much.

    Posted July 13, 2010 at 8:23 am | Permalink
  7. Great story! It gets tricky when sending money home. I am sure every African has a story about this one. Sometimes Kwame should look out for himself first, advance himself first then make a bigger impact.

    Posted July 13, 2010 at 9:51 am | Permalink
  8. fundamentalist wrote:

    Great story! Thanks for sharing. My home state, Oklahoma, has an initiative to encourage people who left the state and became successful to return home and start a business or bring theirs home. It hasn’t worked too well because the state is still very socialistic and punishes businesses severely with regulation and taxes. But it’s still a good idea because the most successful businesses in the state today were started by locals. Oklahoma is much like a third world country, only richer. We are mainly agricultural and mining (oil and gas). We need services and manufacturing, but headquartered here instead of branches because branches pay little in wages and leave when hard times hit. I think poor nations could use a similar strategy, but like Oklahoma they need to get over their socialism and learn to love business instead of punishing it.

    Posted July 13, 2010 at 10:50 am | Permalink
  9. Yaw Nyarko wrote:

    Dear Ehui, I have heard nothing further on the ministry of tourism initiatives. I think they called it the Joseph/Moses project. I guess there has been a change of government so everything done under the earlier minister, Jake ObetsebiI-Lamptey, is on hold. Politics!

    Posted July 13, 2010 at 1:50 pm | Permalink
  10. Yaw Nyarko wrote:

    Dear Fundamentalist, thanks for sharing your insight on Oklahoma. People and countries all over the world share similar concerns and issues. I will try to pass on Oklahoma’s strategies to the folks here in Ghana, where I am now.

    Posted July 13, 2010 at 1:53 pm | Permalink
  11. Yaw Nyarko wrote:

    Camilla, great point about when to give and when to advance oneself to as to be able to give more later. Tricky question indeed. In Ghana, in many areas there is a deep extended family system where richer relatives help the less fortunate. I am a beneficiary of that system. On the other hand, there are those who argue that this dilutes wealth accumulation and results in less entrepreneurial activity. Tricky question indeed!

    Posted July 13, 2010 at 1:56 pm | Permalink
  12. Dan Kyba wrote:

    re: extended family business system.

    The general business model I have worked with when overseas is the family business; the reason for this is a combination of culture and lack of effective third party mechanisms for contract enforcement. It is too much of a risk to hire outside the family group, so hiring is kept within the group where the person is subject to family and social controls; in other words transaction costs are lower by keeping things within the family.

    In developed countries, family businesses tend to be at a competitive disadvantage due to their higher transaction costs when compared to businesses that follow the open merit principle; this is because of efficient third party contract enforcement mechanisms and because family businesses are subject to the following inefficiencies:
    1) smaller pool of talent
    2) higher tolerance of slack, incompetent or dishonest behaviour
    3) introduction of family disputes into the business enterprise.

    I have seen little diminishing of entrepreneurial behaviour despite these challenges and overall, I would argue that businesses in developing countries are more efficient, but less effective than their counterparts in the developed world; the reason comes down to governance – they have to operate in a very challenging businesses environment which forces them to be very sharp in allocating resources and making decisions; their effectiveness is however restricted. In the developed world businesses often ride on the coattails of a positive enabling business environment which makes them more effective at the cost of being less efficient.

    I first noticed this difference when working in Russia, whose business class I regard as magnificent survivors. I have never been to Ghana, but I strongly suspect, there and in developing countries in general, if the rules of the game were brought up to developed country standards, their business communities would beat the pants off their counterparts in the USA, Canada etc.

    This is why, when such people immigrate to Canada, USA etc. they often as not become very successful entrepreneurs – they have been trained in a very hard school.

    Posted July 13, 2010 at 5:06 pm | Permalink
  13. fundamentalist wrote:

    Dan Kyba,
    Interesting post. Ethnic Chinese seem to have used the extended family system to prosper all over SE Asia and China. They use the system, along with targeted bribes, to protect their property in corrupt systems. Jews have used a similar approach throughout history. Any idea why this doesn’t work for other ethnic groups?

    Posted July 14, 2010 at 3:52 pm | Permalink
  14. Dan Kyba wrote:

    @fundamentalist

    For ethnic groups with with a diaspora, if there is something to trade and they have an agreement upon and means to enforce the formal and informal “rules of the game” (North), then you have the makings of an extended trading system reinforced by marriage and kinship ties. Among the ‘ethnic Chinese’, the Hakka have been particularly successful. Generally speaking, in Canada at least, all the immigrant groups have something going along this line.

    For the Jews in the middle ages life was tough; they were discouraged from entering the trades because they were religious outsiders; they were pushed out of agriculture since the Catholic Church could only collect tithes from follow believers and were pushed/pulled into trade and money lending by their own and the Church’s usury laws. They made the best of their limited remediable options and because their property rights were subject to the whims of the Kings they served and financed, they tended to prefer property that was easy to hide and move – ie: jewelry or coin but definitely not real estate – when, as often happened, the rules of game were arbitrarily changed against them.

    Posted July 14, 2010 at 7:09 pm | Permalink

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