Human Capital Outflow under the Effect of Economic Misery and Institutional Quality: Empirical Evidence from Selected Developing Countries

Abstract

Objective: Broader macroeconomic, monetary, and fiscal policies require reliable variance estimates to minimise economic misery. This research aims to determine economic misery and institutional quality on human capital outflow.

Research Gap: An existing study evaluating the relationship of only one variable (economic misery) with human capital outflow. We are examining the relationship between human capital outflow and economic misery after applying the conditionality of a critical variable, the institutional quality index, another essential variable.

Design/Methodology/Approach: This study avails a fixed effect approach to assess the economic misery effect for the case of 68 developing nations between 2000 to 2019. The study uses the Hausman test technique for the reliability of the results.

The Main Findings: Our results substantiate that economic misery (a

combination of inflation and unemployment) positively and significantly impacts human capital outflow in developing countries. Institutional quality further adds to human capital outflow from developing countries to the rest of the world. Our empirical estimations reveal that economic misery conditional to institutional quality matters in stimulating the outflow of human capital. It contributes positively and statistically significantly in the case of developing countries of the world. Income inequality is also a significant contributor to human capital outflow.

Theoretical / Practical Implications of the Findings: Revisiting the developing nations' planning is recommended to minimise economic misery and increase institutional quality. The abstract reveals that if we control the misery index and institutional quality, the developing nations will achieve prosperity and compete with the developed world.

Originality/Value: The authors are the first to examine how economic misery and conditional institutional quality react to human capital outflow.