Our empirical analysis reveals that skilled migration prospects foster human capital formation of natives originating from low-income countries. As some of them will leave (or never return after being trained abroad), the net e¤ect on the quantity of human capital remaining in the country is ambiguous. A brain gain can be obtained if skilled emigration rates are not too high. To evaluate the global impact of migration prospects on human capital, let us use equation (11) and compute the steady state proportion of native educated as a function of …xed e¤ects and the skilled emigration rate. We have
hi;ss = exp
·® + ®i + ±ss+ °pmpi;ss
¡¯
¸
where ±ss, mpi;ss are the …xed e¤ects and skilled emigration rates observed in 2000 (superscript p stands for low-income countries).
Then, we compute the e¤ect on residents’ human capital (Hi;ss) by dropping
emigrants from the native population:
Hi;ss = (1 ¡ mi;ss)hi;ss
1 ¡ mi;sshi;ss¡ mi;ss(1 ¡ hi;ss) where mi;ss is the rate of migration of the unskilled.
Given the parameter set (®; ®i; °p), Figure 3 presents the simulated impact of skilled emigration rates and country-speci…c …xed e¤ects on the long-run proportion of educated in poor countries. The simulation is based on the following assumptions:
mi;ss = mi;ss=10 (in poor countries, skilled migration rates are on average ten times as high as unskilled migration rates) and ±ss = ±2000. We let the country-speci…c
…xed e¤ect vary between -.6 and -.3, which is the range of values obtained in poor countries.
It clearly appears that the …xed e¤ect has a strong impact on the long-run level of human capital, especially for low skilled emigration rates. This result is not surprising as …xed e¤ects captures many determinants of human capital formation such as ed-ucation policies, returns to skills, governance, ethnic discrimnation, etc. The skilled emigration induces an inverted U-shaped e¤ect on the long-run stock of human capi-tal. The latter result is highly compatible with the theoretical model depicted above.
We observe that moderate skilled emigration rates have a small but positive impact on human capital. However, when the emigration rate exceeds 50 percent, the human capital loss increases exponentially compared to the closed economy benchmark. The
”optimal” migration rate (i.e. maximizing residents’ human capital) is around 20 per-cent in countries where the …xed e¤ect is very low and around 30 perper-cent in countries where the …xed e¤ect is not too low. The brain drain is lower than 20-30 percent in many low-income countries, except in the smallest states. Our results suggest that most low-income countries could experience a net brain gain.
Figure 3: Skilled emigration rates, …xed e¤ects and residents’ human capital in low-income countries
0.00 0.10
0.20 0.30
0.40 0.50
0.60 0.70
0.80 0.90
1.00
-0.60-0.53-0.46-0.39-0.32-0.25 0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Skilled emigration rate
FE
In poor countries, …xed e¤ects range from -0.6 to -0.3. Simulation are based on classi…cation 3 in Table 2, and column (3) in Table 3.
6 Conclusion
The new growth literature has stressed the role of human capital for economic de-velopment. Hence, the emigration of skilled workers is usually blamed for depriving developing countries of their most talented workers. This view has been challenged by a new literature putting forward multiple positive feedback e¤ects for sending countries. However, the empirical literature on the consequences of the brain drain remains quite poor. In particular, several contributions demonstrate that skilled migration prospects can increase human capital accumulation ex-ante, possibly
turn-ing the brain drain into a brain gain. Due to data limitations, existturn-ing empirical studies are based on cross-sectional regressions and su¤er from the bias of omitted variables/unobserved heterogeneity, and the di¢culty to solve potential endogeneity problems.
Taking advantage of a new panel data set of emigration rates by education level, this paper con…rms the existence of a strong incentive mechanism when unobserved heterogeneity and endogeneity issues are serioulsy addressed. In addition, it comes out that such an incentive e¤ect is only perceptible among low-income countries for which migration premia are high. In middle-income and rich countries, migration prospects have no signi…cant impact on education decisions so that skilled emigration rates directly re‡ect their loss of human capital. In poor countries, the net e¤ect of the brain drain on human capital is positive when the brain drain is not too high (say lower than 30 percent). This is the case of many countries, except the smallest states. When the emigration rate exceeds that threshold, the cost of the brain drain increases exponentially.
Many questions and sources of uncertainty remain in the literature on the conse-quences of the brain drain. Where did migrants acquire education? Can the outsourc-ing of education explain the positive correlation between emigration rates and human capital investments? Does the outsourcing of education lead to important return ‡ows of educated migrants? Is the incentive e¤ect depending on the destination? Does the brain drain induce severe occupational shortage? In our regressions, many of these factors (outsourcing of education, return migration, etc) are likely to be assimilated to pure incentive mechanisms. It would be helpful to build new micro surveys explicitly conducted to capture the relationship between emigrants and their country of origin, to collect more data and case-studies on the sectoral impact of the brain drain, to
improve the quality of human capital indicators of residents. However, within the limits of a macroeconomic approach, our analysis provides an additional argument in favor of the incentive mechanism. A global research agenda based on multi-level studies (combining country cases, micro and macro studies) would be needed to re…ne the nature of the e¤ect captured in our regressions.
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