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Brain drain and development: Brain drain and development: an overviewan overviewHillel RAPOPORTHillel RAPOPORT

Department of Economics, Bar-Ilan UniversityDepartment of Economics, Bar-Ilan Universityand EQUIPPE, University of Lille 2and EQUIPPE, University of Lille 2

Presentation for the AFD workshop on “Migration and Presentation for the AFD workshop on “Migration and Human Capital Development”, Paris, June 30, 2008Human Capital Development”, Paris, June 30, 2008

(based on joint work with Frederic Docquier)(based on joint work with Frederic Docquier)

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1. Introduction1. Introduction By “brain drain” we mean the international mobility By “brain drain” we mean the international mobility

of people with higher (tertiary) education – an elite of people with higher (tertiary) education – an elite in developing countries (about 5% of the workforce)in developing countries (about 5% of the workforce)

Numbers: by 2000 there were 180 million migrants Numbers: by 2000 there were 180 million migrants worldwide, half of them residing in OECD countries. worldwide, half of them residing in OECD countries. Of these 90 million migrants, 60 million were aged 25 Of these 90 million migrants, 60 million were aged 25 or more and can be split more or less equally across or more and can be split more or less equally across education levels (primary, secondary, tertiary).education levels (primary, secondary, tertiary).

Skilled migrants in OECD countries come from Skilled migrants in OECD countries come from Africa (7%), Asia (35%), Latin America (18%), Eastern Africa (7%), Asia (35%), Latin America (18%), Eastern Europe (8%) and from other OECD countries (32%).Europe (8%) and from other OECD countries (32%).

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Equal split across education categories but different Equal split across education categories but different trends: +70% for skilled migrants in the 1990s trends: +70% for skilled migrants in the 1990s against only +13% for unskilled migrants.against only +13% for unskilled migrants.

Three caveats:Three caveats:- illegal migration: not very serious as we are talking - illegal migration: not very serious as we are talking about STOCKS of SKILLED peopleabout STOCKS of SKILLED people- home/host country education: the definition of a - home/host country education: the definition of a highly skilled migrant may be either too inclusive or highly skilled migrant may be either too inclusive or too exclusive, depending on the outcome of interesttoo exclusive, depending on the outcome of interest- magnitude (headcounts) v. intensity (emigration - magnitude (headcounts) v. intensity (emigration rates): dramatic rise in brain drain magnitudes, but rates): dramatic rise in brain drain magnitudes, but not necessarily in intensities due to the concomitant not necessarily in intensities due to the concomitant rise in educational attainments in source countries.rise in educational attainments in source countries.

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What are the causes of this increased brain drain?What are the causes of this increased brain drain?

1. General rise in educational attainments in 1. General rise in educational attainments in developing countries (induces a mechanical rise developing countries (induces a mechanical rise even if migration propensities are constant across even if migration propensities are constant across education levels)education levels)

2. Globalization tends to increase positive self-2. Globalization tends to increase positive self-selection (skilled people agglomerate where human selection (skilled people agglomerate where human capital is already abundant, rising skill premium in capital is already abundant, rising skill premium in some countries – especially the US); however some countries – especially the US); however migration networks are a counter-acting forcemigration networks are a counter-acting force

3. 3. Selective immigration policiesSelective immigration policies since the 1980s: since the 1980s: point-systems in Australia, Canada et now in the UK, point-systems in Australia, Canada et now in the UK, H1-B Visas in the US, German Green Card, European H1-B Visas in the US, German Green Card, European Blue Card, French “immigration choisie”.Blue Card, French “immigration choisie”.

Should we (they) worry?Should we (they) worry?

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The answer has long been: YES and NOThe answer has long been: YES and NO

YES: the welfare loss to source countries YES: the welfare loss to source countries goes well beyond the marginal product of the goes well beyond the marginal product of the migrant due to fiscal, technological and migrant due to fiscal, technological and Lucas-type externalitiesLucas-type externalities

NO: there are positive feedback effects NO: there are positive feedback effects (remittances, return migration, business and (remittances, return migration, business and scientific networks).scientific networks).

How do these positive and negative effects How do these positive and negative effects balance out?balance out?

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Since the 1970s, the "pessimistic view" has Since the 1970s, the "pessimistic view" has been dominant.been dominant.

Illustration:Illustration:"The irony of international migration today is that "The irony of international migration today is that many of the people who migrate legally from poor to many of the people who migrate legally from poor to richer lands are the very ones that Third World richer lands are the very ones that Third World countries can least afford to lose: the highly educated countries can least afford to lose: the highly educated and skilled. Since the great majority of these migrants and skilled. Since the great majority of these migrants move on a permanent basis, this move on a permanent basis, this perverseperverse brain drain brain drain not only represents a loss of valuable human not only represents a loss of valuable human resources but could prove to be a serious constraint resources but could prove to be a serious constraint on the future economic progress of Third World on the future economic progress of Third World nations"nations" (Todaro, 1996: 119). (Todaro, 1996: 119).

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Recent, more optimistic view:Recent, more optimistic view:

New theoretical arguments:New theoretical arguments: migration prospects raise migration prospects raise the expected return to education and thus foster the expected return to education and thus foster investment in education; when this incentive effect investment in education; when this incentive effect dominates, the home country can gain.dominates, the home country can gain.

New data:New data: Docquier and Marfouk (World Bank, 2005), Docquier and Marfouk (World Bank, 2005), Beine, Docquier and Rapoport (WBER2007), Dumont Beine, Docquier and Rapoport (WBER2007), Dumont and Lemaître (OECD WP), Defoort (Population, 2008): and Lemaître (OECD WP), Defoort (Population, 2008): first comparative data sets on emigration rates by first comparative data sets on emigration rates by education levelseducation levels

New evidence:New evidence: the first cross-country studies found the first cross-country studies found evidence of positive effects for some channels (FDI, evidence of positive effects for some channels (FDI, technology adoption, human capital formation).technology adoption, human capital formation).

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Structure of the talk:Structure of the talk:

2. Facts:2. Facts: evolution and spatial distribution of evolution and spatial distribution of the brain drainthe brain drain

3. Theory and evidence: 3. Theory and evidence: on the various on the various “feedback” channels (remittances, return “feedback” channels (remittances, return migration, business and scientific networks)migration, business and scientific networks)

4. Theory and evidence: 4. Theory and evidence: on the “brain gain” on the “brain gain” channelchannel

5. Conclusions and policy5. Conclusions and policy insights insights

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2. How big is the brain drain?2. How big is the brain drain?Docquier, Lowell and Marfouk (World Bank, Docquier, Lowell and Marfouk (World Bank,

2005): use immigration data from all OECD 2005): use immigration data from all OECD countries to compute emigration rates by countries to compute emigration rates by education level for about 180 countries in education level for about 180 countries in 1990 and 2000. Results:1990 and 2000. Results:

Population sizes.Population sizes. Emigration rates decrease Emigration rates decrease with country size, are 7 times higher in small with country size, are 7 times higher in small countries (10% and 25% for total and skilled countries (10% and 25% for total and skilled emigration).emigration).

Income levels.Income levels. Middle income countries have Middle income countries have the highest total and skilled emigration rates, the highest total and skilled emigration rates, but the selection bias is highest (12!) in poor but the selection bias is highest (12!) in poor countries.countries.

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Results for selected countries in 2000:Results for selected countries in 2000:

Main exporters of brains: UK (1.441 million), Main exporters of brains: UK (1.441 million), Philippines (1.126), India (1.037), Mexico (0.923), Philippines (1.126), India (1.037), Mexico (0.923), Germany (0.848), China (0.816).Germany (0.848), China (0.816).

Skilled emigration rates >80% in Caribbean and Skilled emigration rates >80% in Caribbean and Central American countries such as Guyana, Central American countries such as Guyana, Jamaica or Haiti, and >50% in many African Jamaica or Haiti, and >50% in many African countries. 25 out of the 30 countries with highest countries. 25 out of the 30 countries with highest selection biases are in Africa.selection biases are in Africa.

Lowest skilled emigration rates: Turkmenistan Lowest skilled emigration rates: Turkmenistan (0.2%), Tadjikistan (0.4%), Saudi Arabia (0.5%), (0.2%), Tadjikistan (0.4%), Saudi Arabia (0.5%), Bhutan (0.6%) and... the United States (0.5%).Bhutan (0.6%) and... the United States (0.5%).

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Correction for age of entryCorrection for age of entry (Beine, Docquier and (Beine, Docquier and Rapoport (WBER2007)Rapoport (WBER2007)

Used data on immigrants’ age of entry (as a proxy Used data on immigrants’ age of entry (as a proxy for where education was acquired) for 75% of skilled for where education was acquired) for 75% of skilled migrants and estimated the age of entry structure of migrants and estimated the age of entry structure of the remaining 25% using a gravity model.the remaining 25% using a gravity model.

Their results show that controlling for age of entry Their results show that controlling for age of entry has a strong incidence for certain countries, mainly has a strong incidence for certain countries, mainly in Central America.in Central America.

However, the rankings based on corrected rates are However, the rankings based on corrected rates are roughly similar to the previous ones – suggesting roughly similar to the previous ones – suggesting cross-country comparisons results are robust to the cross-country comparisons results are robust to the use of corrected data.use of corrected data.

Examples (+0/+22): Haïti 84/74, Ghana 47/42, Cuba Examples (+0/+22): Haïti 84/74, Ghana 47/42, Cuba 29/17, Afghanistan 23/11, Mexico 15/10, Poland 13/12 29/17, Afghanistan 23/11, Mexico 15/10, Poland 13/12

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Panel data (Defoort, Population2008).Panel data (Defoort, Population2008).

Skilled emigration rates increased in the 1990s. True Skilled emigration rates increased in the 1990s. True with a longer time-horizon?with a longer time-horizon?

Panel data based on the six main immigration Panel data based on the six main immigration countries, 1975-2000 (one observation every five countries, 1975-2000 (one observation every five years).years).

Global stability in brain drain intensities as the rise Global stability in brain drain intensities as the rise in educational attainments has pushed selection in educational attainments has pushed selection biases downwards.biases downwards.

Increases in Central America, East Europe, Sub-Increases in Central America, East Europe, Sub-Saharan Africa, South-Central Asia, and decreases Saharan Africa, South-Central Asia, and decreases in the Caribbean and North Africa.in the Caribbean and North Africa.

Increases in countries such as Brazil, India, Mexico, Increases in countries such as Brazil, India, Mexico, or South Africa.or South Africa.

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Figure 1: Long-run trends in skilled emigration, 1975–2000 (Defoort (2008)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1975 1980 1985 1990 1995 2000

Central America

Sub-Saharan Africa

Northern Africa

Eastern Europe

South America

Middle EastSouth-Cent Asia

Eastern Asia

South-East Asia

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Figure 2. Males and females’ brain drain

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

50,0%

Males

Females

Source: Docquier, Lowell and Marfouk (2007)

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3. Theory and evidence: 3. Theory and evidence: feedback effectsfeedback effects

The “pessimistic” models of the 1970s (e.g., The “pessimistic” models of the 1970s (e.g., Bhagwati and Hamada, JDE1974) were Bhagwati and Hamada, JDE1974) were based on a number of critical assumptions:based on a number of critical assumptions:

(i)(i) Migrants self-select out of the general Migrants self-select out of the general populationpopulation

(ii)(ii) No uncertainty on migration opportunitiesNo uncertainty on migration opportunities(iii)(iii) Complete disconnection after emigration.Complete disconnection after emigration.

In such conditions, skilled emigration can only In such conditions, skilled emigration can only have a negative impact on human capital have a negative impact on human capital formation at home.formation at home.

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Waving the above listed assumptions allows Waving the above listed assumptions allows for potentially beneficial effects to kick-in:for potentially beneficial effects to kick-in:

migrants may return after a whilemigrants may return after a while the education decision may be made in a the education decision may be made in a

context of uncertainty regarding future context of uncertainty regarding future migration possibilitiesmigration possibilities

skilled migrants may send remittancesskilled migrants may send remittances skilled migrants may take part in business skilled migrants may take part in business

and other types of networks that indirectly and other types of networks that indirectly benefit the source country.benefit the source country.

We discuss these possibilities in the next sub-We discuss these possibilities in the next sub-sections.sections.

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3.1. Return and temporary migration3.1. Return and temporary migrationSelective immigration programs are often Selective immigration programs are often

intended for temporary migrants; in addition, intended for temporary migrants; in addition, temporary migration may be voluntary.temporary migration may be voluntary.

Potential benefits emphasized in recent Potential benefits emphasized in recent theoretical literature:theoretical literature:

Returnees contribute to diffuse the advanced Returnees contribute to diffuse the advanced technology learned abroad (Dos Santos and technology learned abroad (Dos Santos and Postel-Vinay, JPopE2003)Postel-Vinay, JPopE2003)

Negative selection in return migration that Negative selection in return migration that embodies a brain gain (Stark et al., EL1997)embodies a brain gain (Stark et al., EL1997)

Savings, managerial skills (McCormick & Savings, managerial skills (McCormick & Wahba, EJ2001, Dustmann & Kirchkamp, Wahba, EJ2001, Dustmann & Kirchkamp, JDE2002).JDE2002).

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Evidence on temporary/return skilled migrationEvidence on temporary/return skilled migration In general, return migrants are negatively self-In general, return migrants are negatively self-

selected; return skilled migration is more a selected; return skilled migration is more a consequence than a trigger of growth.consequence than a trigger of growth.

Example: proportion of PhDs in Science and Example: proportion of PhDs in Science and Engineering who return to Taiwan, Korea, China, Engineering who return to Taiwan, Korea, China, India, 1970s/1990s.India, 1970s/1990s.

Mixed results from case-studies (e.g., Indian IT Mixed results from case-studies (e.g., Indian IT workers: few returnees among engineers workers: few returnees among engineers (Saxeenian, 2001), many among high-level workers (Saxeenian, 2001), many among high-level workers (Commander et al., 2004)(Commander et al., 2004)

Agrawal, Kapur and McHale (2008): few returnees Agrawal, Kapur and McHale (2008): few returnees among Indian inventors, and perform poorlyamong Indian inventors, and perform poorly

No comparative evidence except for Rosenzweig No comparative evidence except for Rosenzweig (2007)(2007)

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3.2. Remittances3.2. Remittances RRemittances are a major source of emittances are a major source of

disposable income and can relax credit disposable income and can relax credit constraints on human and physical capital constraints on human and physical capital investment.investment.

Do skilled migrants remit more than Do skilled migrants remit more than unskilled migrants?unskilled migrants?

From the literature we know that the two From the literature we know that the two main motivations to remit are (familial) main motivations to remit are (familial) altruism and exchange (generally for altruism and exchange (generally for preparing one’s return).preparing one’s return).

It is therefore unclear whether the educated It is therefore unclear whether the educated remit more: higher income, but move with remit more: higher income, but move with family, on a more permanent basis.family, on a more permanent basis.

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Evidence on remittances Evidence on remittances

Macro data:Macro data: Faini (WBER2007) shows that remittances decrease Faini (WBER2007) shows that remittances decrease

with the proportion of skilled migrants. Confirmed with the proportion of skilled migrants. Confirmed after instrumenting by Nimni, Ozden and Schiff after instrumenting by Nimni, Ozden and Schiff (2008)(2008)

Micro data:Micro data: Kangasniemi et al. (2007): nearly half of Indian Kangasniemi et al. (2007): nearly half of Indian

medical doctors in the UK send remittances (16% of medical doctors in the UK send remittances (16% of income on average).income on average).

McCormick and Wahba (EJ2001): skill-acquisition McCormick and Wahba (EJ2001): skill-acquisition more important for educated migrants than savings more important for educated migrants than savings to access to self-employment.to access to self-employment.

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3.3. The role of networks3.3. The role of networks Business networks: reduces transaction Business networks: reduces transaction

costs between the host and home countries, costs between the host and home countries, which can favor bilateral trade and FDI which can favor bilateral trade and FDI inflows – complementarity v. substitutabilityinflows – complementarity v. substitutability

Scientific networks: allow for the diffusion of Scientific networks: allow for the diffusion of knowledge and favor technology adoptionknowledge and favor technology adoption

Political networks: allow for the diffusion of Political networks: allow for the diffusion of democratic values, norms of public behavior, democratic values, norms of public behavior, can lead to better institutionscan lead to better institutions

Each type of network effect may potentially Each type of network effect may potentially compensate the source country for any initial compensate the source country for any initial loss of skills.loss of skills.

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Evidence on business networksEvidence on business networksTrade:Trade: Bilateral trade: Gould (1994) for the U.S., Bilateral trade: Gould (1994) for the U.S.,

Head and Rees (1998) for Canada: demand Head and Rees (1998) for Canada: demand for ethnic goods + networksfor ethnic goods + networks

Combes et al. (2005) for intra-regional trade Combes et al. (2005) for intra-regional trade in France: business/social networksin France: business/social networks

Role of ethnic Chinese networks in Role of ethnic Chinese networks in international trade (Rauch and Trindade, international trade (Rauch and Trindade, 2002, Rauch and Casella, 2003) – solve 2002, Rauch and Casella, 2003) – solve information problems with trade in information problems with trade in differentiated productsdifferentiated products differentiated goods.differentiated goods.

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FDI:FDI: Kugler and Rapoport (2007), US bilateral Kugler and Rapoport (2007), US bilateral

data: complementarity between skilled and data: complementarity between skilled and services, substitutability between unskilled services, substitutability between unskilled and manufacturing FDIand manufacturing FDI

Confirmed by Javorcik et al. (2007) using IV.Confirmed by Javorcik et al. (2007) using IV. Kugler and Rapoport (ongoing), bilateral data Kugler and Rapoport (ongoing), bilateral data

for all pairs of countries: same qualitative for all pairs of countries: same qualitative results after correction for selection.results after correction for selection.

Docquier and Lodigiani (2006): cross-country Docquier and Lodigiani (2006): cross-country comparisons using aggregate emigration by comparisons using aggregate emigration by skill level; positive effect, stronger for skill level; positive effect, stronger for democratic countries and intermediate democratic countries and intermediate corruption levelscorruption levels

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Evidence on scientific networksEvidence on scientific networks Meyer (2001) provides lots of anecdotal Meyer (2001) provides lots of anecdotal

evidence on knowledge diffusion and brain evidence on knowledge diffusion and brain circulationcirculation

Agrawal, Kapur & McHale (2008), use patent Agrawal, Kapur & McHale (2008), use patent citation data for Indian inventors: co-location citation data for Indian inventors: co-location effect larger on average than diaspora effect, effect larger on average than diaspora effect, implying a net loss. However the latter is implying a net loss. However the latter is much stronger for the most cited patents, much stronger for the most cited patents, which are likely to have the highest valuewhich are likely to have the highest value

Kerr (2008): similar findings for more Kerr (2008): similar findings for more diasporas (e.g., Chinese) in more countries diasporas (e.g., Chinese) in more countries

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Starting point: migration is in essence Starting point: migration is in essence probabilistic (with internal and external probabilistic (with internal and external sources of uncertainty).sources of uncertainty).

Migration prospects raise the expected Migration prospects raise the expected return to education and may thus foster return to education and may thus foster domestic gross (pre-migration) human domestic gross (pre-migration) human capital formation: brain gaincapital formation: brain gain

If this incentive effect is strong enough to If this incentive effect is strong enough to dominate the brain drain, then there can be a dominate the brain drain, then there can be a net gain for the source countrynet gain for the source country

Theoretical models explore the conditions Theoretical models explore the conditions required for this to occur -- see Figure 3 required for this to occur -- see Figure 3

4. Brain drain and human capital4. Brain drain and human capitalformation: gross and net effectsformation: gross and net effects

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Figure 3: Probabilistic migration and human Figure 3: Probabilistic migration and human capital formationcapital formationP

p

Pn

p*0 1p’

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Micro-level evidence:Micro-level evidence: Kangasniemi et al. (SSM, 2007): 30% of Indian MDs Kangasniemi et al. (SSM, 2007): 30% of Indian MDs

in the UK say emigration prospects affected their in the UK say emigration prospects affected their education decisions, respondents say 40% current education decisions, respondents say 40% current medical students in India contemplate emigration.medical students in India contemplate emigration.

Lucas (2004), Philippines: “It is difficult to believe Lucas (2004), Philippines: “It is difficult to believe that these high, privately financed enrolment rates that these high, privately financed enrolment rates are not induced by the possibility of emigration. are not induced by the possibility of emigration. There are signs that the choice of major field of There are signs that the choice of major field of study ... responds to shifts in international demands. study ... responds to shifts in international demands. Higher education is almost certainly induced to a Higher education is almost certainly induced to a significant extent by the potential for emigration''. significant extent by the potential for emigration''.

Clemens (2005): dramatic rise in enrollment in Clemens (2005): dramatic rise in enrollment in nursing schools in South Africa following recent UK nursing schools in South Africa following recent UK recognition of foreign education for nurses.recognition of foreign education for nurses.

Batista et al. (2007) for Cape Verde, Gibson, Batista et al. (2007) for Cape Verde, Gibson, McKenzie & Stiltman (2008) for Tonga.McKenzie & Stiltman (2008) for Tonga.

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Macro-level evidence (Beine, Docquier and Macro-level evidence (Beine, Docquier and Rapoport, EJ2008)Rapoport, EJ2008)

cross-section of 127 developing countries, cross-section of 127 developing countries, using Docquier and Marfouk (2005).using Docquier and Marfouk (2005).

First step: testing for the brain gain hypothesis First step: testing for the brain gain hypothesis (i.e., the gross, or ex-ante effect).(i.e., the gross, or ex-ante effect).

We run a regression of the type:We run a regression of the type:ΔΔln(Hln(Ha,90-00a,90-00)=a)=a00+a+a11.ln(.ln(Ha,90Ha,90)+a)+a22.ln(p.ln(p9090)+……)+……

++εε We find a We find a positive effect of migration on gross positive effect of migration on gross

(pre-migration) human capital formation, with an (pre-migration) human capital formation, with an elasticity of about 5% (very stable across elasticity of about 5% (very stable across specifications and methods – OLS and IV).specifications and methods – OLS and IV).

Ongoing work shows findings are robust to the Ongoing work shows findings are robust to the use of other brain drain and HC measures, and use of other brain drain and HC measures, and to alternative functional formsto alternative functional forms

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Second step: net effect (beneficial/detrimental BD)Second step: net effect (beneficial/detrimental BD) Obviously what is important is not how many more Obviously what is important is not how many more

invest in education but how many remain in the invest in education but how many remain in the home countryhome country

To compute net effects for each country, we do the To compute net effects for each country, we do the following simulation exercise:following simulation exercise:

HHcf2000 cf2000 = H= Ha2000 a2000 - a- a22.ln(p.ln(ps90s90/p/pu90u90),),Where HWhere Hcf2000 cf2000 is the counterfactual ex-post HC stock is the counterfactual ex-post HC stock of the country in 2000, Hof the country in 2000, Ha2000a2000 is the observed ex-ante is the observed ex-ante HC stock (all natives), and pHC stock (all natives), and ps90s90/p/pu90u90 is the ratio of is the ratio of skilled to unskilled migration propensities in 1990.skilled to unskilled migration propensities in 1990.

Hence, HHence, Hcf2000cf2000 is the net of migration human capital is the net of migration human capital stock the country would have if skilled workers were stock the country would have if skilled workers were constrained to emigrate with the same probability as constrained to emigrate with the same probability as unskilled workers.unskilled workers.

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Let’s take a numerical example: assume Let’s take a numerical example: assume there are 100 natives in 1990, 20 of them there are 100 natives in 1990, 20 of them chose to educated and half of these skilled chose to educated and half of these skilled leave while out of 80 unskilled workers only leave while out of 80 unskilled workers only 10 have left by 2000.10 have left by 2000.

Assume emigration rates were also 4 times Assume emigration rates were also 4 times higher for the skilled in 1990.higher for the skilled in 1990.

Then HThen Hp2000 p2000 = 10/80 = 12.5%, H= 10/80 = 12.5%, Ha2000 a2000 = 20%, and= 20%, andHHcf2000 cf2000 = 0.2 - 0.05*ln(4) = 13%.;= 0.2 - 0.05*ln(4) = 13%.;

According to our computations, such a According to our computations, such a country has a counterfactual stock which is country has a counterfactual stock which is higher than its observed stock; it therefore higher than its observed stock; it therefore loses half a percentage point of HC – or a 4% loses half a percentage point of HC – or a 4% decrease. decrease.

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Once we do this simulation for all the Once we do this simulation for all the countries in our sample, we find that:countries in our sample, we find that:

- the losers are characterized by high migration - the losers are characterized by high migration rates (>20%) and/or high human capital rates (>20%) and/or high human capital stocks (also >20%)stocks (also >20%)

- more losersmore losers, which tend to lose , which tend to lose relatively relatively moremore, but winners represent 80% of the , but winners represent 80% of the sample population (include China, India, sample population (include China, India, Indonesia) -- hence the overall absolute net Indonesia) -- hence the overall absolute net gain for developing countries.gain for developing countries.

Two conclusions: the BD contributes to Two conclusions: the BD contributes to increase the number of skilled worldwide increase the number of skilled worldwide andand in the developing world; it is likely to affect in the developing world; it is likely to affect strongly thestrongly the World Distribution of Income. World Distribution of Income.

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Figure 4. Brain drain and (net) HC formationFigure 4. Brain drain and (net) HC formation

R 2 = 0.6142

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Emigration rate of tertiary-educated workers

Net

effe

ct o

n hu

man

cap

ital

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Beine, Defoort and Docquier (ongoing)Beine, Defoort and Docquier (ongoing)- use Defoort’s (2008) panel data.- use Defoort’s (2008) panel data.- estimate a - estimate a ββ-convergence equation for -convergence equation for gross human capital formation, with country gross human capital formation, with country and time fixed effects + interactions between and time fixed effects + interactions between emigration rates and income group dummiesemigration rates and income group dummies- results: fixed effects, β (negative), and - results: fixed effects, β (negative), and interaction between emigration and low-interaction between emigration and low-income status (positive) highly significantincome status (positive) highly significant- interpretation: there is convergence, and - interpretation: there is convergence, and the incentive effect is stronger for poor the incentive effect is stronger for poor countries, suggesting credit constraints are countries, suggesting credit constraints are not such a serious issue for higher not such a serious issue for higher education.education.

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5. Conclusion5. Conclusion Micro and macro evidence suggest positive impact of Micro and macro evidence suggest positive impact of

skilled emigration through business and diaspora skilled emigration through business and diaspora networks (FDI, technology) and some brain gain.networks (FDI, technology) and some brain gain.

This is starting to change the way people think about This is starting to change the way people think about the brain drain in academic and policy forumsthe brain drain in academic and policy forums

At a policy level, the fact that the brain drain has At a policy level, the fact that the brain drain has redistributive effects has implications for:redistributive effects has implications for:- immigration policy in receiving countries: should be - immigration policy in receiving countries: should be differentiated across origin countries without differentiated across origin countries without distorting the system too much (legal, moral issues).distorting the system too much (legal, moral issues).- education policy - education policy in sending countriesin sending countries : is it still : is it still optimal to subsidize education if people emigrate? optimal to subsidize education if people emigrate? Migration and subsidies can be substitutesMigration and subsidies can be substitutes- taxation policy in both: think afresh about the - taxation policy in both: think afresh about the Bhagwati tax (surplus sharing rather than Bhagwati tax (surplus sharing rather than compensation, feasibility issues).compensation, feasibility issues).