The returns to the brain drain and brain circulation in sub-saharan africa

NBER WORKING PAPER SERIES

THE RETURNS TO THE BRAIN DRAIN AND BRAIN CIRCULATION IN SUB-SAHARAN AFRICA: SOME COMPUTATIONS USING DATA FROM GHANA Yaw Nyarko Working Paper 16813 http://www.nber.org/papers/w16813

NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 February 2011

I thank Bill Easterly with whom I collaborated on a precursor of this paper. I alsothank David N. Weil, Oliver Babson, Murray Liebbrandt and participants in NBER Africa Project conferences for very useful comments . I also thank the NBER Africa Project for funding related to the research presented here. I thank my Research assistants over the past few years for research work related to this paper - Victor Archavski, Moussa Blimpo, Silvana Melitsko and Nicole Hildebrant. The viewsexpressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. © 2011 by Yaw Nyarko. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.

The Returns to the Brain Drain and Brain Circulation inSub-Saharan Africa: Some Computations Using Data from Ghana Yaw Nyarko NBER Working Paper No. 16813 February 2011 JEL No. F35,F43,O0,O55 ABSTRACT We look at the decision of the government or "central planner" in the allocation of scarce governmental resources for tertiary education, as well as that for the individual. We provide estimates of the net present values, or cost and benefits. These includecosts of tertiary education; the benefits of improved skills of those who remain in the country; and also takes into account the flows of the skilled out of the country (the brain drain) as well as the remittances they bring into the country. Our results are positive for the net benefits relative to costs. Our results suggest that (i) there may be room for creative thinking about the possibilitythat the brain drain could provide mechanisms for dramatic increases in education levels within African nations; and (ii) by at least one metric, spending by African nations on higher education in this period yielded positive returns on the investment. Our results on the individual decision problem resolve a paradox in the returns to education literature which finds low returns to tertiaryeducation.

Yaw Nyarko Department of Economics New York University 19 W. 4th Street, 6th Floor New York, NY 10012 yaw.nyarko@nyu.edu

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Introduction

Over the past several decades, African nations have been spending large amounts of their limited government revenues on education, particularly higher education. Many African leaders and many in the press in many African countries often expressthe view that higher education is critical for African economic development. There are those, however, who criticize spending on higher education because of statistics showing that a high percentage of those who are educated leave the country (the Brain Drain) - they point to statistics showing that for some countries around 50% of the tertiary educated leave, and that many of those who leave wereeducated at government expense. The question we pose is fairly simple. Could it be that the huge investments in education, particularly at the tertiary level, were actually the right thing to do during the period we study - roughly the period from post independence to around the mid-2000’s? Specifically, could it be that spending on higher education, knowing full well the extent of the Brain Drain,could have been the right thing to do for many Sub-Saharan African nations, at least in terms of yielding positive and high net returns on investment. We show that taking into account remittances of brain drainers provides a metric under which the large expenses in tertiary education have been a success via the metric we use. As we will discuss in our concluding remarks, imaginative thinking...