Brain drain

SERIES

IZA DP No. 4207

PAPER

Brain Drain in Globalization: A General Equilibrium Analysis from the Sending Countries’ Perspective
Luca Marchiori I-Ling Shen Frédéric Docquier

DISCUSSION

June 2009

Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor

Brain Drain in Globalization: A General Equilibrium Analysis from the Sending Countries’ PerspectiveLuca Marchiori
Catholic University of Louvain and University of Luxembourg

I-Ling Shen
Catholic University of Louvain, University of Geneva and IZA

Frédéric Docquier
Catholic University of Louvain, Belgian National Fund of Scientific Research and IZA

Discussion Paper No. 4207 June 2009

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IZA Discussion Paper No. 4207 June 2009ABSTRACT Brain Drain in Globalization: A General Equilibrium Analysis from the Sending Countries’ Perspective
The paper assesses the global effects of brain drain on developing economies and quantifies the relative sizes of various static and dynamic impacts. By constructing a unified generic framework characterized by overlapping-generations dynamics and calibrated to real data, this studyincorporates many direct impacts of brain drain whose interactions, along with other indirect effects, are endogenously and dynamically generated. Our findings suggest that the short-run impact of brain drain on resident human capital is extremely crucial, as it does not only determine the number of skilled workers available to domestic production, but it also affects the sending economy’s capacity toinnovate or to adopt modern technologies. The latter impact plays an important role particularly in a globalized economy where capital investments are made in places with higher production efficiencies ceteris paribus. Hence, in spite of several empirically documented positive feedback effects, those countries with high skilled emigration rates are the most candid victims to brain drain since theyare least likely to benefit from the “brain gain” effect, and thus suffering from declines of their resident human capital.

JEL Classification: Keywords:

F22, J24, O15

brain drain, capital flow, development, human capital, remittances

Corresponding author: I-Ling Shen Department of Econometrics University of Geneva Uni Mail 40 Bd du Pont d'Arve CH-1211 Geneva 4 Switzerland E-mail:i-ling.shen@unige.ch

1. Introduction Is brain drain a curse or a boon for the sending countries? In the survey by Commander et al. (2004), while different forces at work are discussed and several possible positive and negative effects of skilled emigration are reviewed, they conclude by suggesting that “much more research is needed to pin down the relevant magnitudes.” In order to study the global...