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The brain drain, 'educated unemployment', human capital formation, and economic betterment

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  • C. Simon Fan
  • Oded Stark

Abstract

Extending both the 'harmful brain drain' literature and the 'beneficial brain gain' literature, this paper analyzes both the negative and the positive impact of migration by skilled individuals in a unified framework. The paper extends the received literature on the 'harmful brain drain' by showing that in the short run, international migration can result in 'educated unemployment' and overeducation in developing countries, as well as a brain drain from these countries. A simulation suggests that the costs of 'educated unemployment' and overeducation can amount to significant losses for the individuals concerned, who may constitute a substantial proportion of the educated individuals. Adopting a dynamic framework, it is then shown that due to the positive externality effect of the prevailing, economy-wide endowment of human capital on the formation of human capital, a relaxation in migration policy in both the current period and the preceding period can facilitate 'take-off' of a developing country in the current period. Thus, it is suggested that while the migration of some educated individuals may reduce the social welfare of those who stay behind in the short run, it improves it in the long run. Copyright (c) 2007 The Authors Journal compilation (c) 2007 The European Bank for Reconstruction and Development .

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 15 (2007)
Issue (Month): (October)
Pages: 629-660

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Handle: RePEc:bla:etrans:v:15:y:2007:i::p:629-660

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  1. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  2. Stark, Oded, 2004. "Rethinking the Brain Drain," World Development, Elsevier, vol. 32(1), pages 15-22, January.
  3. Galor, Oded & Tsiddon, Daniel, 1996. "Income Distribution and Growth: The Kuznets Hypothesis Revisited," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 63(250), pages S103-17, Suppl..
  4. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(2), pages 501-26, May.
  5. Pritchett, Lant, 1995. "Divergence, big time," Policy Research Working Paper Series 1522, The World Bank.
  6. Stark, Oded & Wang, Yong, 2001. "Inducing Human Capital Formation: Migration as a Substitute for Subsidies," Economics Series, Institute for Advanced Studies 100, Institute for Advanced Studies.
  7. Stark, Oded & Fan, C. Simon, 2006. "International Migration and "Educated Unemployment"," Discussion Papers, University of Bonn, Center for Development Research (ZEF) 7126, University of Bonn, Center for Development Research (ZEF).
  8. Oded Stark & Christian Helmenstein & Alexia Prskawetz, 1998. "Human Capital Depletion, Human Capital Formation, and Migration: A Blessing in a "Curse"?," Departmental Working Papers, Chinese University of Hong Kong, Department of Economics _096, Chinese University of Hong Kong, Department of Economics.
  9. Howard Davies, 2005. "Trade in the Chinese 21st Century," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(1), pages 1-13, January.
  10. Fan, C. Simon, 2004. "Quality, trade, and growth," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 271-291, October.
  11. Nachum Sicherman, 1987. "Over-Education in the Labor Market," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 48, Chicago - Center for Study of Economy and State.
  12. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1707, C.E.P.R. Discussion Papers.
  13. Stark, Oded, 2005. "The new economics of the brain drain," MPRA Paper 30939, University Library of Munich, Germany.
  14. Beine, Michel & Docquier, Frederic & Rapoport, Hillel, 2001. "Brain drain and economic growth: theory and evidence," Journal of Development Economics, Elsevier, vol. 64(1), pages 275-289, February.
  15. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1997. "A brain gain with a brain drain," Economics Letters, Elsevier, vol. 55(2), pages 227-234, August.
  16. Eric A. Hanushek, 1996. "Measuring Investment in Education," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 9-30, Fall.
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Cited by:
  1. Stark, Oded & Casarico, Alessandra & Devillanova, Carlo & Uebelmesser, Silke, 2012. "On the formation of international migration policies when no country has an exclusive policy-setting say," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 420-429.
  2. Katarzyna Budnik, 2011. "Emigration Triggers: International Migration of Polish Workers between 1994 and 2009," National Bank of Poland Working Papers 90, National Bank of Poland, Economic Institute.
  3. Byra, Lukasz, 2013. "Rethinking the brain drain: Dynamics and transition," International Review of Economics & Finance, Elsevier, Elsevier, vol. 28(C), pages 19-25.

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