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Inducing human capital formation: migration as a substitute for subsidies

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  • Stark, Oded
  • Wang, Yong

Abstract

When productivity is fostered by an individual's own human capital as well as by the economy-wide average level of human capital, individuals under-invest in human capital. The provision of subsidies for the formation of human capital, conditional on the subsidy being self-financed by tax revenues, can bring the economy to its socially optimal level of human capital. Yet a strictly positive probability of migration to a richer country, by raising both the level of human capital formed by optimizing individuals in the home country and the average level of human capital of non-migrants in the country, can enhance welfare and nudge the economy toward the social optimum. Indeed, under a well-controlled, restrictive migration policy the welfare of all workers is higher than in the absence of this policy.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 86 (2002)
Issue (Month): 1 (October)
Pages: 29-46

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Handle: RePEc:eee:pubeco:v:86:y:2002:i:1:p:29-46

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Nancy H. Chau & Oded Stark, 1998. "Human Capital Formation, Asymmetric Information, and the Dynamics of International Migration," Departmental Working Papers _095, Chinese University of Hong Kong, Department of Economics.
  2. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1997. "A Brain Gain with a Brain Drain," Economics Series 45, Institute for Advanced Studies.
  3. Stark, Oded, 1995. " Return and Dynamics: The Path of Labor Migration When Workers Differ in Their Skills and Information Is Asymmetric," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(1), pages 55-71, March.
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