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Emigration and human capital: who leaves, who comes back and what difference does it make?

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  • Aitor Lacuesta

    () (Banco de España)

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    Abstract

    This paper studies the loss of human capital that emigration generates in the country of origin. To that end I estimate the human capital distribution of emigrants had they not migrated. Unlike previous studies, I take into account the selection of migrants in terms of unobserved characteristics that affect their productivity. Wages in Mexico of those migrants who come back home after being abroad for some time will be crucial to learn something about the selection of non-returning migrants in terms of unobserved productivity. To test whether returning migrants' wages contain any useful information, I follow two steps. First, I use the model of Borjas and Bratsberg (1986) to show that, regardless of the cause for coming back, the distribution of abilities of non-returning migrants is more similar to the distribution of temporary migrants than to that of non-migrants. Moreover, I test some implications of the model in the data. Second, I show that returning migrants' wages reflect their pre-emigration productivity and are not affected by possible human capital gains derived from the decision to emigrate. Taking into account all this evidence, I use returning migrants' wages in Mexico upon return to estimate the distribution of human capital of non-returning migrants had they not migrated. I show that emigrants come form the middle part of the distribution of human capital in the origin country. I find evidence that taking unobserved human capital factors into account is relevant for the dispersion of the estimated distribution as well as for each of its quantiles. Moreover, it does not greatly affect the aggregate mean of human capital.

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    File URL: http://www.bde.es/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/06/Fic/dt0620e.pdf
    File Function: First version, August 2006
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    Bibliographic Info

    Paper provided by Banco de España in its series Banco de España Working Papers with number 0620.

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    Length: 43 pages
    Date of creation: Aug 2006
    Date of revision:
    Handle: RePEc:bde:wpaper:0620

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    Related research

    Keywords: emigration; human capital; productivity;

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    References

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    1. S. Fabiani & M. Druant & I. Hernando & C. Kwapil & B. Landau & C. Loupias & Fernando Martins & T. Mathä & R. Sabbatini & H. Stahl & A. Stokman, 2005. "The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence," Working Papers w200510, Banco de Portugal, Economics and Research Department.
    2. Álvarez, L. & Dias, D. & Dhyne, E. & Hoffmann, J. & Jonker, N. & Le Bihan, H. & Lünnemann, P. & Rumler, F. & Veronese, G. & Vilmunen, J., 2005. "Price Setting in the Euro Area: Some Stylized Facts from Individual Consumer Price Data," Working papers 136, Banque de France.
    3. Arturo Galindo & Alejandro Izquierdo & José Manuel Montero, 2006. "Real Exchange Rates, Dollarization and Industrial Employment in Latin America," Research Department Publications 4478, Inter-American Development Bank, Research Department.
    4. Luis J. Álvarez & Ignacio Hernando, 2005. "The price setting behaviour of spanish firms - evidence from survey data," Working Paper Series 538, European Central Bank.
    5. Luis J. �lvarez & Pablo Burriel & Ignacio Hernando, 2010. "Price-setting behaviour in Spain: evidence from micro PPI data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 105-121.
    6. Fung, K. C. & Garcia-Herrero, Alicia & Iizaka, Hitomi & Siu, Alan, 2005. "Hard or Soft? Institutional Reforms and Infrastructure Spending as Determinants of Foreign Direct Investment in China," Santa Cruz Department of Economics, Working Paper Series qt9377h519, Department of Economics, UC Santa Cruz.
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    Cited by:
    1. Catia Batista & Pedro C. Vicente, 2007. "Brain Drain or Brain Gain?Micro Evidence from an African Success Story," Economics Series Working Papers 343, University of Oxford, Department of Economics.

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