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Endogenous Skill Formation and the Source Country Effects of Emigration

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  • Hartmut Egger

    ()

  • Gabriel J Felbermayr

    ()

Abstract

In this paper we set up a simple theoretical framework to study the possible source country effects of skilled labor emigration. We show that for given technologies, labor market integration necessarily lowers GDP per capita in a poor source country of emigration, because it distorts the education decision of individuals. As pointed out by our analysis, a negative source country effect also materializes if all agents face identical emigration probabilities, irrespective of their education levels. This is in sharp contrast to the case of exogenous skill supply. Allowing for human capital spillovers, we further show that with social returns to schooling there may be a counteracting positive source country effect if the prospect of emigration stimulates the incentives to acquire education. Since, in general, the source country effects are not clear, we calibrate our model for four major source countries - Mexico, Turkey, Morocco, and the Philippines - and show that an increase in emigration rates beyond those observed in the year 2000 is very likely to lower GDP per capita in poor economies.

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Bibliographic Info

Paper provided by Department of Economics, University of Hohenheim, Germany in its series Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim with number 308/2009.

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Length: 31 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:hoh:hohdip:308

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Keywords: Emigration; endogenous skill formation; source country effects;

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  1. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
  2. Richard B. Freeman, 2006. "People Flows in Globalization," NBER Working Papers 12315, National Bureau of Economic Research, Inc.
  3. Jess Benhabib & Mark M. Spiegel, 2002. "Human capital and technology diffusion," Working Paper Series 2003-02, Federal Reserve Bank of San Francisco.
  4. Oded Stark & Christian Helmenstein & Alexia Prskawetz, 1998. "Human Capital Depletion, Human Capital Formation, and Migration: A Blessing in a "Curse"?," Departmental Working Papers _096, Chinese University of Hong Kong, Department of Economics.
  5. Egger, Hartmut & Falkinger, Josef & Grossmann, Volker, 2007. "Brain Drain, Fiscal Competition, and Public Education Expenditure," IZA Discussion Papers 2747, Institute for the Study of Labor (IZA).
  6. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
  7. Michel Beine & Fréderic Docquier & Hillel Rapoport, 2008. "Brain Drain and Human Capital Formation in Developing Countries: Winners and Losers," Economic Journal, Royal Economic Society, vol. 118(528), pages 631-652, 04.
  8. 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.
  9. Jens Südekum, 2010. "Human Capital Externalities and Growth of High- and Low-Skilled Jobs," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(1), pages 92-114, February.
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  11. Abdurrahman Aydemir & George J. Borjas, 2007. "Cross-Country Variation in the Impact of International Migration: Canada, Mexico, and the United States," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 663-708, 06.
  12. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  13. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  14. Stark, Oded & Wang, Yong, 2001. "Inducing Human Capital Formation: Migration as a Substitute for Subsidies," Economics Series 100, Institute for Advanced Studies.
  15. Hartmut Egger & Gabriel J. Felbermayr, 2007. "Endogenous Skill Formation and the Source Country Effects of International Labor Market Integration," CESifo Working Paper Series 2018, CESifo Group Munich.
  16. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Globalization and firm level adjustment with imperfect labor markets," Journal of International Economics, Elsevier, vol. 75(2), pages 295-309, July.
  17. Edward P. Lazear & Kathryn L. Shaw, 2009. "The Structure of Wages: An International Comparison," NBER Books, National Bureau of Economic Research, Inc, number laze08-1, July.
  18. Bhagwati, Jagdish & Hamada, Koichi, 1974. "The brain drain, international integration of markets for professionals and unemployment : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 1(1), pages 19-42, April.
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