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Does Aid Induce Brain Drain? The Effect of Foreign Aid on Migration Selection

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  • Darwin Ugarte

    ()

  • Vincenzo Verardi

    ()
    (Center for Research in the Economics of Development, University of Namur)

Abstract

Recent evidence suggests that aid induces migration. However, total migration is quite general from a policy perspective since what explains the welfare consequences of migration is the extent of emigration selection. In this paper we ask whether skilled or unskilled migration is more sensitive to aid and to the different mechanisms through which aid may affect self-selection among international emigrants. We show that aid induces positive selection. And that the effect on skilled migration is larger than the effect on unskilled migration. As possible mechanisms to explain the relation, we find that aid induces skilled migration by reducing transaction and information costs, by improving the distribution of schooling, and by helping to overcome liquidity constraints.

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File URL: http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1012.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by University of Namur, Department of Economics in its series Working Papers with number 1012.

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Length: 39 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:nam:wpaper:1012

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Keywords: Foreign aid; International migration; Self-selection; Brain drain.;

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  1. Jeff Dayton-Johnson & Louka T. Katseli, 2006. "Migration, Aid and Trade: Policy Coherence for Development," OECD Development Centre Policy Briefs 28, OECD Publishing.
  2. Alfonso Flores-Lagunes, 2007. "Finite sample evidence of IV estimators under weak instruments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 677-694.
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