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

  • C. Simon Fan
  • Oded Stark

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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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0351.2007.00299.x
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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. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  2. Stark, Oded, 2004. "Rethinking the Brain Drain," World Development, Elsevier, vol. 32(1), pages 15-22, January.
  3. Stark, Oded, 2005. "The new economics of the brain drain," MPRA Paper 30939, University Library of Munich, Germany.
  4. 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.
  5. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
  6. Sicherman, Nachum, 1991. ""Overeducation" in the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 101-22, April.
  7. Eric A. Hanushek, 1996. "Measuring Investment in Education," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 9-30, Fall.
  8. 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, vol. 6(1), pages 1-13, January.
  9. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1997. "A brain gain with a brain drain," Economics Letters, Elsevier, vol. 55(2), pages 227-234, August.
  10. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1998. "Human Capital Depletion, Human Capital Formation, and Migration. A Blessing in a "Curse"?," Economics Series 55, Institute for Advanced Studies.
  11. Boucher, Steve & Stark, Oded & Taylor, J. Edward, 2005. "A Gain with a Drain? Evidence from Rural Mexico on the New Economics of the Brain Drain," Working Papers 190907, University of California, Davis, Department of Agricultural and Resource Economics.
  12. Fan, C. Simon, 2004. "Quality, trade, and growth," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 271-291, October.
  13. Galor, Oded & Tsiddon, Daniel, 1996. "Income Distribution and Growth: The Kuznets Hypothesis Revisited," Economica, London School of Economics and Political Science, vol. 63(250), pages S103-17, Suppl..
  14. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
  15. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  16. Fan, C. Simon & Stark, Oded, 2007. "International migration and "educated unemployment"," Journal of Development Economics, Elsevier, vol. 83(1), pages 76-87, May.
  17. Stark, Oded & Wang, Yong, 2001. "Inducing Human Capital Formation: Migration as a Substitute for Subsidies," Economics Series 100, Institute for Advanced Studies.
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