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Does High-skilled Migration Affect Publicly Financed Investments?

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  • Volker Grossmann
  • David Stadelmann

Abstract

This paper analyzes the interaction between migration of high-skilled labor and publicly financed investment. We develop a theoretical model with multiple, ex ante identical jurisdictions where individuals decide on education and subsequent emigration. Migration decisions are based on differences in net income across jurisdictions which may occur endogenously. The interaction between income differences and migration flows gives rise to the potential of multiple equilibria: a symmetric equilibrium without migration and an asymmetric equilibrium in which net income levels differ among jurisdictions and trigger migration flows. In the former equilibrium, all jurisdictions have the same public investment level. In the latter one, public investment is high in host economies of skilled expatriates and low in source economies. We empirically test the hypothesis that emigration rates are negatively associated with publicly financed investment levels for OECD countries.
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  • Volker Grossmann & David Stadelmann, 2012. "Does High-skilled Migration Affect Publicly Financed Investments?," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 944-959, November.
  • Handle: RePEc:bla:reviec:v:20:y:2012:i:5:p:944-959
    DOI: roie.12005
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    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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