Inducing human capital formation: migration as a substitute for subsidies
When productivity is fostered by an individual's own human capital as well as by the economy-wide average level of human capital, individuals under-invest in human capital. The provision of subsidies for the formation of human capital, conditional on the subsidy being self-financed by tax revenues, can bring the economy to its socially optimal level of human capital. Yet a strictly positive probability of migration to a richer country, by raising both the level of human capital formed by optimizing individuals in the home country and the average level of human capital of non-migrants in the country, can enhance welfare and nudge the economy toward the social optimum. Indeed, under a well-controlled, restrictive migration policy the welfare of all workers is higher than in the absence of this policy.
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References listed on IDEAS
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- Nancy H. Chau & Oded Stark, 1998.
"Human Capital Formation, Asymmetric Information, and the Dynamics of International Migration,"
Departmental Working Papers
_095, Chinese University of Hong Kong, Department of Economics.
- Stark, Oded & Chau, Nancy H., 1998. "Human Capital Formation, Asymmetric Information, and the Dynamics of International Migration," Economics Series 52, Institute for Advanced Studies.
- Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1997.
"A brain gain with a brain drain,"
Elsevier, vol. 55(2), pages 227-234, August.
- Stark, Oded, 1995. " Return and Dynamics: The Path of Labor Migration When Workers Differ in Their Skills and Information Is Asymmetric," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(1), pages 55-71, March.
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