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The Brain Drain, "Educated Unemployment," Human Capital Formation, and Economic Betterment

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  • Stark, Oded
  • Fan, C. Simon

Abstract

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 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.

Suggested Citation

  • Stark, Oded & Fan, C. Simon, 2007. "The Brain Drain, "Educated Unemployment," Human Capital Formation, and Economic Betterment," Discussion Papers 7122, University of Bonn, Center for Development Research (ZEF).
  • Handle: RePEc:ags:ubzefd:7122
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    References listed on IDEAS

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    1. Howard Davies, 2005. "Trade in the Chinese 21st Century," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(1), pages 1-13, January.
    2. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1997. "A brain gain with a brain drain," Economics Letters, Elsevier, vol. 55(2), pages 227-234, August.
    3. 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 103-117, Suppl..
    4. Fan, C. Simon & Stark, Oded, 2007. "International migration and "educated unemployment"," Journal of Development Economics, Elsevier, vol. 83(1), pages 76-87, May.
    5. Oded Stark, 2005. "The New Economics of the Brain Drain," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(2), pages 137-140, April.
    6. 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.
    7. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    8. Sicherman, Nachum, 1991. ""Overeducation" in the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 9(2), pages 101-122, April.
    9. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1998. "Human capital depletion, human capital formation, and migration: a blessing or a "curse"?," Economics Letters, Elsevier, vol. 60(3), pages 363-367, September.
    10. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    11. Fan, C. Simon, 2004. "Quality, trade, and growth," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 271-291, October.
    12. 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.
    13. Stark, Oded & Wang, Yong, 2002. "Inducing human capital formation: migration as a substitute for subsidies," Journal of Public Economics, Elsevier, vol. 86(1), pages 29-46, October.
    14. Stark, Oded, 2004. "Rethinking the Brain Drain," World Development, Elsevier, vol. 32(1), pages 15-22, January.
    15. 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.
    16. Eric A. Hanushek, 1996. "Measuring Investment in Education," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 9-30, Fall.
    17. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
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    Citations

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    Cited by:

    1. Makulec, Agnieszka., 2014. "Philippines' bilateral labour arrangements on health-care professional migration : in search of meaning," ILO Working Papers 994869923402676, International Labour Organization.
    2. Katarzyna Budnik, 2011. "Emigration Triggers: International Migration of Polish Workers between 1994 and 2009," NBP Working Papers 90, Narodowy Bank Polski, Economic Research Department.
    3. Masso, Jaan & Eamets, Raul & Mõtsmees, Pille, 2013. "The Effect of Migration Experience on Occupational Mobility in Estonia," IZA Discussion Papers 7482, Institute for the Study of Labor (IZA).
    4. repec:ilo:ilowps:486369 is not listed on IDEAS
    5. repec:ilo:ilowps:486992 is not listed on IDEAS
    6. Stark, Oded & Byra, Lukasz & Casarico, Alessandra & Uebelmesser, Silke, 2017. "A critical comparison of migration policies: Entry fee versus quota," Regional Science and Urban Economics, Elsevier, vol. 66(C), pages 91-107.
    7. repec:gam:jecomi:v:6:y:2018:i:1:p:2-:d:125115 is not listed on IDEAS
    8. Zhang, Yi & Matz, Julia Anna, 2017. "On the train to brain gain in rural China," Discussion Papers 252443, University of Bonn, Center for Development Research (ZEF).
    9. Muhammad Ali & Abiodun Egbetokun & Manzoor Hussain Memon, 2018. "Human Capital, Social Capabilities and Economic Growth," Economies, MDPI, Open Access Journal, vol. 6(1), pages 1-18, January.
    10. Byra, Lukasz, 2013. "Rethinking the brain drain: Dynamics and transition," International Review of Economics & Finance, Elsevier, vol. 28(C), pages 19-25.
    11. Hung-Ju Chen & Xiangbo Liu, 2015. "International Migration, Skill Acquisition and Matching Frictions," Economics Bulletin, AccessEcon, vol. 35(3), pages 1469-1476.
    12. Stark, Oded & Casarico, Alessandra & Devillanova, Carlo & Uebelmesser, Silke, 2012. "On the formation of international migration policies when no country has an exclusive policy-setting say," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 420-429.

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    Keywords

    Labor and Human Capital;

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