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

  • Oded Stark

    ()

  • C. Simon Fan

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.

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Paper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 07-01.

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Length: 39 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:edb:cedidp:07-01
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  1. 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.
  2. Stark, Oded, 2003. "Rethinking The Brain Drain," Discussion Papers 18770, University of Bonn, Center for Development Research (ZEF).
  3. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Stark, Oded & Wang, Yong, 2001. "Inducing Human Capital Formation: Migration as a Substitute for Subsidies," Economics Series 100, Institute for Advanced Studies.
  5. 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 1003-26, October.
  6. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1997. "A brain gain with a brain drain," Economics Letters, Elsevier, vol. 55(2), pages 227-234, August.
  7. Stark, Oded, 2005. "The new economics of the brain drain," MPRA Paper 30939, University Library of Munich, Germany.
  8. Fan, C. Simon & Stark, Oded, 2007. "International migration and "educated unemployment"," Journal of Development Economics, Elsevier, vol. 83(1), pages 76-87, May.
  9. 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.
  10. 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.
  11. Nachum Sicherman, 1987. "Over-Education in the Labor Market," University of Chicago - George G. Stigler Center for Study of Economy and State 48, Chicago - Center for Study of Economy and State.
  12. 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..
  13. Fan, C. Simon, 2004. "Quality, trade, and growth," Journal of Economic Behavior & Organization, Elsevier, vol. 55(2), pages 271-291, October.
  14. 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.
  15. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  16. Eric A. Hanushek, 1996. "Measuring Investment in Education," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 9-30, Fall.
  17. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
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