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Financial Liberalization and the Brain Drain: A Panel Data Analysis

Author

Listed:
  • Mitra, Aniruddha

    () (Bard College)

  • Bang, James T.

    () (St. Ambrose University)

  • Wunnava, Phanindra V.

    () (Middlebury College)

Abstract

This paper explores the impact of financial liberalization on the migration of high skilled labor from 46 countries to the OECD, taken at five year intervals over the period 1985-2000. Using an exploratory factor analysis, we are able to distinguish between two dimensions of financial liberalization, namely the robustness of the markets and their freedom from direct government control. We find that a standard deviation improvement in the robustness of the source country financial sector magnifies the extent of brain drain by a factor of about four percentage points on the average. However, a corresponding increase in the freedom of the source country financial sector from government control has a modest negative impact on the emigration of high skilled labor and the effect is not statistically significant. Further, the impact of improved financial sector robustness on selection is more pronounced for non-OECD economies than for OECD nations, which experience virtually no impact on skilled emigration.

Suggested Citation

  • Mitra, Aniruddha & Bang, James T. & Wunnava, Phanindra V., 2011. "Financial Liberalization and the Brain Drain: A Panel Data Analysis," IZA Discussion Papers 5953, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5953
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    References listed on IDEAS

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    More about this item

    Keywords

    institutions; financial liberalization; immigration; brain drain;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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