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Ability Drain

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  • Schiff, Maurice

    () (World Bank)

Abstract

Is ability drain (AD) economically significant? That immigrants or their children founded over 40% of the Fortune 500 US companies suggests it is. Moreover, brain drain (BD) induces a brain gain (BG). This cannot occur with ability. Nonetheless, while BD has been studied extensively, AD drain has not. I examine migration's impact on ability (a), education (h), and productive human capital or 'skill' (s) – which includes both a and h – for source country residents and migrants, under the points system (PS), 'vetting' system (VS), which accounts for s (e.g., US H1-B visa), and 'new' points system (NS), which combines PS and VS (e.g., Canada, 2015+). I find that i) Migration reduces (raises) source country residents' (migrants') average ability and has an ambiguous (positive) impact on their average education and skill, with a net skill drain more likely than a net BD; ii) AD is greater than BD; iii) the effects increase with ability's inequality or variance V(a); iv) the policies in turn raise V(a), V(h) and V(s), with V(a) > V(h); v) effects in i) - iv) are larger under VS than PS; vi) residents' (migrants') consumption is lower (higher) under either policy than under a closed economy; vii) consumption falls with ability's inequality; viii) contrary to the situation with education and skill, consumption inequality is lower under VS than PS; viii) ability, education and skill (consumption) under NS are identical (is larger than) the combined values under PS and VS. Orders of magnitude, empirical research plans, and policy implications are provided.

Suggested Citation

  • Schiff, Maurice, 2015. "Ability Drain," IZA Discussion Papers 9542, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9542
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    References listed on IDEAS

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    1. Akgüç, Mehtap & Liu, Xingfei & Tani, Massimiliano & Zimmermann, Klaus F., 2016. "Risk attitudes and migration," China Economic Review, Elsevier, vol. 37(C), pages 166-176.
    2. Frédéric Docquier & Hillel Rapoport, 2012. "Globalization, Brain Drain, and Development," Journal of Economic Literature, American Economic Association, vol. 50(3), pages 681-730, September.
    3. 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.
    4. Henrik Jacobsen Kleven & Camille Landais & Emmanuel Saez, 2013. "Taxation and International Migration of Superstars: Evidence from the European Football Market," American Economic Review, American Economic Association, vol. 103(5), pages 1892-1924, August.
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    More about this item

    Keywords

    brain gain; brain drain; ability drain; vetting system; points system; migration;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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