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Brain Drain and Brain Return: Theory and Application to Eastern-Western Europe

Recent empirical evidence seems to show that temporary migration is a widespread phenomenon, espe- cially among highly skilled workers who return to their countries of origin when these begin to grow. This paper develops a simple, tractable overlapping generations model that provides a rationale for return migra- tion and predicts who will migrate and who returns among agents with heterogeneous abilities. The model also incorporates the interaction between the migration decision and schooling: the possibility of migrating, albeit temporarily, to a country with high returns to skills produces positive schooling incentive effects. We use parameter values from the literature and data on return migration to simulate the model for the Eastern-Western European case. We then quantify the effects that increased openness (to migrants) would have on human capital and wages in Eastern Europe. We find that, for plausible values of the parameters, the possibility of return migration combined with the education incentive channel reverses the brain drain into a significant brain gain for Eastern Europe.

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Paper provided by The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria in its series NRN working papers with number 2009-19.

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Length: 34 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:jku:nrnwps:2009_19
Contact details of provider: Postal: NRN Labor Economics and the Welfare State, c/o Rudolf Winter-Ebmer, Altenbergerstr. 69, 4040 Linz
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  1. Stiglitz, Joseph E, 1975. "The Theory of "Screening," Education, and the Distribution of Income," American Economic Review, American Economic Association, vol. 65(3), pages 283-300, June.
  2. Bhagwati, Jagdish & Hamada, Koichi, 1974. "The brain drain, international integration of markets for professionals and unemployment : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 1(1), pages 19-42, April.
  3. Borjas, George J & Bratsberg, Bernt, 1996. "Who Leaves? The Outmigration of the Foreign-Born," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 165-76, February.
  4. J. N. Bhagwati & C. Rodriguez, 1975. "Welfare-Theoretical Analysis of the Brain Drain," Working papers 158, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Stark, Oded & Helmenstein, Christian & Prskawetz, Alexia, 1997. "A brain gain with a brain drain," Economics Letters, Elsevier, vol. 55(2), pages 227-234, August.
  6. Chau, Nancy H & Stark, Oded, 1999. "Migration under Asymmetric Information and Human Capital Formation," Review of International Economics, Wiley Blackwell, vol. 7(3), pages 455-83, August.
  7. Simon Commander & Rupa Chanda & Mari Kangasniemi & L. Alan Winters, 2008. "The Consequences of Globalisation: India's Software Industry and Cross-border Labour Mobility -super-1 ," The World Economy, Wiley Blackwell, vol. 31(2), pages 187-211, 02.
  8. Sebastian Gundel & Heiko Peters, 2008. "What determines the duration of stay of immigrants in Germany?: Evidence from a longitudinal duration analysis," International Journal of Social Economics, Emerald Group Publishing, vol. 35(11), pages 769-782, October.
  9. Barrett, Alan & O'Connell, Philip J., 2000. "Is There a Wage Premium for Returning Irish Migrants?," IZA Discussion Papers 135, Institute for the Study of Labor (IZA).
  10. Oded Stark & Christian Helmenstein & Alexia Prskawetz, 1998. "Human Capital Depletion, Human Capital Formation, and Migration: A Blessing in a "Curse"?," Departmental Working Papers _096, Chinese University of Hong Kong, Department of Economics.
  11. Michel Beine & Frédéric Docquier & Hillel Rapoport, 2001. "Brain drain and economic growth: theory and evidence," ULB Institutional Repository 2013/10449, ULB -- Universite Libre de Bruxelles.
  12. Michel Beine & Frédéric Docquier & Hillel Rapoport, . "Brain drain and human capital formation in developing countries: winners and losers?," ULB Institutional Repository 2013/10415, ULB -- Universite Libre de Bruxelles.
  13. Christian Dustmann & Yoram Weiss, 2007. "Return Migration: Theory and Empirical Evidence from the UK," British Journal of Industrial Relations, London School of Economics, vol. 45(2), pages 236-256, 06.
  14. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
  15. Catia Batista & Pedro C. Vicente, 2007. "Brain Drain or Brain Gain?Micro Evidence from an African Success Story," Economics Series Working Papers 343, University of Oxford, Department of Economics.
  16. Grogger, Jeffrey & Hanson, Gordon H., 2011. "Income maximization and the selection and sorting of international migrants," Journal of Development Economics, Elsevier, vol. 95(1), pages 42-57, May.
  17. Schiff, Maurice, 2005. "Brain gain : claims about its size and impact on welfare and growth are greatly exaggerated," Policy Research Working Paper Series 3708, The World Bank.
  18. Stark, Oded & Wang, Yong, 2001. "Inducing Human Capital Formation: Migration as a Substitute for Subsidies," Economics Series 100, Institute for Advanced Studies.
  19. Anna Iara, 2006. "Skill Diffusion by Temporary Migration? Returns to Western European Working Experience in the EU Accession Countries," Development Working Papers 210, Centro Studi Luca d\'Agliano, University of Milano.
  20. Susana Iranzo & Giovanni Peri, 2009. "Migration and Trade: Theory with an Application to the Eastern-Western European Integration," CReAM Discussion Paper Series 0905, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  21. McCormick, Barry & Wahba, Jackline, 2001. "Overseas Work Experience, Savings and Entrepreneurship amongst Return Migrants to LDCs," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 164-78, May.
  22. Daron Acemoglu, 2001. "Directed Technical Change," NBER Working Papers 8287, National Bureau of Economic Research, Inc.
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