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Does Aid Induce Brain Drain? The Effect of Foreign Aid on Migration Selection

Author

Listed:
  • Darwin Ugarte

  • Vincenzo Verardi

    (Center for Research in the Economics of Development, University of Namur)

Abstract

Recent evidence suggests that aid induces migration. However, total migration is quite general from a policy perspective since what explains the welfare consequences of migration is the extent of emigration selection. In this paper we ask whether skilled or unskilled migration is more sensitive to aid and to the different mechanisms through which aid may affect self-selection among international emigrants. We show that aid induces positive selection. And that the effect on skilled migration is larger than the effect on unskilled migration. As possible mechanisms to explain the relation, we find that aid induces skilled migration by reducing transaction and information costs, by improving the distribution of schooling, and by helping to overcome liquidity constraints.

Suggested Citation

  • Darwin Ugarte & Vincenzo Verardi, 2010. "Does Aid Induce Brain Drain? The Effect of Foreign Aid on Migration Selection," Working Papers 1012, University of Namur, Department of Economics.
    • Handle: RePEc:nam:wpaper:1012
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    References listed on IDEAS

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    1. Alfonso Flores-Lagunes, 2007. "Finite sample evidence of IV estimators under weak instruments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 677-694.
    2. Jeff Dayton-Johnson & Louka T. Katseli, 2006. "Migration, Aid and Trade: Policy Coherence for Development," OECD Development Centre Policy Briefs 28, OECD Publishing.
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    More about this item

    Keywords

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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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