Ability Drain

Due to paucity of data, assessing whether ability drain is economically significant is difficult, though the fact that immigrants or their children founded over 40% of the Fortune 500 US companies strongly suggests that it is. Moreover, brain-drain-induced brain gain cannot occur with ability. Nonetheless, while brain drain has been studied extensively, ability drain has not. This paper examines migration’s impact on productive human capital or ‘skill’ (s) – which includes both ability (a) and education (h) – for source country residents and migrants, under the points system (PS), which accounts for education (e.g., Canada’s pre-2015 policy), ‘vetting’ system (VS), which also accounts for ability (e.g., US H1-B visa), and ‘new’ points system (NS), a combination of PS and VS (e.g., Canada, 2015 onwards). Findings: Migration i) results in an ability drain, that is greater than the brain drain; ii) has an ambiguous (positive) impact on home country residents’ (migrants’) average education and skill (S), with a net skill drain more likely than a net brain drain; iii) these effects increase with ability’s inequality or variance V(a); iv) all effects are larger under VS than under PS (i.e., larger ability, brain and skill drain, and thus likelier net skill drain, and greater inequality of ability, education and skill; v) the policies in turn raise V(a),V(h) and V(s), with V(a)> V(h); vi) based on findings for the US, migrants’ higher ability may account for some 20% of the migrant-to-resident income gap; (vii) residents’ average consumption is lower under either policy than under a closed economy; (viii) ability’s inequality has a negative (ambiguous) impact on average consumption under the vetting (points) system, (ix) contrary to the case with education and skill, consumption inequality is lower under VS; (x) ability and education (consumption) under NS is identical to (larger than) the average of their values under PS and VS. Policy implications are provided.