Skilled migration and growth. Testing brain drain and brain gain theories

The economic effects of the migration of skilled workers from developing countries are highly controversial in the theoretical literature. Traditional models on the brain drain phenomenon stress the negative impact on growth, while new models introduce the possibility of a brain gain for labor exporting economies through indirect channels (i.e. increased incentives for those individuals left behind to accumulate human capital), or direct channels (such as remittances, return migration or FDI and trade linkages). Using a new dataset on the educational level of the migration workforce into the OECD, we test the hypothesis of brain gain estimating a growth equation and a human capital equation. We reject the hypothesis of brain gain in all the cases. The results confirm that countries which export high skilled labor to rich economies tend to have a lower level of human capital and, hence, worse economic performance.