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Skill-biased technological change, unemployment and brain drain

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Abstract

We develop a general equilibrium model of technological change and migration to examine the effects of a change in skill endowments on wages, employment rates and emigration rates of skilled and unskilled workers. We find that, depending on the elasticity of substitution between skilled and unskilled workers, an increase in the skill ratio can increase the expected wage of the skilled and decrease the brain drain. We provide empirical estimates and simulations to support our findings and show that effects are empirically relevant and potentially sizeable. Our findings fit the stylized facts on educational upgrading in developing countries during the 1980s and the subsequent decrease in the brain drain from those countries during the 1990s.

Suggested Citation

  • Harald Fadinger & Karin Mayr, 2011. "Skill-biased technological change, unemployment and brain drain," Vienna Economics Papers vie1108, University of Vienna, Department of Economics.
    • Handle: RePEc:vie:viennp:vie1108
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    Cited by:

    1. Exadaktylos, Dimitrios & Riccaboni, Massimo & Rungi, Armando, 2024. "Talents from abroad. Foreign managers and productivity in the United Kingdom," International Economics, Elsevier, vol. 177(C).
    2. Roxana Idu, 2019. "Source Country Economic Development and Dynamics of the Skill Composition of Emigration," Economies, MDPI, vol. 7(1), pages 1-18, March.
    3. Leite, Duarte N. & Afonso, Óscar & Silva, Sandra T., 2019. "A tale of two countries: Directed technical change, trade and migratory movements," Economic Modelling, Elsevier, vol. 83(C), pages 173-194.
    4. Marcos J Ribeiro & Klaus Prettner, 2025. "The Skill Premium Across Countries in the Era of Industrial Robots and Generative AI," Department of Economics Working Papers wuwp381, Vienna University of Economics and Business, Department of Economics.
    5. Dario Cords & Klaus Prettner, 2022. "Technological unemployment revisited: automation in a search and matching framework [The future of work: meeting the global challenges of demographic change and automation]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 115-135.
    6. Jonas Loebbing, 2020. "Redistributive Income Taxation with Directed Technical Change," CESifo Working Paper Series 8743, CESifo.
    7. Bloom, David E. & Prettner, Klaus & Saadaoui, Jamel & Veruete, Mario, 2025. "Artificial intelligence and the skill premium," Finance Research Letters, Elsevier, vol. 81(C).
    8. Loebbing, Jonas, 2020. "Redistributive Income Taxation with Directed Technical Change," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224606, Verein für Socialpolitik / German Economic Association.
    9. Gil, Pedro Mazeda & Afonso, Oscar & Brito, Paulo, 2019. "Economic growth, the high-tech sector, and the high skilled: Theory and quantitative implications," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 89-105.
    10. repec:cfe:wpcefa:2017_02 is not listed on IDEAS
    11. Oscar Afonso & Manuela Magalhães, 2021. "The role of intellectual property rights in a directed technical change model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2142-2176, April.
    12. Raphaël Franck, 2024. "Labor scarcity, technology adoption and innovation: evidence from the cholera pandemics in 19th century France," Journal of Economic Growth, Springer, vol. 29(4), pages 543-583, December.
    13. Guimarães, Luís & Mazeda Gil, Pedro, 2022. "Explaining the Labor Share: Automation Vs Labor Market Institutions," Labour Economics, Elsevier, vol. 75(C).

    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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