Migration, Learning, and Development

US-educated Indian engineers played a major role in the establishment of the “Silicon Valley of Asia” in Bangalore. The experience of India and other countries shows that returning well-educated emigrants, despite their small numbers, can make a difference. This paper builds a model of “local” knowledge spillovers, in which migration of a small number of highly skilled individuals greatly affects country-level human capital accumulation. All economic activity occurs in pairs of individuals randomly matched to each other. Each pair produces the consumption good; the skills of the two partners are complementary. At the same time, the less skilled partner increases human capital by learning from the more skilled colleague. With poor institutions at home, highly skilled individuals leave the country seeking better opportunities abroad. On the contrary, improved institutions foster return migration of emigrants who have acquired more knowledge while abroad. These return migrants greatly amplify the positive effect of better institutions.