Incentives for human capital development

See also: brain drain

The possibility of migration creates incentives for people to acquire skills that will make it easy for them to get jobs in other countries. Of all the people who do acquire such skills, many may ultimately choose not to migrate but instead use those skills to take up jobs in their home countries.

In his paper Economics and Emigration: Trillion-Dollar Bills on the Sidewalk? (PDF, 24 pages), Michael Clemens reviews the literature on the topic on pages 7-8 (89-90 in the print version):

But it is not well-established under what conditions the emigration of skilled workers results in a net depletion, in equilibrium, of the stock of skilled workers in the origin country. Mountford (1997), Stark, Helmenstein, and Prskawetz (1997), and a subsequent literature theorize that when emigration to high-wage countries becomes possible, even when it is costly and uncertain, the expected value of human capital rises for all potential migrants. Because not all of those who were thus encouraged to invest will leave, the existence of an emigration option for some people can tend to raise the human capital stock at home. Macro and micro studies suggest that this effect is real and large enough to substantially offset the departures in some settings (Beine, Docquier, and Rapoport, 2008; Chand and Clemens, 2008; Batista, Lacuesta, and Vicente, 2011; Docquier and Rapoport, forthcoming).

Below is a list of the references mentioned in the paper:

  • Mountford, Andrew. 1997. “Can a Brain Drain Be Good for Growth in the Source Economy?” Journal of Development Economics, 53(2): 287–303. DOI (Weblink).
  • Stark, Oded, Christian Helmenstein, and Alexia Prskawetz. 1997. “A Brain Gain with a Brain Drain.” Economics Letters, 55(2): 227–34. DOI (Weblink).
  • Beine, Michel, Frédéric Docquier, and Hillel Rapoport. 2008. “Brain Drain and Human Capital Formation in Developing Countries: Winners and Losers.” Economic Journal, 118(528): 631–52. DOI (Weblink).
  • Chand, Satish, and Michael A. Clemens. 2008. “Skilled Emigration and Skill Creation: A Quasiexperiment.” Center for Global Development Working Paper 152. Weblink (CGDev website).
  • Batista, Catia, Aitor Lacuesta, and Pedro C. Vicente. 2011. “Testing the ‘Brain Gain’ Hypothesis: Micro Evidence from Cape Verde.” Journal of Development Economics, forthcoming.
  • Docquier, Frédéric, and Hillel Rapoport. Forthcoming. “Globalization, Brain Drain, and Development.” Journal of Economic Literature.