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Brain Drain-Induced Brain Gain and the Bhagwati Tax: Are Early and Recent Paradigms Compatible?
TL;DR: In this article, the authors examined whether the early view regarding brain drain's negative impact on source countries is compatible with the recent more optimistic BD-induced brain gain view, and derived BD's impact on education, welfare, the optimal education subsidy, and a combination of 𝑠 and (the optimal) 𝐵𝑇, when residents' (emigrants) weight in the government's objective function is 1 (1−ǫ), with 𝛽 𝜖 [0,1].
Abstract: Based on a welfare-maximization model of skilled migration where education generates a positive externality, this paper examines whether the early view regarding brain drain’s (BD) negative impact on source countries – and the Bhagwati tax (𝐵𝑇) associated with it – is compatible with the recent more optimistic BD-induced brain gain view. I derive BD’s impact on education, welfare, the optimal education subsidy (𝑠), and a combination of 𝑠 and (the optimal) 𝐵𝑇, when residents’ (emigrants’) weight in the government’s objective function is 1 (1−𝛽), with 𝛽 𝜖 [0,1]. I find that: i) education, welfare and 𝑠 levels are higher (lower) under an open than under a closed economy for 1−𝛽>(<) 𝑦0/𝑦𝑑, the ratio of origin-country to destination-country income; ii) 𝑠 and 𝐵𝑇 are ‘policy complements,’ i.e., they are positively related; and iii) 𝐵𝑇 increases with 𝛽, reaching a maximum at 𝛽=1 (where government only care about residents). Two implications and a proposal are: a) The early literature focused on resident – rather than on migrant – welfare (the 𝛽=1 case), which is precisely the case where 𝐵𝑇 is largest; b) A second policy instrument should be useful, especially if constraints exist on making changes in the other. Thus, as opening up the economy implies a lower 𝑠, raising 𝐵𝑇 should be beneficial if, say, parents’ and teachers’ organizations make it politically difficult if not impossible to reduce 𝑠; c) A proposal for collecting the tax is presented.
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TL;DR: The authors examined migration's impact on ability, education, and productive human capital or "skill" (which includes both ability and education) for source country residents and migrants, under three different regimes: (i) a points system that accounts for educational attainment; (ii) a "vetting" system that account for both ability or education or skill (e.g., the US H1-B visa program); and (iii) a point system that combines the points and vetting systems (as in Canada since 2015).
Abstract: Immigrants or their children founded over 40% of the Fortune 500 US companies. This suggests that ‘ability drain’ is economically significant. While brain drain associated with migration also induces a brain gain, this cannot occur with ability drain. This paper examines migration’s impact on ability, education, and productive human capital or ‘skill’ (which includes both ability and education) for source country residents and migrants, under three different regimes: (i) a points system that accounts for educational attainment; (ii) a ‘vetting’ system that accounts for both ability and education or skill (e.g., the US H1-B visa program); and (iii) a points system that combines the points and vetting systems (as in Canada since 2015). It finds that migration reduces (raises) source country residents’ (migrants’) average ability and has an ambiguous (positive) impact on their average education and skill, with a net skill drain more likely than a net brain drain. These effects increase the more unequal is ability, i.e., the higher the variance in ability. The average ability drain for highly educated US immigrants from 42 developing source countries is 84 percent of the brain drain, a ratio that increases with source countries’ income and is greater than one for most Latin American and Caribbean countries. Heterogeneity in ability is the ultimate cause of both ability and brain drain (as they are equal to zero under homogeneous ability). Policy implications are provided.
5 citations
27 Dec 2019
TL;DR: In this article, the authors explore and assess tax policy options that may be undertaken to prevent the emigration of high-skilled individual, namely the Bhagwati tax proposal, exit tax, revenue sharing and tax incentives.
Abstract: International migration has continued to escalate over the last three decades, creating a risk of brain drain in developing countries. This paper reviews the extent to which the use of tax instruments to address brain drain can be justified in developing economies with large populations. Furthermore, it explores and assesses tax policy options that may be undertaken to prevent the emigration of high-skilled individual, namely the Bhagwati tax proposal, exit tax, revenue sharing and tax incentives. Five things can be concluded from the assessment of several policy choices. First, there is no stand-alone tax policy that can optimally address brain drain, in the sense of reducing the number of high-skilled individuals who emigrate. Second, most policies put more focus on the element of fairness to compensate for the “loss” caused by the home country. Third, almost every available policy requires better coordination at the international level. Fourth, all policy options require closer collaboration with immigration agencies. Finally, each policy has the potential to produce unintended consequences.
1 citations
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TL;DR: In this paper, the authors focus on the impact of migration prospects on human capital formation and growth in a small, open developing economy and derive the theoretical conditions required for such a possibility to be observed.
1,200 citations
TL;DR: This article examined the impact of brain drain migration on human capital formation in developing countries and found evidence of a positive effect of skilled migration prospects on gross human capital creation in a cross-section of 127 countries.
Abstract: Using new data on emigration rates by education level, we examine the impact of brain drain migration on human capital formation in developing countries. We find evidence of a positive effect of skilled migration prospects on gross human capital formation in a cross-section of 127 countries. For each country of the sample we then estimate the net effect of the brain drain using counterfactual simulations. Countries combining relatively low levels of human capital and low emigration rates are shown to experience a ‘beneficial brain drain’, and conversely, there are more losers than winners, and the former tend to lose relatively more than what the latter gain.
936 citations
"Brain Drain-Induced Brain Gain and ..." refers background in this paper
...…led to a series of studies over the last two decades showing that, given the higher return on education in the North than in the South, South-North migration prospects raise education’s expected return and hence raise its level (e.g., Mountford 1997; Vidal, 1998; Beine et al. 2001, 2008; etc.)....
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...Beine et al. (2008) found that countries with low (high) human capital levels and brain drain rates experienced a net brain gain (drain), with a net brain drain for a majority of countries and a net brain gain for developing countries as a whole....
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TL;DR: It is shown how the temporary possibility of emigration may permanently increase the average level of productivity of an economy and how average productivity is a positive function of past average levels of human capital in an economy.
916 citations
"Brain Drain-Induced Brain Gain and ..." refers background in this paper
...…led to a series of studies over the last two decades showing that, given the higher return on education in the North than in the South, South-North migration prospects raise education’s expected return and hence raise its level (e.g., Mountford 1997; Vidal, 1998; Beine et al. 2001, 2008; etc.)....
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TL;DR: The authors of as discussed by the authors show that for finite, rather than infinestimal, shifts of labour, there would still be a loss to those left behind, if the social marginal product exceeds the private marginal product, thanks to strong externalities.
830 citations
01 Jan 2006
TL;DR: In this article, the authors consider the negative effects of the brain drain for source countries in an endogenous growth framework and show that such prospects may in fact foster human capital formation in developing countries.
Abstract: For the last few years, the pace of international migration has accelerated. According to the United Nations (2002), the number of international migrants increased from 154 million to 175 million between 1990 and 2000. The consequences for countries of origin and destination have attracted the increased attention of policymakers, scientists, and international agencies. The phenomenon is likely to further develop in the coming decades as a part of the world globalization process. The international community must be prepared to address the challenges raised by the increasing mobility of workers. In particular, the migration of skilled workers (the so-called brain drain) is a major piece of the migration debate. The transfer of human resources has undergone extensive scrutiny in developing countries but also in such industrial countries as Canada, the United Kingdom, and Germany, where an important fraction of talented natives is working abroad. When considering the consequences for countries of origin, early literature supports the view that skilled migration is unambiguously detrimental for those left behind (Grubel and Scott 1966; Johnson 1967; Bhagwati and Hamada 1974; Kwok and Leland 1982). This is the case if the migrants’ contribution to the economy is greater than their marginal product or if the education of skilled emigrants was partly funded by taxes on residents. The negative effects of the brain drain for source countries have been reformulated in an endogenous growth framework (Miyagiwa 1991; Haque and Kim 1995; Wong and Yip 1999). More recently, the effects of migration prospects on human capital formation have been the focus of several studies, which suggest that such prospects may in fact foster human capital
764 citations
"Brain Drain-Induced Brain Gain and ..." refers background in this paper
...Docquier and Marfouk (2006) show that the former was over four times the latter in 1990-2000 (63.7 percent vs. 14.4 percent, respectively)....
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