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BRAIN DRAIN IN GLOBALIZATION: A GENERAL EQUILIBRIUM ANALYSIS FROM THE SENDING COUNTRIES' PERSPECTIVE

Authors

  • LUCA MARCHIORI,

    1. Marchiori: Economics and Research Department, Central Bank of Luxembourg, Luxembourg L-2983, Luxembourg; IRES, Université catholique de Louvain, Louvain-La-Neuve B-1348, Belgium. Phone +352 4774 4557, Fax +352 4774 4920, E-mail luca.marchiori@bcl.lu; marchioriluca@gmail.com
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  • I-LING SHEN,

    1. Shen: Research Group, The Milken Institute, Santa Monica, CA 90401; IRES, Université catholique de Louvain, Louvain-La-Neuve B-1348, Belgium; Institute for the Study of Labor (IZA), Bonn, Germany. Phone (310) 570-4643, Fax (310) 570-4625, E-mail ishen@milkeninstitute.org
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  • FRÉDÉRIC DOCQUIER

    1. Docquier: IRES, Université catholique de Louvain, Louvain-La-Neuve B-1348, Belgium; Fonds National de la Recherche Scientifique (FNRS), Brussels, Belgium. Phone +32 10 47 41 49, Fax +32 10 47 39 45, E-mail: frederic.docquier@uclouvain.be
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    • This paper was prepared when Luca Marchiori and I-Ling Shen were Ph.D. candidates at IRES, Université catholique de Louvain, and when they were post-doctoral researchers at University of Luxembourg and University of Geneva, respectively. The authors gratefully acknowledge financial support from the Belgian Federal Government (PAI grant P6/07, “Economic Policy and Finance in the Global Economy: Equilibrium Analysis and Social Evaluation”), from the Belgian French-speaking community (“Grant ARC 09/14-019 on “Geographical Mobility of Factors”), and from the European Commission (Marie Curie Research Training Network “Transnationality of Migrants”). They thank Andrew Mountford and Hillel Rapoport for many insightful and valuable comments. Scientific feedbacks are appreciated from the audience at the 2009 meeting of the Swiss Society of Economics and Statistics in Geneva, the Second International Conference on Migration and Development in Washington, DC, the 24th Pacific Economic Community Seminar (PAFTAD 33) in Taipei, the Third Conference of Transnationality of Migrants –TOM (Marie Curie Research Training Network) in Hamburg, and the seminar participants at the Milken Institute. All remaining errors are of course ours. The views expressed in this paper are those of the authors and do not necessarily reflect those of the Central Bank of Luxembourg nor of the Milken Institute.


Abstract

According to the economic literature, high-skilled emigration may either harm or benefit developing economies. Recent research highlighted several positive and negative channels through which the brain drain operates. This paper aims at evaluating the relative magnitudes of various brain drain channels and quantifying their global impact on migrants' sending countries. For this purpose, we develop a 10-region general equilibrium model of the world economy characterized by overlapping-generations dynamics. Our findings suggest that the short-run impact of brain drain on resident human capital is extremely crucial, as it affects not only the number of high-skilled workers available to domestic production, but also the sending economy's capacity to innovate/adopt modern technologies. This latter effect is particularly important in globalization, where capital investments are made in places with high production efficiencies. Hence, despite positive feedback effects, those countries facing prevalent high-skilled emigration are the most candid victims to brain drain. (JEL F22, J24, O57)

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