May 26, 2011

Poor countries can end up benefiting when their brightest citizens emigrate

Amplify’d from
Drain or gain?

Poor countries can end up benefiting when their brightest citizens emigrate

WHEN people in rich countries worry about migration, they tend to think of low-paid incomers who compete for jobs as construction workers, dishwashers or farmhands. When people in developing countries worry about migration, they are usually concerned at the prospect of their best and brightest decamping to Silicon Valley or to hospitals and universities in the developed world. These are the kind of workers that countries like Britain, Canada and Australia try to attract by using immigration rules that privilege college graduates.

Lots of studies have found that well-educated people from developing countries are particularly likely to emigrate. By some estimates, two-thirds of highly educated Cape Verdeans live outside the country. A big survey of Indian households carried out in 2004 asked about family members who had moved abroad. It found that nearly 40% of emigrants had more than a high-school education, compared with around 3.3% of all Indians over the age of 25. This “brain drain” has long bothered policymakers in poor countries. They fear that it hurts their economies, depriving them of much-needed skilled workers who could have taught at their universities, worked in their hospitals and come up with clever new products for their factories to make.

Many now take issue with this view (see article). Several economists reckon that the brain-drain hypothesis fails to account for the effects of remittances, for the beneficial effects of returning migrants, and for the possibility that being able to migrate to greener pastures induces people to get more education. Some argue that once these factors are taken into account, an exodus of highly skilled people could turn out to be a net benefit to the countries they leave. Recent studies of migration from countries as far apart as Ghana, Fiji, India and Romania have found support for this “brain gain” idea.

The most obvious way in which migrants repay their homelands is through remittances. Workers from developing countries remitted a total of $325 billion in 2010, according to the World Bank. In Lebanon, Lesotho, Nepal, Tajikistan and a few other places, remittances are more than 20% of GDP. A skilled migrant may earn several multiples of what his income would have been had he stayed at home. A study of Romanian migrants to America found that the average emigrant earned almost $12,000 a year more in America than he would have done in his native land, a huge premium for someone from a country where income per person is around $7,500 (at market exchange rates).

There are more subtle ways in which the departure of some skilled people may aid poorer countries. Some emigrants would have been jobless had they stayed. Studies have found that unemployment rates among young people with college degrees in countries like Morocco and Tunisia are several multiples of those among the poorly educated, perhaps because graduates are more demanding. Migration may lead to a more productive pairing of people’s skills and jobs. Some of the benefits of this improved match then flow back to the migrant’s home country, most directly via remittances.

The possibility of emigration may even have beneficial effects on those who choose to stay, by giving people in poor countries an incentive to invest in education. A study of Cape Verdeans finds that an increase of ten percentage points in young people’s perceived probability of emigrating raises the probability of their completing secondary school by around eight points. Another study looks at Fiji. A series of coups beginning in 1987 was seen by Fijians of Indian origin as permanently harming their prospects in the country by limiting their share of government jobs and political power. This set off a wave of emigration. Yet young Indians in Fiji became more likely to go to university even as the outlook at home dimmed, in part because Australia, Canada and New Zealand, three of the top destinations for Fijians, put more emphasis on attracting skilled migrants. Since some of those who got more education ended up staying, the skill levels of the resident Fijian population soared.

Migrants can also affect their home country directly. In a recent book about the Indian diaspora, Devesh Kapur of the University of Pennsylvania argues that Indians in Silicon Valley helped shape the regulatory structure for India’s home-grown venture-capital industry. He also argues that these people helped Indian software companies break into the American market by vouching for their quality. Finally, migrants may return home, often with skills that would have been hard to pick up had they never gone abroad. The study of Romanian migrants found that returnees earned an average of 12-14% more than similar people who had stayed at home. Letting educated people go where they want looks like the brainy option.

Articles and books referred to in this piece:

“Diaspora, Democracy and Development” by Devesh Kapur, Princeton University Press, 2010

The Returns to the brain drain and brain circulation in sub-Saharan Africa: Some computations using data from Ghana”, by Yaw Nyarko, NBER Working Paper 16813, February 2011

“Testing the ‘Brain Gain’ Hypothesis: Micro Evidence from Cape Verde” by Catia Batista, Aitor Lacuesta and Pedro C. Vicente. IZA DP No. 5048, July 2010

The selection of migrants and returnees: Evidence from Romania and its implications” by J. William Ambrosini, Karin Mayr, Giovanni Peri and Dragos Radu. NBER Working Paper 16912, March 2011.

“Skilled emigration and skill creation: A quasi-experiment“ by Satish Chand and Michael A.Clemens. Center for Global Development working paper.


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