Frederic Docquier and Hillel Rapoport (2011). Harvard University Center for International Development Working Paper No. 219, March. Forthcoming in the Journal of Economic Literature

This article reviews the past 40 years of economic scholarship on the brain drain of skilled labor from developing to developed countries.  It concludes that the welfare impact of outmigration is highly dependant on policies in developing countries.

There is a school of thought that holds that trade and FDI are the most salient facets of globalization.  Between 1960 and 2005, trade as a fraction of global GDP tripled while FDI tripled in the 1990s alone.  In comparison, since the 1960s, the world migration rate has kept pace with population growth at around 2.5-2.9 percent.

These statistics might lead one to believe that migration has not been a key part of the globalization and development story.  However, the story changes if one looks at skilled migration.  Since 1960, the foreign-born share of the population in high income countries has tripled.  In the OECD, the number of high skilled resident immigrants grew by 70% in the 1990s, while the number of low skilled resident immigrants grew by only 30%.  Docquier and Rapoport argue that the movement of highy skilled individuals from developing to developed countries—commonly know as brain drain—“can certainly be regarded as one of the major aspects of globalization.”  In this paper, they review the economic research regarding the impact of brain drain on the world and on developing countries.

There have been three waves of economic research on the brain drain since the 1960s.  Led by academics like Grubel, Scott, Johnson, Berry, and Soligo, the first wave tended to use typical trade theoretic analysis and argued that international migration was welfare neutral in developing countries and benefitted the global economy by the more efficient allocation of human capital.  Positive feedback such as remittances and migrants’ tendency to leave assets in their home countries offset any potential losses. 

The first wave assumed economic efficiency in most of their theories.  Led first and foremost by Jagdish Bhagwati, the second wave in the 1970s argued when inefficiencies such as domestic labor rigidities, informational imperfections, and negative externalities existed,  migration could indeed harm welfare in migrant-sending countries.  In this context, high skill migration could lead to more inequality at the global level.

Beginning in the 1990s, the third wave took a more holistic account.  Economists in this school have asked, under what conditions can migration hurt or improve welfare in developing countries?  Some have found that migration can improve welfare even in the face of inefficiencies.  This wave has benefitted from newly available migration data, and thus one of its major strengths is that its findings are ground in evidence, as opposed to the primarily theoretical arguments of earlier waves.

A highly skilled immigrant is defined as an individual 25 or older holding an academic degree beyond the high school level at the census date.  In absolute terms, the largest suppliers of international migrants in 2000 were the Philippines at 1.1 million, India at 1.0 million, Mexico at 0.95 million, and China at 0.8 million.  The largest receiving countries were the United Kingdom at 1.5 million and Germany at 0.9 million.  In relative terms, small countries top the list, with over 80% of highly skilled individuals emigrating in Guyana, Jamaica, and Haiti and over 50% in many African nations.  In 2005, 49.6% of all international migrants were women, and recent economic work finds that a majority of highly skilled international migrants are women.  Other economic work emphasized that pull factors are more important than push factors in international migration.

One interesting case is Africa’s medical brain drain.  The authors note that “It is common to point to the medical brain drain (MBD) as one of the major factors leading to the under-provision of healthcare staff in Africa and, ultimately, to low health status and shorter life expectancy” (37).  Various studies have investigated this question, but do not conclusively suggest whether there is a significant outmigration of doctors or impact on health outcomes.  Another interesting case is outmigration of very highly skilled European workers to the United States.  Studies suggest that European PhD holders and science and technology researchers tend to emigrate to the United States at a rate far above the European average.  Yet another interesting case is the connection between the Indian diaspora in the United States and the rise of India’s IT sector.  While Indian policymakers were initially concerned with this outmigration, studies suggest that the movement of Indian professionals to Silicon Valley played a “crucial role” in India’s IT development (43).

The authors conclude that the impact of outmigration on developing country welfare is ultimately policy dependent.  Overall, “The recent literature shows that high-skill emigration need not deplete a country’s human capital stock and can generate positive network externalities.  The brain drain side of globalization creates winners and losers among developing countries, and certain source-country characteristics in terms of governance, technological distance, demographic size, and interactions between these, are associated with the ability of a country to capitalize on the incentives for human capital formation in a context of migration and seize the global benefits from having a skilled, educated diaspora.  As illustrated with case studies of the African medical brain drain, the exodus of European scientists to the United States, and the role of the Indian diaspora in the development of India’s IT sector, the conditions under which a country is gaining or losing are not a matter of fate; to a large extent, they depend on the public policies adopted in the receiving and sending countries” (51).