The Brain Drain, ‘Educated Unemployment’, Human Capital Formation, and Economic Betterment

Abstract

Labour migration has long been a topic of intense interest in population research in general and in development economics in particular. The topic has been gaining added appeal in the era of globalization. The received wisdom has been that such migration results in a detrimental brain drain for the developing countries (for a systematic review see Bhagwati and Wilson, 1989).¹ A recent and growing literature argues that the brain drain is accompanied by a beneficial brain gain.² The new writings contend that compared with a closed economy, an economy open to migration differs not only in the opportunities that workers face but also in the structure of the incentives that they confront; higher prospective returns to human capital in a foreign country impinge favourably on human capital formation decisions at home.

We are indebted to Nicola Fuchs-Schündeln, to two anonymous referees, to Katarzyna Saczuk, and to Anna Zylicz for helpful advice and constructive suggestions. Financial Support from the Humboldt Foundation, the Sohmen Foundation, and the International Centre for the Study of East Asian Development is gratefully acknowledged.