What are the consequences of the best and brightest emigrating?

The very name “brain drain” suggests that high-skilled migration can be nothing but bad for developing countries. Indeed, the prospect of a harmful effect of brain drain is often one of the first concerns raised in policy discussions around migration, and every day the news is filled with statements such as “the Philippines is suffering a crippling brain drain”, “brain drain still a big concern” in India;  and that Bangladesh “must stop brain drain to take the country forward”.

However, recently there has been a surge of more optimistic views of highly skilled migration, ranging from theories of “brain gain” in which the prospect of migration in the future induces people (including those who end up not migrating) to get more education; the idea of “brain circulation”, in which migrants are meant to do wonders for their home countries once they return with knowledge and ideas from abroad; and the “create-your-own Silicon Valley” view of diaspora as a source of trade, investment funds, and inspiration.

What has been largely missing from this discussion is detailed evidence as to what high-skilled migrants actually do. Apart from anecdotes and the famous case studies of Taiwanese and Indian IT entrepreneurs, existing studies have had to indirectly infer what migrants might be doing from aggregate data. In a recent working paper John Gibson and I present the results of a multi-year extensive effort to actually see at the micro-level what the consequences of the best and brightest migrating are. We focus on the types of countries for which high-skilled emigration rates are highest – small island nations and a sub-saharan African country (Ghana).

Our results show that the gains to the migrants themselves by far dominate any other effect – the best and brightest stand to gain US$40,000-70,000 per year from working abroad rather than in their home countries – several times the wages they would earn at home. Income differences of these magnitudes, coupled with better career opportunities abroad make it no wonder that so many high-skilled choose to migrate.

We find these migrants do remit, although less than they would have earned at home, that they are actively engaged in knowledge transfer about study and work opportunities abroad, but it is much rarer to be advising businesses or governments from abroad, and that involvement in trade and foreign investment is modest.

What about the fiscal costs? People often focus on the cost of tertiary training. But we believe the focus should be on the return governments (and society) would get from this training. The lost tax revenue depends on how progressive tax rates are (and how easy they are to avoid). A country like Papua New Guinea, which has a top marginal tax rate of 42 percent, and very low government spending levels, stands to lose more fiscally from high-skilled migration than a country like Tonga, which has a 10 percent flat tax.

Ultimately we find that the overall consequences of high-skilled migration are beneficial for citizens of their sending countries, unless externalities are orders of magnitude larger than ever measured. As Bhagwati has noted, externalities are “the first refuge of scoundrels” in policy debates, given scant evidence as to their existence, let alone magnitudes. Certainly we believe such externalities of high-skilled individuals are less likely to manifest themselves in societies which repress the basic right of free movement – North Korea keeps most of its best and brightest from emigrating, but we hardly see large rates of innovation and growth as a result.