• Brain drain

Brain drain

This paper argues that:

• migration is typically associated with a welfare loss in sending countries unless remittances are sufficiently high
• remittances are a declining function of the skilled composition of the migrant labour force, suggesting that the negative impact from the brain drain may not be compensated by a larger flow of remittances
• remittances contribute positively to growth.

The author suggest that these effects could be mitigated by the beneficial impact of return migration, the incentive effects of skilled migration on human capital investment, and the creation of business networks abroad, with a positive impact on trade and FDI flows. Based on the research findings however, the author questions the sign and the significance of these channels. Return migrants are negatively selected, educational enrolments seem to be only weakly affected by skilled migration, and the brain drain may discourage FDI by exacerbating the scarcity of skilled workers.

Arguing that receiving countries are unlikely to relax their constraints to the entrance of unskilled migrants, the author suggests that temporary schemes, where both skilled and unskilled workers, are admitted for a relatively short period could perhaps work better. They would allow a sustained and steady flow of remittances; they could be targeted to the labour market needs of receiving countries; migrant workers would return home after having acquired valuable skills and could be instrumental in promoting new trade and investment links.

To improve the flow of remittances, the author suggests that reducing the costs of formal channels would raise the amount of remittances and would encourage the shift away from informal channels. The author argues that the best way to attract remittances is a sound policy stance that protects property rights and maintains a stable macroeconomic environment.

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