A Political Economy and Voicing Model of the Institutional Impact of Brain Drain, Human Capital, Inequality and Country Size

Abstract

Brain drain BD, human capital h, and inequality's institutional impact is examined in a model where a rent-seeking elite taxes residents and voicing affects the likelihood of regime change. We find that BD and h's impact on institutional quality (Q) are as follows: i) Q is a U-shaped function of BD, with maximum (minimum) at BD = 0 (0 ) BD1, and is maximized at BD = 0; vi) Q increases in a high (low) BD country under a host country's immigration promotion (restriction); vii) a high BD country's institutions improve (worsen) under a large (small) reduction in BD; viii) the latter is particularly relevant for small and micro states where BD and Q are likely to be greater than in large but otherwise similar countries.