Revisiting the Brain Drain Literature with Insights from a Dynamic General Equilibrium World Model

Abstract

AbstractThe existing brain drain literature has found various mechanisms through which the high‐skilled South‐to‐North migration affects developing economies. However, some of the new‐found effects remain disputable due to limited evidence. This study aims to provide suggestive guidelines for future research by identifying the mechanisms that can generate larger economic impacts at the aggregate. The analysis is based on a dynamic general equilibrium world model that is calibrated to published statistics and incorporates empirical estimates on the effects of brain drain. It simulates short‐ and long‐run impacts of increased brain drain on GDP per capita, GNI per capita, and income inequality. The results suggest that more studies should be conducted to further examine how the brain drain influences human capital formation and technology spillovers. Both have significant impacts on domestic production and national income. A better understanding of different remitting patterns is also desirable to understand how to reduce inequality and promote recipients’ investment in productive assets.