The education policy challenge to the brain drain problem

Abstract

In a world of increased mobility of students and workers, both developing and developed countries are attempting to prevent brain drain. This study's research question is how we can prevent it. Utilising an analytical method, this study finds that education subsidies may be implemented as a new policy option to do so. In particular, developed countries, which are faced with a small wage disparity with the destination country, can eliminate brain drain for any degree of human capital transferability by paying subsidies appropriately. However, developing countries, which are faced with a large wage disparity, cannot always alleviate brain drain. The significance of this policy lies in that education subsidies affect the choice of study location, which in turn induces individuals to work in their home countries. Moreover, education subsidies are more effective than a Bhagwati tax since individuals have less incentive to evade subsidies.