Abstract
Staff Studies is the bi-annual (March and September) peer-reviewed journal of the Central Bank of Sri Lanka. The Journal aims at stimulating innovative research for the analysis of current macroeconomic issues and policy challenges faced by central banks while providing a forum to present recent theoretical and empirical research.
Highlights
Services play a dominant role in economic growth and development of a country
Quah (1997) shows that most of the economic growth in many developed and developing countries arises from growth in the services sector
To avoid mass migration due to strategic complementarity, a poor or source country could improve economic and social environment to provide additional incentives for the high quality human capital to remain in their country
Summary
Services play a dominant role in economic growth and development of a country. Quah (1997) shows that most of the economic growth in many developed and developing countries arises from growth in the services sector. The model further reveals that if a country is poorer than a “threshold poverty level”, the strategic complementarity and coordination failure may not be strong enough to generate a no-migration equilibrium At those poverty levels, the benefits of migration will outweigh the costs irrespective of whether other agents with high quality human capital migrate or not. The model further reveals that policy option of complete liberalization could possibly reduce the welfare of the rich or host country, due to the possible migration of low level human capital. To avoid mass migration due to strategic complementarity, a poor or source country could improve economic and social environment to provide additional incentives for the high quality human capital to remain in their country.
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