Too High or Just Right? Cost-Benefit Approach to Emigration Question

Abstract

If raising of the infamous “iron curtain” just halfopenedthe door for labour emigration from the postcommunistcountries, the full-fledged membership to theEuropean Union threw that door wide open. As a resultmost of these countries experienced significant upsurge oflabour emigration after they entered EU. Mostdemographers and economists of the Eastern Europeancountries tend to conclude that the loss of human capitaldue to international migration is detrimental to donornation’s productive capacity and reduces its economicgrowth and wellbeing. The following adverse effects ofemigration are usually cited: depletion of the country’shuman capital assets, resulting in lower productivity; lossof return on investment in education; smaller tax base;larger inequality in the donor country.It is rather obvious that if country looses its skilled,educated and demanded workforce this could retard itsdevelopment. However, “could” does not necessarilymeans “should”, and the “net-impact” of migration issubject to the kind and scale of feedback effects. Whileoutward negative consequences of emigration areemphasized in many academic studies and publicdiscussions, the issues of potential positive feedback effectsof it on the donor country are generally ignored.Acknowledging the existence of direct and indirect adverseeffects of workforce emigration, particularly of braindrain, this article nevertheless attempts to challengeconventional assumption of the “unequivocal” calamity ofemigration by pointing out that it can also trigger quite afew offsetting feedback effects that would bring gains forthe sending country. Those hidden benefits of emigrationfor the donor country include, but are not limited to,decrease of unemployment and entailed reduction ofdemand in welfare payments, remittance flows, stimulationof exports and technological advancement, shrinkage ofshadow economy. The authors advocate the cost-benefitapproach to migration, and suggest that in the long-termperspective these positive effects, enhanced by economicmultipliers, might offset or even outweigh for sending countryimmediate losses caused by the workforce emigration.While usually such optimism is not reserved for “braindrain” phenomenon, the authors argue that in the long runit probably will bring efficiency gains to all parties, bothdonor and recipient, as well. Theoretical insights of thepaper are illustrated, wherever possible, by theappropriate statistical evidence from Lithuania as thecountry with one of the highest rates of emigration in theEuropean Union.