Migration, human capital formation and the beneficial brain drain hypothesis: a note

Abstract

The recent brain drain literature suggests that the migration of highly skilled people can be beneficial for a country as it gives incentives to form additional human capital. We criticise this claim by developing a career concerns model and proposing that the migration opportunity as an incentive mechanism is unreliable. In addition, we show that when an individual forms two types of human capital, increased migration opportunity for one type has a negative effect on the formation of the other type. The economic benefit and full policy implications of the findings were not addressed in this paper.

Keywords:

• brain drain
• incentives
• human capital

JEL Classifications:

• F22

Acknowledgements

The author would like to thank Bibhas Saha, Arijit Mukherjee and the seminar participants at Bournemouth University, UK, and Dhaka University, Bangladesh, for comments and suggestions. The author would like to thank Sue Barnes for carefully reading the draft of the paper. All the remaining errors are the author’s.

Notes

1. We do not provide the calculations for the second period as it is also quite straight forward. It should be also noted that the human capital acquired in the first period may ease the process of acquiring human capital in the second period, resulting in a reduced effort for the same level of human capital. We assume no such reduction of effort in the second period which is obviously an overly simplified assumption. Together, total human capital of two periods is higher, but here we emphasis on the lack of migration motivated effort in the second period.

2. Substitutability is however not essential to obtain a similar result (see Appendix 1).