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THE BRAIN DRAIN++++

Frédéric Docquiera and Hillel Rapoportb

a FNRS and IRES, Université Catholique de Louvainb Department of Economics, Bar-Ilan University, EQUIPPE, Universités de Lille, and Center

for Research and Analysis of Migration (CReAM), University College London

October 2006

A new entry for the New Palgrave Dictionary of Economics (second edition)

Abstract. The term ”brain drain” designates the international transfer of human resources and mainlyapplies to the migration of relatively highly educated individuals from developing to developedcountries. While the brain drain has long been viewed as detrimental to poor country’s growthpotential, recent economic research has emphasized a number of positive feedback effects and shownthat migration prospects may foster human capital formation at origin. The total effect is thereforeuncertain. Empirically, the first studies to address this issue point to a strong negative total effect formost developing countries; however, a handful of large, middle-income developing countries seem toexperience moderate gains.

+ Addresses for correspondence: Frédéric Docquier, IRES, Department of Economics, Université Catholique deLouvain, 3, Place Montesquieu, B-1348 Louvain-La-Neuve, Belgium. Email: docquier@ires.ucl.ac.be. HillelRapoport: Department of Economics, Bar-Ilan University, 52900 Ramat Gan, Israel. Email:hillel@mail.biu.ac.il.

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The term ”brain drain” designates the international transfer of resources in the form of human

capital and mainly applies to the migration of relatively highly educated individuals from

developing to developed countries. In the non-academic literature, the term is generally used

in a narrower sense and relates more specifically to the migration of engineers, physicians,

scientists and other very highly skilled professionals with university training. The brain drain

has long been viewed as a serious constraint on poor countries development and is also a

matter of concern for many European countries such as the U.-K., Germany or France, which

have recently seen a significant fraction of their talented workforce emigrate abroad. Recent

comparative data reveal that by 2000 there were 20 millions highly skilled immigrants (i.e.,

foreign-born workers with tertiary education) living in the OECD area, a 70% increase in ten

years against only a 30% increase for unskilled immigrants. These highly-skilled immigrants

come mainly (for two-thirds of them) from developing and transition countries and represent a

third of total immigration to the OECD. The causes of this growing brain drain are well

known. On the supply-side, the globalization of the world economy has strengthened the

tendency for human capital to agglomerate where it is already abundant and contributed to

increase positive self-selection among migrants. And on the demand side, host countries have

gradually introduced quality-selective immigration policies and are now engaged in what

appears as an international competition to attract global talent.

1. How big is the brain drain?

Extending and updating the work of Carrington and Detragiache (1998), Docquier and

Marfouk (2006) recently collected OECD immigration data to construct estimates of

emigration rates by educational attainment (primary, secondary and tertiary schooling) for all

the world countries in 1990 and 2000. Their estimates for the highest education level may be

taken as a brain drain measure. This may seem too broad a definition for the most advanced

countries where the highly educated typically represent about a third of the total workforce

but seems appropriate in the case of developing countries, where this share is on average just

about 5%. Note that due to data constraints, South-South migration is not taken into account

in the Docquier and Marfouk (2006) data set; this can lead to potential under-estimation of the

brain drain for some countries for which other developing countries are significant

destinations. On the other hand, the very definition of immigrants as foreign-born workers

does not account for whether education has been acquired in the home or in the host country;

this can lead to potential over-estimation of the brain drain as well as to possible spurious

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cross-country variation in skilled emigration rates (Rosenzweig, 2005). In an attempt to solve

this problem, Beine et al. (2006a) used age of entry as a proxy for where education has been

acquired and proposed alternative brain drain estimates excluding people who immigrated

before a given age (12, 18 and 22); their results show country rankings by degree of brain

drain intensity only mildly affected by the correction and extremely high correlations between

corrected and uncorrected estimates.

Keeping this in mind, one can use a simple multiplicative decomposition of the brain drain:

Skilled emigration rate = Average emigration rate x Schooling gap. The first component is

the ratio of emigrants to natives (residents + emigrants) and reflects the sending country’s

openness to emigration; the second component is the ratio of skilled to average emigration

rate. Table 1 summarizes the data for different country groups in 2000. Countries are grouped

according to demographic size, income per capita (using the World Bank classification), and

region. Unsurprisingly, we observe a decreasing relationship between emigration rates and

country size, with average skilled emigration rates about seven times higher in small countries

than in large countries. Regarding income groups, the highest emigration rates are observed in

middle-income countries, where people have both the incentives and means to emigrate.

Regarding the regional distribution of the brain drain, the most affected regions are the

Caribbean and the Pacific islands, Sub-Saharan Africa (where the schooling gap is

exceptionally high), and Central America.

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Table 1. Data by country group in 2000

Skilled emig. rate Average emig. rate Schooling gap

By country sizeLarge countries (Pop>25 million) 4.1% 1.3% 3.144Upper-Middle (25>Pop>10) 8.8% 3.1% 2.839Lower-Middle (10>Pop>2.5) 13.5% 5.8% 2.338Small countries (Pop<2.5) 27.5% 10.3% 2.666By income groupHigh Income countries 3.5% 2.8% 1.238Upper-Middle Income countries 7.9% 4.2% 1.867Lower-Middle Income countries 7.6% 3.2% 2.383Low Income countries 6.1% 0.5% 12.120By regionAMERICA 3.3% 3.3% 1.002 USA and Canada 0.9% 0.8% 1.127 Caribbean 42.8% 15.3% 2.807 Central America 16.9% 11.9% 1.418 South America 5.1% 1.6% 3.219EUROPE 7.0% 4.1% 1.717 Eastern Europe 4.3% 2.2% 1.930 Rest of Europe 8.6% 5.2% 1.637 incl. EU15 8.1% 4.8% 1.685AFRICA 10.4% 1.5% 7.031 Northern Africa 7.3% 2.9% 2.489 Sub-Saharan Africa 13.1% 1.0% 13.287ASIA 5.5% 0.8% 7.123 Eastern Asia 3.9% 0.5% 8.544 South-central Asia 5.3% 0.5% 10.030 South-eastern Asia 9.8% 1.6% 5.980 Near and Middle East 6.9% 3.5% 1.937OCEANIA 6.8% 4.3% 1.578 Australia and New Zealand 5.4% 3.7% 1.479 Other Pacific countries 48.7% 7.6% 6.391Source: Docquier and Marfouk (2006)

It is clear that the magnitude of the brain drain has increased dramatically over the last few

decades. However, in terms of intensity (or emigration rates), the picture is less clear as one

must factor in the general progress in educational attainments observed all over the world.

Figure 1 presents the skilled emigration rates by region computed by Defoort (2006) using a

long run perspective. Focusing on the six major destination countries (USA, Canada,

Australia, Germany, UK and France), she computed skilled emigration rates from 1975 to

2000 (one observation every 5 years). One can see that some regions experienced an increase

in the intensity of the brain drain (especially Central America and Sub Saharan Africa) while

significant decreases were observed in others (notably the Middle East and Northern Africa).

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Figure 1. Long-run trends in skilled emigration

2. From brain drain to brain gain?

It is certainly a good thing for rich countries to integrate a skilled and talented workforce, and

the move is also worthwhile (at least ex ante) from the perspective of the individual migrant.

However, the social return to human capital is likely to exceed its private return given the

many externalities (fiscal, technological, and Lucas-type) involved. This externality argument

is central in the early brain drain economic literature (Bhagwati and Hamada, 1974), which

emphasized that the brain drain entails significant losses for those left behind and contributes

to increase inequality at the world level. Another negative aspect of the brain drain is that it

can induce shortages of manpower in certain activities, for example when engineers or health

professionals emigrate in disproportionately large numbers, thus undermining the ability of

the origin country to adopt new technologies or deal with health crises. This can be reinforced

by governments distorting the provision of public education away from general (portable)

skills when the graduates leave the country, with the country ending up educating too few

nurses, doctors, or engineers, and too many lawyers (Poutvaara, 2004). The argument,

however, can be reversed as the prospect for migration may create a bias in the opposite

direction (see Lucas (2005) for an illuminating analysis of Philippines high education market).

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The prospect of migration can also impact on the very decision as to whether to study. When

education is a passport to emigration, migration prospects create additional incentives to

invest in human capital; if migration is probabilistic in that people are uncertain about their

chances of future migration when they make education decisions, then under certain

circumstances described in a series of recent theoretical papers (e.g., Mountford, 1997, Beine

et al., 2001), this can be turned into a gain for the source country. This has been confirmed

empirically by Beine et al. (2006b), who found a positive and significant effect of migration

prospects on human capital formation in a cross-section of 127 developing countries. From

the latter’s perspective, however, what matters is not how many of their native-born engage in

higher education, but how many remain at home. To estimate country-specific net effects,

Beine et al. (2006b) used counterfactual simulations and found that countries combining

relatively low levels of human capital and low skilled emigration rates are likely to experience

a net gain. There appears to be more losers than winners; more importantly, the former incur

substantial losses while the latter exhibit only small gains. The situation of many small

African and Central American countries appears extremely worrisome. In contrast, the largest

developing countries all seem to experience moderate gains.

3. Feedback effects

Remittances. The literature on migrants’ remittances shows that the two main motivations to

remit are altruism, on the one hand, and exchange, on the other hand (Rapoport and Docquier,

2006). Altruism is primarily directed towards one's immediate family, while remittances

motivated by exchange pay for services such as taking care of the migrant's assets or relatives

at home. Such transfers are typically observed in case of a temporary migration and signal the

migrants' intention to return. It is therefore a priori unclear whether educated migrants remit

more than their uneducated compatriots; the former may remit more to meet their implicit

commitment to reimburse the family for funding of education investments (and, in addition,

they have a higher income potential), but on the other hand, they tend to emigrate with family,

and on a more permanent basis. Indeed, at an aggregate level, Faini (2006) finds that brain

drain migration (as measured by the proportion of skilled among emigrants) is associated to

lower remittance inflows.

Return migration and brain circulation. Return migration is seldom among the highly

educated unless sustained growth precedes return. For example, less than a fifth of Taiwanese

and Korean PhDs who graduated from US universities in the 1970s in the fields of Science

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and Engineering returned to Taiwan or Korea, a proportion that rose to two-thirds in the

course of the 1990s, after two decades of impressive growth in these countries. The figures for

Chinese and Indian PhDs graduating from US universities in the same fields during the 1990s

are fairly identical to what they were for Taiwan or Korea 20 years ago (OECD, 2002). These

numbers suggest that return skilled migration is more a consequence than a trigger of growth.

However, a recent survey conducted among 225 Indian software firms showed clear signs of

brain circulation, with 30-40 per cent of the higher-level employees have relevant work

experience in a developed country (Commander et al., 2004).

Diaspora externalities. A large sociological literature emphasizes the potential for skilled

migrants to reduce transaction and other types of information costs and thus facilitate trade,

FDI and technology transfers between their host and home countries. This has first been

confirmed in the field of international trade (Gould, 1994, Head and Ries, 1998, Rauch and

Casella, 2003). Regarding FDI, Kugler and Rapoport (2006) used U.S. data on immigration

and FDI outflows and found that past skilled immigration significantly increases a country’s

chances to attract FDI in the subsequent period. These results complement recent case-studies

of the software industry showing that skilled migrants take an active part in the creation of

business networks which lead to FDI deployment in their home country (Arora and

Gambardella, 2005).

4. Conclusion

The number of skilled migrants from poor to rich countries has increased dramatically over

the last decades. In the face of rising wage differentials and of diverging demographic

structures between rich and poor countries, this tendency is likely to be confirmed in the

future. While the brain drain has long been viewed as detrimental to poor country’s growth

potential, recent economic research has emphasized that alongside positive feedback effects

arising from skilled migrants’ participation to business networks, one also has to consider the

effect of migration prospects on human capital building in source countries. This new

literature suggests that a limited degree of skilled emigration could be beneficial for growth

and development. Empirical research shows that this is indeed the case for a limited number

of large, intermediate-income developing countries. For the vast majority of poor and small

developing countries, however, current skilled emigration rates are most certainly well

beyond any sustainable threshold level of brain drain.

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