An endogenous growth model with heterogeneous agents is analyzed to show that ''human capital flight'' or ''brain drain'' can lead to a permanent reduction in income and growth of the country of emigration relative to the country of immigration. Convergence between the two is therefore rendered unlikely with such migration. While, in a closed economy, subsidizing human capital accumulation at all levels of education can benefit economic growth, in an open economy where the educated are more likely to migrate, growth may be better fostered by subsidizing only lower levels of education.
This paper formulates and estimates alternative models for the pricing of labor services. We present economic models that rationalize empirical specifications in the literature and we offer evidence on the validity of those specifications. Widely used efficiency units models of labor services are inconsistent with evidence from the U.S. labor market. A model of heterogeneous skills provides a more accurate description of earnings data. We present evidence that the pursuit of comparative advantage and selective migration are important features of the U.S. labor market. When these features are included in the model. the only support for an effect of schooling quality on earnings is through the return to college education. Three interactions are empirically important in explaining log wage equations: (A) between schooling quality and education, (B) between regional labor market shocks and education and (C) between region-of-residence and region-of-birth. Because of this third interaction which can arise from comparative advantage in the labor market, no unique quality effect on returns to education can be defined independently of the market in which it is used.
This article examines the role tax policy can play in fostering human capital accumulation in a resource-constrained dual economy whose population is growing. The study shows how human capital accumulation, in turn, affects the intersectoral terms of trade and the economic growth process of such an economy, The dual economy is assumed to consist of two sectors, agriculture and manufacturing. Production in agriculture requires unskilled labor; land, and capital, whereas production in the manufacturing sector requires skilled and unskilled labor and capital Schooling facilities are limited, and access is rationed by the government. Moreover; schooling requires an investment of time. This article demonstrates the existence of a unique short-run equilibrium It also demonstrates that the steady state equilibrium is unique and locally stable. Comparative steady stare analysis suggests that a balanced budget increase in public investment in education (financed by a tax increase on capital income or incomes of skilled workers) alters the terms of trade between agriculture and manufacturing sectors and favorably affects the economic growth process.
Inter-jurisdictional labor mobility reduces the incentive for local public funding of education. This can be rectified by dividing the financial burden between the federal and local level, subsidizing local expenditures by inter-jurisdictional payments based on net migration flows.
It is assumed that there are two regions, that production requires both skilled and unskilled labour, and that one region is innately more productive than the other. Workers, who differ in their migration or training costs? make individually rational decisions. In equilibrium the ratio of skilled workers to unskilled workers is always higher in the more productive region. Average incomes differ between regions because regional differences in wage rates are reinforced by regional differences in the structure of employment. The model is also used to analyse the effects of policies intended to equalize the distribution of income.
Within an asymmetric information framework, we investigate the effects of subsidies for return when the size of the foreign student population is endogenous. Given the stability condition and the assumption that the education system is effective in the home country, we show that susidies for return always act to improve the average ability of returning Ph. D. s but the impact upon the number of emigrants is ambiguous. As a consequence, subsidies for return may be ineffective for a general, reasonable government objective function. Also, we show that the number of emigrants with asymmetric information structure may be smaller than the case of symmetric information due to uncertainties present in our model.
A model of the "new growth theory" type is applied to the persistence of racial income differentials in the presence of community segregation. When community human capital affects human capital accumulation by individuals, differences between groups can persist indefinitely, even in the absence of current discrimination. Intercommunity mobility can benefit advantaged minority workers, who leave behind an impoverished ghetto. Workplace integration without community integration may not lead to equality even in the long run. We examine various policies and show that a large, temporary intervention may be successful in achieving racial equality while a smaller permanent one fails.
Are there arty differences in how workers of different skill levels respond to regional shocks? This paper addresses that question using the methodology of Blanchard and Katz (1992) and a unique data set on working-age population, labor force, and employment for five educational groups (ranging from the illiterate to the college-educated) over 1964-92 for the 50 Spanish provinces. The paper finds that the highly skilled migrate very promptly in response to a decline il in regional labor demand, while low-skilled workers drop out of the labor force or stay unemployed.
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The standard neoclassical model cannot explain persistent migration flows and lack of cross-country convergence when capital and labor are mobile. Here we present a model when both phenomena may take place. Assuming increasing returns and perfect capital mobility, the driving forces behind labor migration are the size and the composition of the workforce, The size of the workforce produces divergence: a larger workforce in one country implies higher wages, the wage gap induces in-migration and this makes the wage gap even larger. In this case migration is only beneficial for the labor importing country. The evolution in the composition of the workforce due to migration may have opposite effects, In one case in-migration keeps the wage of skilled workers high enough to induce people to qualify for skilled jobs. This improves the composition of labor in the receiving country only and it makes divergence a likely outcome. In another case labor migration keeps the relative wage of unskilled workers in the rich country high enough to induce all migrants to take unskilled jobs and reduce the skilled-to-unskilled ratio in that country. Then, migration is beneficial to the country which was first exporting labor.
An implementation of the theory of labor migration under asymmetric information shows that return migration arises from the reinstatement of informational symmetry which induces low-skill workers, who are no longer pooled with high-skill workers, to return. When workers in an occupation constitute more than two skill levels, say four (without loss of generality), the following patterns emerge: Migration is sequential, that is, it proceeds in waves. Each wave breaks into workers who return and workers who stay; within waves the returning migrants are the low-skill workers. The average skill level of migrants is rising in the order of their wave.
We study human capital depletion and formation in an economy open to out-migration, as opposed to an economy which is closed. Under the assumption of asymmetric information, the enlarged opportunities and the associated different structure of incentives can give rise to a brain gain in conjunction with a brain drain. Migration by high-skill members of its workforce notwithstanding, the home country can end up with a higher average level of human capital per worker.
We specify conditions under which a strictly positive probability of employment in a foreign country raises the level of human capital formed by optimizing workers in the home country. While some workers migrate, "taking along" more human capital than if they had migrated without factoring in the possibility of migration (a form of brain drain), other workers stay at home with more human capital than they would have formed in the absence of the possibility of migration (a form of brain gain).
This paper focuses on a possible effect of emigration on human capital formation. Emigration to a higher returns to skill country provides an incentive to invest in human capital. The level of human capital formation in the source country can therefore be positively correlated with the probability of emigration. Incidentally a surge in emigration can lead the source country out of an under-development trap. The implications of the model for the convergence controversy are also discussed.
This paper constructs a two-sector overlapping-generations model of endogenous growth to study the effects of brain drain on growth, education and income distribution. It is shown that brain drain reduces the economic growth rate and generally hurts the non-emigrants through the static income-distributional effects and the dynamic damage on economic growth and human capital accumulation. If the initial rate of human capital accumulation is relatively low, brain drain could deteriorate both the sum of discounted income and lifetime discounted utility of a representative non-emigrant. The government can choose to spend more on education to lessen the detrimental growth effects of brain drain.
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