Reversing the Brain Drain: Is it Beneficial?
43 Pages Posted: 27 Sep 2012
Date Written: September 15, 2012
This paper investigates the costs and benefits of reversing the brain drain from a developing country by calling back its expatriates from abroad. I employ a life cycle model with 2 countries, one poor and one rich, with migration and return migration from and to the poor country. The cost of bringing back a worker is the high enough compensation that must be paid to him to make him indifferent between working the two countries. The benefit is the increase in domestic output because of his higher skill level and the increase in skill level of everyone else because of positive externalities from him. An important contribution of the paper is to empirically estimate the spillovers from a returning migrant. Results show that the welfare gains are maximized when workers with skill levels that are 1.28 standard deviations above the mean skill level of domestic workers are called back.
Keywords: brain drain, spillovers, life cycle model, return migration
JEL Classification: E27, F22, I38, O15, O29
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