Human capital flight
Human capital flight is the emigration or immigration of individuals who have received advanced training in their home country. The net benefits of human capital flight for the receiving country are sometimes referred to as a "brain gain" whereas the net costs for the sending country are sometimes referred to as a "brain drain". In occupations with a surplus of graduates, immigration of foreign-trained professionals can aggravate the underemployment of domestic graduates, whereas emigration from an area with a surplus of trained people leads to better opportunities for those remaining. However, emigration may cause problems for the home country if trained people are in short supply there.
Research shows that there are significant economic benefits of human capital flight for the migrants themselves and for the receiving country. The consequences for the country of origin are less straightforward, with research suggesting they can be positive, negative or mixed. Research also suggests that emigration, remittances and return migration can have a positive effect on democratization and on the quality of political institutions in the country of origin.
Types
There are several types of human capital flight:- Organizational: The flight of talented, creative and highly qualified employees from large corporations that occurs when employees perceive the direction and leadership of the company to be regressive, unstable or stagnant, and thus unable to satisfy their personal and professional ambitions.
- Geographical: The flight of highly trained individuals and college graduates from their area of residence.
- Industrial: The movement of traditionally skilled workers from one sector of an industry to another.
Origins and uses
The term "brain drain" was coined by the Royal Society to describe the emigration of "scientists and technologists" to North America from post–World War II Europe. Another source indicates that this term was first used in the United Kingdom to describe the influx of Indian scientists and engineers. Although the term originally referred to technology workers leaving a nation, the meaning has broadened into "the departure of educated or professional people from one country, economic sector, or field for another, usually for better pay or living conditions".Brain drain is a phenomenon where, relative to the remaining population, a substantial number of more educated persons emigrate.
Given that the term "brain drain", as frequently used, implies that skilled emigration is bad for the country of origin, some scholars recommend against using the term in favor of more neutral and scientific alternative terms.
Effects
The positive effects of human capital flight are sometimes referred to as "brain gain" whereas the negative effects are sometimes referred to as "brain drain". According to economist Michael Clemens, it has not been shown that restrictions on high-skill emigration reduce shortages in the countries of origin. According to development economist Justin Sandefur, "there is no study out there... showing any empirical evidence that migration restrictions have contributed to development." Hein de Haas, Professor of Sociology at the University of Amsterdam, describes the brain drain as a "myth", whilst political philosopher Adam James Tebble argues that more open borders aid both the economic and institutional development of poorer migrant sending countries, contrary to proponents of "brain-drain" critiques of migration. However, according to University of Louvain economist Frederic Docquier, human capital flight has an adverse effect on most developing countries, even if it can be beneficial for some developing countries. Whether a country experiences a "brain gain" or "brain drain" depends on factors such as composition of migration, level of development, and demographic aspects including its population size, language and geographic location.Economic effects
Some research suggests that migration is beneficial both to the receiving and exporting countries, while other research suggests detrimental effect on the country of origin. According to one study, welfare increases in both types of countries: "welfare impact of observed levels of migration is substantial, at about 5% to 10% for the main receiving countries and about 10% in countries with large incoming remittances". According to economists Michael Clemens and Lant Pratchett, "permitting people to move from low-productivity places to high-productivity places appears to be by far the most efficient generalized policy tool, at the margin, for poverty reduction". A successful two-year in situ anti-poverty program, for instance, helps poor people make in a year what is the equivalent of working one day in the developed world. Research on a migration lottery that allowed Tongans to move to New Zealand found that the lottery winners saw a 263% increase in income from migrating relative to the unsuccessful lottery entrants. A 2017 study of Mexican immigrant households in the United States found that by virtue of moving to the United States, the households increase their incomes more than fivefold immediately. The study also found that the "average gains accruing to migrants surpass those of even the most successful current programs of economic development." A 2024 study found that EU migration to the United States had adverse effects on EU productivity in the short-term but positive long-term effects through productivity spillover effects.Remittances increase living standards in the country of origin. Remittances are a large share of GDP in many developing countries, and have been shown to increase the wellbeing of receiving families. In the case of Haiti, the 670,000 adult Haitians living in the OECD sent home about $1,700 per migrant per year, well over double Haiti's $670 per capita GDP. A study on remittances to Mexico found that remittances lead to a substantial increase in the availability of public services in Mexico, surpassing government spending in some localities. A 2017 study found that remittances can significantly alleviate poverty after natural disasters. Research shows that more educated and higher earning emigrants remit more. Some research shows that the remittance effect is not strong enough to make the remaining natives in countries with high emigration flows better off. A 2016 NBER paper suggests that emigration from Italy due to the 2008 financial crisis reduced political change in Italy.
Return migration can also be a boost to the economy of developing states, as the migrants bring back newly acquired skills, savings and assets. A study of Yugoslav refugees during the Yugoslav Wars of the early 1990s found that citizens of former Yugoslavia who were allowed temporary stays in Germany brought back skills, knowledge and technologies to their home countries when they returned home in 1995, leading to greater productivity and export performance.
Studies show that the elimination of barriers to migration would have profound effects on world GDP, with estimates of gains ranging between 67 and 147.3%. Research also finds that migration leads to greater trade in goods and services between the sending and receiving countries. Using 130 years of data on historical migrations to the United States, one study finds "that a doubling of the number of residents with ancestry from a given foreign country relative to the mean increases by 4.2 percentage points the probability that at least one local firm invests in that country, and increases by 31% the number of employees at domestic recipients of FDI from that country. The size of these effects increases with the ethnic diversity of the local population, the geographic distance to the origin country, and the ethno-linguistic fractionalization of the origin country." Emigrants have been found to significantly boost Foreign direct investment back to their country of origin. According to one review study, the overall evidence shows that emigration helps developing countries integrate into the global economy.
A 2016 study reviewing the literature on migration and economic growth shows that "migrants contribute to the integration of their country into the world market, which can be particularly important for economic growth in developing countries." Some research suggests that emigration causes an increase in the wages of those who remain in the country of origin. A 2014 survey of the existing literature on emigration finds that a 10 percent emigrant supply shock would increase wages in the sending country by 2–5.5%. A study of emigration from Poland shows that it led to a slight increase in wages for high- and medium-skilled workers for remaining Poles. A 2013 study finds that emigration from Eastern Europe after the 2004 EU enlargement increased the wages of remaining young workers in the country of origin by 6%, while it had no effect on the wages of old workers. The wages of Lithuanian men increased as a result of post-EU enlargement emigration. Return migration is associated with greater household firm revenues. A study from the IMF concluded that emigration of high skilled labour from Eastern Europe has adversely affected economic and productivity growth in Eastern Europe and slowed down convergence in per capita income between high and low income EU countries.
A 2019 study in the Journal of Political Economy found that Swedish emigration to the United States during the late 19th and early 20th century strengthened the labour movement and increased left-wing politics and voting trends. The authors argue that the ability to emigrate strengthened the bargaining position of labour, as well as provided exit options for political dissidents who might have been oppressed.