Developing Economies

Money and the Brain Drain

Brain Drain
Toettoet/Flickr

Debating the developing-economy brain drain can entertain economists for hours. Either it's a scourge that deprives developing countries of much-needed talent, or it's a boon that has emigrants sending tons of cash home, bolstering the fortunes of everyone left behind.

Now, two economists have tried to attach more numbers to the phenomenon. John Gibson at the University of Waikato in New Zealand and David McKenzie at the World Bank looked at migrants from five countries to figure out how they interacted with their birthlands.

They tracked top high-school students from 1976 to 2004 in Ghana, Micronesia, New Zealand, Papua New Guinea, and Tonga— countries known for their skilled migrants. They found the migrants tended to earn $40,000-$70,000 more per year than they would have by staying at home. And they send about $5,000 per year home.

The economists conclude that individuals have a lot to gain from migrating, and the costs to the home countries— like lost taxes from the migrants— are small. "Governments should not be so concerned about high rates of skilled emigration," Gibson and McKenzie write, "but focus instead on the basics of providing the policy environment needed to foster growth and innovation at home."

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