Brain Drain and Brain Gain. The Global Competition to Attract High-Skilled Migrants

Brain Drain and Brain Gain: The Global Competition to Attract High-Skilled Migrants, edited by Tito Boeri, Herbert Bruecker, Friederic Docquier, and Hillel Rapoport. 2012. A Report for the Fondazione Rodolfo DeBenedetti (Milan). New York: Oxford University Press. 317 + xviii. ISBN 978-0-19-965482-6, $99.

“Brain Drain and Brain Gain is an ambitious book. The authors aim to explain who emigrates, why they emigrate, and the effects of emigration on both sending and receiving countries. They discuss the determinants and impacts of both general international migration and its high-skilled subset, where high-skilled is defined as migrants with at least some tertiary education. Drawing on several new migration databases, the authors largely succeed in achieving their aims, in spite of frequently having to resort to proxy variables (with varying credibility) in their econometric estimations.

The book is divided into two parts. The first part, by Herbert Br¨ ucker, Simone Pertoli, Giovanni Facchini, Anna Maria Mayda, and Giovanni Peri, deals with migration from a destination-country perspective. Br¨ ucker et al. first address issues such as immigration policies in the developed world and the scale of low-skilled and high-skilled immigration in various countries. The empirical core of the first part is in Chapters 3 and 4, where the authors discuss the results of a gravity-type model

of migration flows and an econometric estimation of the macroeconomic impacts of immigration, respectively. In both chapters, a distinction is made between general migration effects and the separable effect of skilled migration. Chapters 5–7 are more speculative, using data on individual attitudes to immigrants and the actions of interest groups to arrive at some conjectures about immigration policy choices. The second part of the book (Chapters 8–11), by Fr´ed´eric Docquier and Hillel Rapoport, deals with the other side of the migration coin: what are the effects of the brain drain in the—mostly poorer—source countries? Using newly available data on the size and skill composition of emigration flows from more than 100 countries as well as econometric results from recent empirical studies, the authors attempt to quantify the effects of various direct and indirect impacts of emigration on source countries. According to Docquier and Rapoport these effects are not limited to the direct effect of exporting human capital, but may also include such desirable indirect effects as greater incentives to invest in education, greater flows of foreign direct investments and other “diaspora externalities.”

Different estimates of the various effects are used as inputs in analyses that simulate the short-term and long-term impacts of reducing the rate of skilled emigration to the low-skilled emigration rate. The results of all these estimations convey a surprisingly coherent message. International migration is mostly good for the recipient countries, and even more so to the extent that immigrants are highly educated. More surprisingly, emigration can under plausible assumptions also be beneficial to the sending countries, with the only real exception being countries where the rates of skilled emigration exceed 30 or 40 percent. The main reasons for this counterintuitive result are that the higher human capital returns associated with emigration stimulate greater private investments in education and that ethnic networks in destination countries give rise to greater volumes of investment, trade and information exchange in the source countries. In spite of all these salutary effects of international migration, the authors frequently refer to “the battle for brains” in their characterization of international flows of skilled migrants. The reason

is that developed countries that are net exporters of human capital benefit much less from migration than net importers. Certain countries, notably Australia and Canada, have been much more successful at attracting skilled immigrants, both from other rich countries and from the developing world. According to the macroeconomic estimates presented in Chapter 4 (“The Effects of Brain Gain on Growth, Investment, and Employment”), immigration induces significantly greater employment of natives, additional capital accumulation and higher per capita GDP. These positive macroeconomic effects increase in tandem with an increase in the share of immigrants with tertiary educational qualifications. Why, then, have skilled migrants tended to favor North America and Australia over Europe and Japan?

Chapter 3, “The Determinants of Highly Skilled Migration,” offers a few clues as to why some countries have been better than others at attracting a disproportionate number of skilled immigrants. Unsurprisingly, high wages attract migrants and high after-tax wage differentials contribute to a greater share of skilled immigrants. But other factors matter too. Immigration policy affects the skill composition of the immigrant population in two ways. First, skill-based points systems (as in Australia, Canada, and New Zealand) result in a greater share of skilled immigrants. Second, less generous welfare benefits for immigrants than for the native population has the effect of raising the share of highly educated immigrants.

Certain aspects of general public policy also have significant impacts on immigration volumes and structures. For example, a high minimum wage reduces overall immigration but has little impact on the highly skilled. Conversely, employment protection laws have no significant effect on overall immigration but reduce the share of highly skilled in the immigrant population, as do public expenditures on the elderly and on the unemployed. Although the authors do not spell out the overall policy implications, their empirical results show that a more open immigration policy coupled with labor market deregulation and a less generous welfare state would be most conducive to attaining greater overall immigration and a greater share of high-skilled immigrants. It is surely no coincidence that Australia, Canada, and Switzerland receive the largest skilled migration flows on a per capita basis and rank as three of the four freest OECD economies according to recent indexes of economic freedom.

While the empirical analyses in the book draw on rich data sources and on ingenious applications of proxy variables, I think that the choice of region within nation states would offer even more revealing information about migrants’ choices and economic impacts. It is well-known that migrants cluster in the largest and most dynamic metropolitan regions to a greater extent than host populations. As Sascha Becker notes in his comment on Part I (p. 205), “a 1 percent increase

in the share of university graduates [in a city] increases wages of incumbent workers on average by 1 percent.” This alludes to the knowledge externalities that skilled immigrants may generate, and which disproportionately benefit the main urban regions in a host country. A regional perspective may also shed additional light on the positive effects on source countries, as when mobile skilled migrants travel back and forth between high-technology clusters in Silicon Valley, Hsinchu (Taiwan), and Bangalore (India). The lack of a regional perspective should however not detract from thestrengths of this book, which are many. I learned a great deal from Brain Drain and Brain Gain, and I suspect that it will be treated as a key reference by migration economists.”

David Emanuel Andersson

Department of Economics and Quantitative Methods

Nottingham University Business School

China