2011 02-07 - Can Africa possibly get a positive return on brain drain?

Is the Brain Drain Good for Africa? – Rachel Lund/Miguel Santos 1

“Is the Brain Drain Good for Africa?”

Easterly, W., Nyarko, Y., (2010).

(chapter in Skilled Immigration Today: Prospects, Problems, and

Policies, edited by Jagdish Bhagwati and Gordon Hanson)

Prepared by:

Rachel Lund

Miguel Santos


It is widely believed that brain-drain has negative effects on poor/developing countries…

• Skills are necessary for long-run development in source country

• Human capital of migrants may have had positive effects on

income or growth rates of those left behind (had they stayed)

• Human capital of migrants may have had a positive effect on

institutions/political leadership of home society (have they stayed)

• Family separation resulting from migration may be costly from a

non-monetary standpoint

• Skills are necessary for long-run development in source country

• Human capital of migrants may have had positive effects on

income or growth rates of those left behind (had they stayed)

• Human capital of migrants may have had a positive effect on

institutions/political leadership of home society (have they stayed)

• Family separation resulting from migration may be costly from a

non-monetary standpoint

The case for putting a halt to brain drain

These beliefs have inspired multilateral organizations to issue a call to

restrict or even ban active recruitment among developed countries…


The African Brain Drain in Context

13%

5%

1%

43%

17%

5% 4%

9%7%

5%7%

5%

49%

1% 2% 1%

15%12%

2% 2%5%

3%1%

4% 4%

8%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Sub

-Sah

aran

Afr

ica

Wor

ld

Nor

th A

mer

ica

Car

ibbe

an

Mex

ico/

Cen

tral

Am

eric

a

Sou

th A

mer

ica

Eas

tern

Eur

ope

Res

t of E

urop

e

Nor

ther

n A

fric

a

Eas

tern

Asi

a

Wes

tern

Asi

a

Aus

tral

ia/N

ewZ

eala

nd

Oce

nia

Skilled emigrants / (Skilled emigrants + skilled residents)

Emigrants / (Emigrants + residents)

Source: Docquier and Marfouk (2005)

13 times more likely to emigrate if skilled (highest in the world)


Could poor/developing countries possibly obtain a benefit from brain drain?

• Migrants are themselves better off

• Remittances

• Family members left behind may have indirect utility from greater

well being of migrants

• Home country population may have stronger incentives to invest in

human capital if they can migrate

• Migrants can have an impact on politics/institutions from abroad

• Migrants may return and bring technology/facilitate trading

network that increase source-country exports

• Migrants are themselves better off

• Remittances

• Family members left behind may have indirect utility from greater

well being of migrants

• Home country population may have stronger incentives to invest in

human capital if they can migrate

• Migrants can have an impact on politics/institutions from abroad

• Migrants may return and bring technology/facilitate trading

network that increase source-country exports

The case for letting brain drain happen without restrictions

Key consideration: The main object of development thinking should not

be nation-states, but rather nationals: “No reason to ignore the benefits

accruing from a given policy to a Tanzanian who is no longer in Tanzania”


• Brain drain does not explain the skill gap in Africa

• Considering the welfare of all nationals, individuals and their

families may be better off as a consequence of brain drain

• Remittances more than compensate for the high cost of

educating brain-drainers in Africa

• Brain drain provides incentives for human capital

accumulation: Skill creation offset loss of skills

• Brain drain does not have an impact on economic growth

What is the goal: Undermine from a theoretical and

empirical standpoint the received wisdom about brain drain


Brain drain does not explain the skill gap in Africa

2.8%

11%

18%

0.4%

2%

2%

3.2%

13%

20%

Sub-Saharan Africa Mexico/Central America Europe (excludingEastern Europe)

Skilled residents / All residentsSkilled emigrants / All residentsCounterfactual










What do the authors argue?


Settings and Assumptions

• Two generations: Young & old (one static period exercise)

• Government has resources G which will spend in two different

activities: Infrastructure/roads (H) and education (e):

• : fraction of the young who will be educated when education

spending is e (logically increasing on e)

• Of the educated people d will be drained off to foreign countries,

while (1-d) will remain in home country

• Educated young who do not drain will produce public goods: The

exact quantity will depend on infrastructure and the total number of

educated young people available:

(only educated people produce public goods)

A Simple Theoretical Model for Evaluating Brain Drain

eHG +=)(eΨ=ψ

))1(,( ψdeGfy −−=


Young generation: Three types

• : Educated and drain receive as payoff an income W in the countries where

they work; but they also send remittances R to their families back home

• : Educated and remain in home country with payoff cy

(where c denotes skill premium)

• : Not educated will be modeled as having utility or payoff y

• A typical person who does not know yet what type of young they will end up

being has the following expected income:

What are the expected payoffs to each generation?

dψ

)1( d−ψ

)1( ψ−

ycydRWduY )1()1()( ψψψ −+−+−=

Old generation: Receives an income equal to y plus remittances R.

In expected values:

Additionally: All young care about their parents utility and vice-versa, by

factors , respectively. Taking this into account, ex-ante utility levels are:

dRyuO ψ+=

OY δδ ,OYYY UuU δ+=YOOO UuU δ+=


Does an increase in d help or hurt everyone in the economy?

• Note that if: , then : There will be a negative

effect on the production of public goods

• There will be an effect on the utility of the young composed of two elements:

))1(,( edeGfy −−=efdy −=∂∂ /

Negative impact on public goods y, applying to those staying

Increased chance of draining (affects only the educated) increases expected income

• If the wage W of those who drain is high enough and is sufficiently large,

then increasing d will have a net positive effect

• Regarding the old generation, the change in d will have three effects:

o On the utility of the young they care about (+)

o On remittances (+)

o On the provision of public goods (-)

• It is unlikely that the negative effect on y would be higher than positive effects

on utility of the young and R (is not obvious that the net effect of d is negative)

ψ

[ ]{ } [ ] [ ]{ }cyRWcdfd

ue

Y

ψψψψ −−+−+−−=∂

∂)()1()1(


• When d and W are too high relative to y (as it is expected to be in many poor

countries) this derivative will be positive

What is the optimal investment in education ( )?ψ

[ ]ψ

ψψψ d

dycdycydRWd

uY

)1()1()1()( −+−+−−+−=∂∂

Direct impact on utility foreach group of young people

Impact on income, appliedto the groups staying at home

For the young generation:

For the old generation it can de shown that:

• If the old care about the young and is positive, then the derivative above

will be positive (even if R=0)! If the old generation is a decision maker on the

fate of the young generation, they will also set to be large (in spite of d)

∂∂+

∂∂=

∂∂

dRuuU OY

OO

ψψδκ

ψ where )1(

1YOδδ

κ−

=

ψ∂∂ Yu

ψ












• The cost of producing brains in Africa is very high: Unit cost of tertiary

education (% of per-capita GNP) averages 8.6 in Africa, 1.2 in Asia, 0.9

Latin America, 0.5 developed countries (Hinchliffe, 1987)

How big do remittances have to be?

CostCost of tertiary educationGhana: 6X GNP per capita

6 x 450 = US$2,700

BenefitNPV of annual remittances

@5% discount = 20R

Cost = Benefit ifR = US$135 or

30% GDP per cap.

Estimated remittances per (drained) capita = US$600












• H (total skilled L) =HD (Skilled L staying at home) + HF (Skilled L abroad)

• Assume formation of new skilled labor depends on population growth but also

on the possibility of emigration:

, substituting above leads to:

• The authors run this regression:

- using a number of instruments for dHF/H to address reverse causality and

omitted factors affecting both H and HF: Most significant instruments distance

from main destination countries (US, UK, France) and log of population by 1990

- measuring changes (d) between 1990-2000

• Coefficient for dHF/H is positive, “indicating that brain drain has a positive

effect in the stock of skilled people left at home”, but not significant

• Authors reject (c-1) being -1, so c is significantly different from zero: This does

not necessarily prove that replacement occurs on a one to one basis

Could drain brain have a positive effect on the stock of skilled labor at home?

H

dHF

H

dH

H

dHD−=

H

dHFcbna

H

dH++=

H

dHFcbna

H

dHD)1( −++=












• Authors apply growth

accounting, and find no

negative effects of brain drain

on GDP growth

• As poor growth can also lead

to brain drain (reverse

causality), authors tried

instruments and then ran

second stage regressions, but

in this case instruments did

not pass weak-instruments

test.

Does brain drain negatively affects growth at home country?


� The authors cast some doubt on the conventional wisdom on

brain drain having negative effects in poor countries

� Theory and empirics suggest that the ability of some brains in

the country to drain has had a net positive effect on

individuals staying

� Fail to find negative effect of brain drain on the stock of skills

remaining in source country: Skill creation incentives offset

loss of skills (weak result)

� Fail to find any negative effect of brain drain on economic

growth (very weak result)

√

In summary

√

√

√


� Ghost countries? If the argument is true : How education – as a

public good - will be “produced”? (“One would expect the government

to impose restrictions if populations started leaving in such numbers

that the remainder begins to approach zero”)

� No externalities of education into the home society are taken into

account as negative effects of brain drain

� Neither are the effects of brain drain on income distribution taken

into account, as the candidates for brain drain may be coming from

the elite class (which does not need remittances to survive) while the

rest of the people without access to the population receiving the

negative effects of brain drain (loss of output) and none of the benefits

(remittances, higher expected income)

√

Discussion / Talking points

√

√

1→d

Date post:	29-Nov-2014
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2011 02-07 - Can Africa possibly get a positive return on brain drain?

Economy & Finance