Thought du Jour

Another article worthy of note in the current issue of the Journal of Economic Perspectives is a nicely-written, concise survey of the economics of emigration.

The gains from eliminating migration barriers dwarf … the gains from eliminating other types of barriers. For the elimination of trade policy barriers and capital flow barriers, the estimated gains amount to less than a few percent of world GDP. For labor mobility barriers, the estimated gains are often in the range of 50–150 percent of world GDP.

In fact, existing estimates suggest that even small reductions in the barriers to labor mobility bring enormous gains. …. A conservative reading of the evidence …suggests that the emigration of less than 5 percent of the population of poor regions would bring global gains exceeding the gains from total elimination of all policy barriers to merchandise trade and all barriers to capital flows. For comparison, currently about 200 million people—3 percent of the world—live outside their countries of birth. ….

The departure of some [skilled] people … from a poor country might reduce the productivity of others in that country. Such an effect would tend to offset the gains from emigration. Externalities like these are often assumed to be so pervasive that the literature refers to skilled migration with a pejorative catchphrase—“brain drain”—embodying the assumption. (To see why economists should avoid this term, picture reading a journal article on female labor force participation that calls it the “family abandonment rate.”) ….

[Economist have published 13 times as many journal articles on "international trade" as on "international migration", and the migration papers are] focused … more on the relatively small and uncertain effects of remittances and “brain drain” than on the relatively massive and likely global effects of migration—including the benefits for the migrants themselves? …. [Why?] Perhaps the literature focuses on remittances and “brain drain” because those effects more obviously pertain to national welfare than individual welfare.

Michael A. Clemens, “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?“, Journal of Economic Perspectives 25:3 (Summer 2011), pp. 83-106.

Obsession with national welfare, Clemens writes, is “a grand old tradition in economics”, one that dates from the mercantilists, who wrote long before Adam Smith. Modern economists – despite Adam Smith’s unfortunate use of the term “Wealth of Nations” in the title of his famous book – are supposed to be concerned with individual welfare rather than the wealth or power of nations. (We now leave analysis of the latter to political scientists.)

Michael Clemens is a senior fellow at the Center for Global Development, a Washington, D.C. research institute, where he leads the Migration and Development initiative.

Access to current and back issues of the Journal of Economic Perspectives, published quarterly by the American Economic Association, does not require a subscription or AEA membership. JEP articles are less technical than those of other AEA journals, and are intended for readers who have either completed an undergraduate principles course, or have an equivalent understanding of economics.

Two economists – John Gibson (University of Waikato, New Zealand) and David McKenzie (Development Research Group, World Bank) – have teamed up to draft an excellent ‘state of the art’ paper on migration of professionals and skilled workers. They pose (and answer) eight questions that underly the “brain drain” debate.

The term “brain drain” dominates popular discourse on high-skilled migration, and for this reason, we use it in this article. However, as Harry Johnson noted, it is a loaded phrase implying serious loss. It is far from clear that such a loss actually occurs in practice; indeed, there is an increasing recognition of the possible benefits that skilled migration can offer both for migrants and for sending countries. This paper builds upon a recent wave of empirical research to answer eight key questions underlying much of the brain drain debate: 1) What is brain drain? 2) Why should economists care about it? 3) Is brain drain increasing? 4) Is there a positive relationship between skilled and unskilled migration? 5) What makes brain drain more likely? 6) Does brain gain exist? 7) Do high-skilled workers remit, invest, and share knowledge back home? 8 ) What do we know about the fiscal and production externalities of brain drain?

Here is a brief summary of their answers:

Brain drain rates are not skyrocketing. Africa is not the most affected region for brain drain; small island states are. Most skilled migrants are not doctors. But neither are they taxi drivers. Skilled individuals enjoy massive increases in living standards as a result of migrating. The rise in skilled migration does not appear to be crowding out migration opportunities for unskilled migrants: instead, skilled and unskilled migration have increased together. Skilled migrants are remitting back about as much as the fifi scal cost of their absence. Existing preliminary estimates of the production externalities associated with brain drain are quite small.

John Gibson and David McKenzie, “Eight Questions about Brain Drain“, Journal of Economic Perspectives 25:3 (Summer 2011), pp. 107–128.

Details are in the full article (access is not restricted). The authors conclude by posing and leaving “for further research five more questions for which answers are needed to better understand the overall impacts of high-skilled migration”.

The Gibson/McKenzie survey is part of a three-article Symposium on migration in the current issue of the Journal of Economic Perspectives. The other two articles are “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?”, by Michael A. Clemens, and “Migrant Remittances”, by Dean Yang.