04:49pm Friday 18 August 2017

Waikato research shows “brain drain” no drag on development

New research out of the University of Waikato, being presented at the Royal Economic Society’s annual conference in London this week, shows the “brain drain” may not be a bad thing.

The study, by Waikato’s Professor John Gibson and Dr David McKenzie of the World Bank, shows little evidence that high-skilled emigration has a negative impact on the home countries.

Existing studies show small island countries, such as those in the Pacific and the Caribbean, have the highest rates of tertiary educated people leaving. The other region with a high rate of skilled emigration is sub-Saharan Africa, with Ghana a prominent example.

Based on these patterns, the two researchers have studied the micro-level impacts of highly skilled emigration on Ghana, Micronesia, New Zealand, Papua New Guinea and Tonga.

For each country, the researchers traced the migration histories of top academic achievers in high school each year from 1976 and 2004.

Altogether this involved tracking down and surveying more than 1,200 people now living in 45 different countries.

“This approach allows for natural comparison groups of highly skilled emigrants, returnees and individuals of similar academic talent who never migrated,” says Dr McKenzie. “Targeting a group based on their high school standing avoids biases from studying only particular occupation groups, such as doctors.”

The researchers found both the migration and return migration rates for these individuals were very high. “In Tonga, for example, more than 80% of these individuals had worked or studied abroad by age 35, and 25% had already returned,” says Professor Gibson.

The study showed gains to the migrants themselves by far outweighed any other effect.

“This group of the best and brightest stand to earn US$40,000-70,000 more each year by working abroad rather than at home,” says Dr McKenzie.

“Because this is such an enormous benefit to these individuals, we would need very large spillover effects for high-skilled migration to have a net negative impact on development in their home countries.”

“Instead, we estimate the likely value of these externalities to be at most $1,000 per year – that’s only 2% of the private gains.”

Other benefits from high-skilled migration include remittances, trade and investment. The study found remittances amounted to around $5,000 per year for each individual, while the net effect of trade and investment was much smaller – around $500-1,000 per migrant in Ghana, and even smaller in Micronesia and Tonga.

Professor Gibson says the overall fiscal cost of high-skilled migration depends strongly on the country’s tax system. “Countries like Ghana and Papua New Guinea with highly progressive tax rates and low spending on public services suffer larger fiscal losses from the highly skilled emigrating than do countries like Tonga and Micronesia with flatter tax rates.”

The researchers conclude that while high-skilled migration from smaller and island countries may not bring the trade and investment flows experienced by larger countries like Taiwan, China and India, there’s no evidence that it acts as a brake on development.

“Our study indicates that governments should be less concerned about high rates of skilled emigration, and focus instead on the basics of providing the policy environment needed to foster growth and innovation at home,” says Dr McKenzie.


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