Remittances and the Brain Drain

By R. Faini. 2006

270 citations recorded by the source corpus.

In most destination countries, immigration policies are increasingly tilted toward the most skilled individuals. Whether this shift hurts economic prospects in sending countries, as argued by the traditional brain drain literature, is somewhat controversial. The most recent literature has focused on the link between skilled out-migration and educational achievements. In this paper, we emphasize a different channel. It is often argued that skilled migrants raise economic welfare at home thanks to a relatively larger flow of remittances. Skilled migrants typically earn relatively more and, ceteris paribus, will therefore remit more. However, they are also likely to spend a longer span of time abroad and also are more likely to reunite with their close family in the host country. Both factors should be associated with a relatively smaller flow of remittances from skilled migrants. Hence, the sign of the impact of the brain drain on total remittances is an empirical question. We first develop a simple model showing that skilled migrants may have indeed a lower propensity to remit home out of a given flow of earnings abroad. We then derive an empirical equation of remittances and estimate it on a large panel of developing countries. As a measure of the brain drain, we use the dataset by Docquier and Marfouk (2004) that in turn builds on the pioneering work of Carrington and Detragiache (2004). We find considerable evidence that the brain drain is associated with a smaller flow of remittances.

Subfields: Development, Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/0ab3c0f5a51393bfc1ff47222151ab9031c599b0

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Citations in the corpus

Brain Drain and Inequality Across Nations (2006, unknown): “At an aggregate level, Faini (2006) shows that migrants’ remittances decrease with the proportion of skilled individuals among the emigrants and concludes: ”this result suggests that the negative impact of the brain drain cannot be counterbalanced by higher remittances”.”
Remittances and Vulnerability in Developing Countries (2014, background): “…(El-Sakka and McNabb, 1999; Lianos, 1997), the size of the diaspora abroad and transaction costs (Freund and Spatafora, 2008), the skill composition of migrant stocks (Faini, 2007; Adams Jr., 2009; Niimi et al., 2010), and the interaction with immigration policies (Docquier et al., 2012).”
Migrants’ International Transfers and Educational Expenditure: Empirical Evidence from Albania (2010, unknown): “Faini (2007) on the contrary contradicts this hypothesis, as he finds no evidence that more educated migrants remit more.”
The Economic Consequences of 'Brain Drain' of the Best and Brightest: Microeconomic Evidence from Five Countries (2010, unknown): “Cross-country studies based on macro data have been used to claim the high-skilled remit less (Faini, 2007) whilst recent microeconomic evidence based on surveys of immigrants in a number of destination countries suggests that more educated individuals remit more, with tertiaryeducated migrants…”
The interregional migration of human capital and its regional consequences: a review (2017, methodology): “Based on their cross-country analyses, Faini (2007) and Niimi, Ozden, and Schiff (2010) find that high-skilled migrants remit less.”
Remittances and Economic Growth: Empirical Evidence from Bangladesh, India and Sri Lanka (2012, background): “While Niimi and Ozden ( 2006 ), Faini ( 2007 ) and Adams ( 2009 ) using cross-country data find that countries that have a larger proportion of high-skilled emigrants receive less remittances – perhaps because these emigrants are also more likely to settle in the host countries and reunite with thei”