The World Bank Economic Review Advance Access originally published online on May 24, 2007
The World Bank Economic Review 2007 21(2):177-191; doi:10.1093/wber/lhm006
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Remittances and the Brain Drain: Do More Skilled Migrants Remit More?
Riccardo Faini was a professor of political economy at Università di Roma Tor Vergata and a research fellow at the Institute for the Study of Labor (Bonn) and the Center for Economic Policy Research (London)
JEL codes: F02, F22
In most destination countries, immigration policies are tilted more and more in favor of 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 focuses on the link between skilled outmigration and educational achievements in the home country. This article emphasizes a different channel. It considers the argument that skilled migrants raise economic welfare at home by sending a relatively larger flow of remittances. While skilled migrants typically earn more, and so might be expected to remit more, they are also likely to spend more time abroad and to reunite with their close family in the host country. These second two factors should be associated with a smaller propensity to remit. Thus, the sign of the impact of the brain drain on total remittances is an empirical question. A simple model has been developed showing that skilled migrants may indeed have a lower propensity to remit from a given flow of earnings. An empirical equation of remittances is estimated as a measure of the brain drain in developing countries using the Docquier and Marfouk (2004) data set. Evidence is found that the brain drain is associated with a smaller propensity to remit.
Editor's note: This paper was submitted in September 2006. The author received comments in November. Riccardo Faini passed away suddenly on January 20, 2007. This version was revised by the editor and reflects helpful comments from three referees. The editor thanks David McKenzie for suggestions and Céline Carrère and Mario Piacentini for help.