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The Brain Drain and the World Distribution of Income

The Brain Drain and the World Distribution of Income. Andrew Mountford and Hillel Rapoport. The Evolution of the World Distribution of Income. Depends on both on the growth of income per capita and the growth of population across countries

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The Brain Drain and the World Distribution of Income

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  1. The Brain Drain and the World Distribution of Income Andrew Mountford and Hillel Rapoport Andrew Mountford

  2. The Evolution of the World Distribution of Income • Depends on both on the growth of income per capita and the growth of population across countries • A large literature on the determinants of differences in the rate of growth of income per capita, • Smaller literature on relationship between differential fertility rates and economic growth - with Galor and Weil (1999, 2000) Galor and Moav (2002), Kremer and Chen (2002). De la Croix and Doepke (2003, 2004, 2006) and Moav (2005) being notable exceptions. • Contribution of this paper is to analyse the effect of skilled migration on both economic growth and fertility. Emphasis is on international influences and is thus related to Galor and Mountford (2005). Andrew Mountford

  3. Salient Stylized Facts • Differential Fertility across economies • Concentration of R&D • Increasing Flow of Skilled Workers Migrating to Developed Economies from Less Developed Economies • Evidence of Fertility and Human Capital Responding to Economic Forces Andrew Mountford

  4. Differential Fertility Patterns Andrew Mountford

  5. Growth of Brain Drain Migration Introduction of `Points-System’ immigration policies in many OECD countries • Australia and Canada in 1980s • US 1990 Immigration created specific visas (H1B’s) for High Skilled Workers • Various EU economies (See OECD (2002)) • (UK 2006) Andrew Mountford

  6. Growth of Brain Drain Migration Individual Studies on Immigrants • Chiquiar and Hanson (2002) (Mexican Immigrants to US) • Borjas (2005) (Non-Resident Aliens 50% Engineering PhDs in US ) • Dustmann, Fabbri, Preston Wadsworth (2005) (21% Immigrants in UK are graduates compared to 16% for UK born whites) Andrew Mountford

  7. Growth of Brain Drain Migration • See Docquier and Defoort (2005) Andrew Mountford

  8. Patents in Force by Country of Origin Andrew Mountford

  9. Do Fertility and Human Capital Accumulation Respond to Skilled Migration? Here we present (Very Preliminary) empirical evidence that shows that Brain Drain propensity • Reduces Fertility in sending economies • Increases primary education in sending economies but on average reduces higher education Andrew Mountford

  10. Fertility and the Brain Drain: -Cross Country Evidence Andrew Mountford

  11. Fertility and the Brain Drain: -Cross Country Evidence Andrew Mountford

  12. Fertility and the Brain Drain: -Cross Country Evidence Andrew Mountford

  13. Fertility and the Brain Drain: -Cross Country Evidence Andrew Mountford

  14. penrol91 penrol91 penrol85 logrgdppc1985 16.55 17.827 0.175 (2.363)*** (2.417)*** (0.022)*** bd090 11.674 20.034 0.112 (8.171)* (9.112)*** (0.083)* logfrankrom -7.033 -0.044 (2.967)** (0.026)* Constant -37.623 -28.128 -0.372 (18.588)** -18.664 (0.169)** Observations 100 100 84 R-squared 0.36 0.394 0.446 Education and the Brain Drain: -Cross Country Evidence Andrew Mountford

  15. Education and the Brain Drain: -Cross Country Evidence Andrew Mountford

  16. Education and the Brain Drain: -Cross Country Evidence Andrew Mountford

  17. Has Brain Drain Been Good For Growth Economies with small emigration rates (Typically large economies): Source Beine, Docquier and Rapoport (2006) Andrew Mountford

  18. Has Brain Drain Been Good For Growth Economies with Large emigration rates (Typically small economies) : Source Beine, Docquier and Rapoport (2006) Andrew Mountford

  19. Has Brain Drain Been Good For Growth Mid-Size: Source Beine, Docquier and Rapoport (2006) Andrew Mountford

  20. Theoretical Model Designed to Answers the Questions • Why do economies with low levels of skilled labor and high levels of fertility send skilled workers to economies with a higher levels of skilled labor and low fertility? • Is the phenomenon of Brain Drain emigration likely to be a transitory or a permanent feature of the world economy? • Will this Brain Drain migration increase the rate of economic growth in the receiving economies? And in the sending economies? • Will the Brain Drain promote convergence or divergence in the world distribution of income? • Should the sending or receiving economies try to stop or limit this flow of people? Andrew Mountford

  21. Theoretical Model • OLG Model based on Galor and Moav (2000) extended to include fertility decisions and migration • Agents make optimal fertility and human capital accumulation decisions • Central idea is that the rate of growth of technology is skilled biased while the level of technology is neutral • International diffusion of technology is regarded as a level effect and is thus is not skill biased Andrew Mountford

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  39. Why Might Growth Rates Differ • International Trade (Galor –Mountford) • Institutions (Acemoglu et al ) • Non-Convexities in Growth equation • The Brain Drain (Perotti) Andrew Mountford

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  42. Evolution of World Income Distribution with No Migration Andrew Mountford

  43. Evolution of Skill Intensity in Sending and Receiving Economy: Scenario #1 Andrew Mountford

  44. Evolution of Skill Intensity in Sending and Receiving Economy: Scenario #2 Andrew Mountford

  45. Evolution of Skill Intensity in Sending and Receiving Economy: Scenario #3 Andrew Mountford

  46. Evolution of World Income Distribution with No Migration Andrew Mountford

  47. Conclusions • Even if there is convergence or stability in the world distribution of income per capita there are good reasons for believing that the world distribution of income will diverge due differences in population growth between rich and poor economies • The current trend towards skilled migration from poor to rich economies increases the potential for divergence Andrew Mountford

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