Brain drain, brain gain or brain same? The effect of European accession on human capital formation

With remittances expected to fall in 2009 as the financial crisis unfolds, the primary mechanism through which origin countries recoup the efficiency increases achieved by skilled migration will dissipate.  But is there another mechanism, less direct but with long-term implications, through which migrants can benefit their home country.

The notion of the brain drain from developing to developed countries is not new. What is relatively new in the ’new brain drain’ or ’brain gain’ literature is its positive prognosis regarding the economic implications of labor market liberalization.  Yes there is a brain drain and on the whole it is bad for development.  But the migration of skilled workers need not be a zero sum game.  That is, the gain of the host country need not inevitably translate to the loss of the sending country. 

The brain gain is the notion that the increase in expected returns to education, prompted by the opportunity to migrate, will encourage more individuals to invest in education. A net brain gain will then result if this positive effect raises human capital stocks at a larger rate than that at which they are depleted by the migration itself. In a recent working paper I attempted to test this hypothesis by examining the effect of EU enlargement, and with it the spread of the freedom of movement of people, on the enrollment rate in tertiary education.

The results highlight a significant impact on human capital formation, indicating that; given the promotion of complementary migration policies, such as return migration and guest worker schemes, labor market mobility could represent a powerful tool for growth.