Analysis: The brain drain gain

Human capital flight, or brain drain, is usually considered an economic loss. It has been a major concern to many poor developing countries suffering from high rates of emigration.

As highly skilled professionals leave they take with them the value of their education and training, sponsored by the government and organisations in their home country.

But following a multi-year research, David McKenzie, a senior economist at the development research group, finance and sector development, at the World Bank, says high-skilled migration can actually benefit the sending country.

“The very name brain drain suggests that high-skilled migration can be nothing but bad for developing countries,” McKenzie writes in his latest blog published on the website of the World Bank.

As McKenzie points out, recently there has been a surge of more optimistic views of highly skilled migration.

Those include, for example, theories of brain gain, brain circulation and the so-called “create-your-own Silicon Valley”. Brain gain suggests that people generally seek more education with the prospects of emigration, whether they end up emigrating or staying.

Brain circulation, another theory, is said to benefit countries once emigrates return with their knowledge gained from abroad. (article continues below)

The theory of “create-your-own Silicon Valley” is seen as a source of trade, investment funds and inspiration.

McKenzie says the gains to migrants themselves “by far dominate any other effect”, suggesting some gain between $40,000 (£33,000) and $70,000 every year from working abroad, a multiple of what they would earn at home.

Income differences and better career opportunities are the main reasons why so many highly skilled professionals leave their home country.

Although they do send money home, McKenzie says remittances are still less than what they would have earned at home.

They are engaged in knowledge transfer yet involvement in trade and foreign investment is only modest.

Fiscal costs, such as a loss in tax revenue, vary considerably across countries. They depend on various other factors and are difficult to establish.

“Ultimately we find that the overall consequences of high-skilled migration are beneficial for citizens of their sending countries, unless externalities are orders of magnitude larger than ever measured,” McKenzie writes.

“Certainly we believe such externalities of high-skilled individuals are less likely to manifest themselves in societies which repress the basic right of free movement – North Korea keeps most of its best and brightest from emigrating, but we hardly see large rates of innovation and growth as a result.”