Migration, human capital accumulation and economic development

In this paper we contribute to the debate on the brain drain by focussing on the role played by the composition of human capital in fostering productivity growth and economic development. We present a model in which productivity increases either through imitation or innovation, and both activities use the same types of human capital as inputs, albeit with different intensities. Heterogenous agents endogenously accumulate human capital in response to economic incentives, and might or not be able to emigrate. When no emigration is possible, backwards countries converge to the technological frontier over time. The possibility of migration, however, distorts the optimal accumulation of human capital and slows down, or even hinders, economic development. This effect is stronger the farther away a developing country is from the technological frontier. Developing countries can implement appropriate policies, subsidizing the accumulation of the most useful type of human capital, and thus improve their growth performance. These countries converge faster, and possibly to a higher productivity level than countries where such policies are neglected