Brain Drain and Human Capital Formation in Developing Countries

Using new data on emigration rates by education level, we examine the impact of brain drain migration on human capital formation in developing countries. We find evidence of a positive effect of skilled migration prospects on gross human capital formation in a cross-section of 127 countries. For each country of the sample we then estimate the net effect of the brain drain using counter-factual simulations. Countries combining relatively low levels of human capital and low emigration rates are shown to experience a beneficial brain drain, and conversely, there are more losers than winners, and the former tend to lose relatively more than what the latter gain. The term brain drain designates the international transfer of resources in the form of human capital and mainly applies to the migration of relatively highly educated indi-viduals from developing to developed countries. Recent comparative data reveal that by 2000 there were 20 million highly skilled immigrants (i.e., foreign-born workers with tertiary schooling) living in the OECD member countries, a 63.7 % increase in ten years against only a 14.4 % increase for unskilled immigrants (Docquier and Marfouk, 2006). The vast majority of these highly skilled immigrants come from developing countries and now represent more than a third of total immigration to the OECD. The causes o