Brain Drain and Emigration: How Do They Affect Source Countries?

This paper examines the effect of different skill levels of emigration on a country’s labor market, from high skill brain drain to low skill emigration. By utilizing an IADB Brain Drain data set to measure emigration rates among those with low, medium, and high educational attainment in a country, the effect of brain drain vs. low skill emigration on productivity and unemployment is examined. These data span from 1980 to 2010 with measurements every five years for 195 World Bank countries. By utilizing two two-way fixed effects models with GDP per capita and unemployment rate as the dependent variables, the results indicate that medium skill emigration reduces productivity, confirming a portion of the concept of “Brain Drain.” Low skill emigration also reduces unemployment, and there is evidence of upward pressure on the wages of stayers. Therefore, there are possible benefits and drawbacks of emigration depending on the skill level of the emigrants