• Sebastiaan Tan

How ‘Brain Drain’ really works...

Updated: Jun 18, 2019

The concept of ‘Brain Drain’ refers to the extraction of highly-skilled workers from low-income by high-income countries. Conventional belief suggest this has detrimental effects for low-income countries as they are ‘robbed’ from their most talented people. Instead these people should have been the future leaders, scientists or physicians of their country of origin, leading it to prosperity. As of today, the rate at which ‘Brain Drain’ occurs has increased in the last decades as a consequence of globalization. But is this a bad thing?

In their book, Brock and Blake (2015), consider the countries of Malawi and Japan. The state that Japan has around twenty-one physicians per ten thousand people, while Malawi has only one physician for every fifty thousand people. This inequality in medical skills has negative consequences for the health sector in Malawi. People born in Malawi will live, on average, thirty-two years fewer than their counterparts born in Japan. These facts are troubling in themselves. To make matters worse, it is not that the population of low-income countries have no interest in becoming physicians or a lack of opportunity for medical training. In fact, many developing societies spend a great deal of government budget on training new physicians. The reason for the low numbers of physicians has much to do with what medical training provides: namely, the opportunity to leave the developing society and enter into a more developed one.

As all of the above may sound very bad (and to certain extent it is). However, it provides a distorted view on the concept of ‘Brain Drain’.

A few decades ago the above was considered as one of the foremost reasons why low-income countries were held back in their development, but the concept of ‘Brain Drain’ and its detrimental effects have become obsolete in the era of the internet. Internet-Age emigration is fundamentally different from all of the preceding eras of emigration, due to the existence of transnational societies today. Transnational societies are those in which border between communities and societies are blurred, and citizens not only feel emotional attached to multiple societies, but they actually engage in more than one society.

I hope everyone reading this agrees that ‘Brain Drain’ resolves around human capital and that the concept of human capital is only different from financial -and physical capital in the notion that it cannot be separated from its owner. But is it really nowadays? Obviously, I do know that you are not physically capable of separating your body from your mind, but we have to agree upon the fact that through technologies the concept of human capital as described by Adam Smith in the 18th century doesn’t fit that well anymore.

So if the concept of ‘Brain Drain’ is obsolete and irrelevant today as a result of the growing interconnectedness of people, societies and countries, what do we observe nowadays?

1. Entrepreneurial spirit

First of all, many low-income countries, lack access to credit which forms a constraint to entrepreneurship. Emigration enables credit-constrained individuals to acquire savings, providing them with capital to set up businesses once they return. In particular, when unemployment in the country of origin is high, entrepreneurship can be a source of growth by providing jobs and reduce poverty. For example, in 2007 return migrants accounted for one-third of the start-ups in Taiwan’s Hsinchu (an Industrial Park, which back then accounted for 10% of exports). Next to that, half of the leading software firms in India in 2000 were founded by Indian return migrants from the US. Returning migrants can be a major source of entrepreneurship, technology, marketing knowledge, and investment capital.

2. Higher productivity leads to higher wages.

Migrants acquire skills abroad that allow them to earn higher wages than non-migrants when they return. We have obtained data from returnees in West Africa, who experience a substantial wage premium. Similarly, Egyptian highly educated return migrants earn on average 24% more than non-migrants.

3. Increase in democracy and institutional strength.

Return migrants foster the transmission of knowledge, ideas, and social norms, which may benefit the country of origin. When migrants move to another country, they are exposed to different cultures, social norms, and political ideologies. Return migrants can transmit ideas about the quality of political institutions, raising awareness for political accountability. For example, a study based on a dataset of foreign students worldwide of over 50 years, found that foreign-educated returnees increase the likelihood of democratic change at home. Nowadays, many leaders of low-income countries were educated abroad and have returned to strengthen political institutions in their countries of origin.

4. Remittances

On average an estimated two migrants in five will leave the host country within five years of arrival (OECD, 2011). This number is considered to be growing substantially as people feel more connected with the home country than a few decades ago due to technological developments. They are able to stay in touch with their loved ones, as with the developments in their country of origin. It is easier, cheaper and faster to visit the country of origin than it was forty years ago. The feeling of connectedness to the country of origin has grown. But if they don’t return, migrants do still contribute to economy in home country: Remittances can support the diffusion of technology by reducing the credit constraints of receiving households and encouraging investment and entrepreneurship

This still raises the question why Malawi then has just one physician for every fifty thousand people and Japan twenty-one for every ten thousand? Ultimately, this is a consequence of the fact that physicians are still leaving their low-income country of origin (such as Malawi). This is in line with the old reasoning related to ‘Brain Drain’ in which multiple scholars argued an outflow of educated workers can inflict a very high level of harm in the long run by reducing a country’s growth rate.

However, This line of reasoning assumes that if all skilled persons stay in a dysfunctional governmental institution, that country will somehow get better.

Consider Venezuela, one of the few countries which is suffering a “drain” of people, well-educated or not, demonstrates the short-sightedness of that assumption. It is precisely the country’s governmental institutions dysfunction and economic collapse that has driven its people abroad, among them around a third of its doctors.

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