The Transferability of Human Capital, the Brain Drain and the Brain Gain
I investigate the effects of transferability of human capital on the labour-sending country’s total human capital, i.e. which of the brain drain and the brain gain happens in a steady state and in the short run under the different degrees of human capital transferability. I find that if transferability of human capital is low, education demand is small and no individuals migrate. Conversely, if it is high, education demand is large and individuals with high innate ability attempt to migrate. I also find that even with high transferability, the labour-sending country experiences the brain drain in both the short run and steady state if the wage disparity is small between labour-sending and labour-receiving countries. However, if it is large, high transferability brings about the brain gain in a steady state whereas the brain drain might occur in the short run. Accordingly, highly transferable human capital does not necessarily contribute to raising the labour-sending country’s total human capital. The labour-sending country might be faced with a trade-off in raising its total human capital in the short run and steady state.
The preliminary version of this chapter was presented at the 16th Annual Conference of the European Economics and Finance Society, University of Ljubljana, Slovenia, June 2017; the 9th International Symposium on Human Capital and Labor Markets, Central University of Finance and Economics, China, December 2017; the China Meeting of the Econometric Society, Fudan University, China, June 2018; the 23rd Annual Workshop on Economic Science with Heterogeneous Interacting Agents, International Christian University, Japan, July 2018. I wish to thank participants at these conferences for valuable comments. This study was supported by JSPS KAKENHI Grant Number JP15K03356.
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