Jhon Mchale by 6GRR8e58


									Emigrants and Institutions

John McHale
Queen’s University

   Big picture

   A framework

   What we know (and don’t know)

   Policy implications
High skilled absence rates for many
The first-order impact is on the emigrants

   Large income differentials

   Due to differences in institutions . . . economic
    problem with the places not the people

   Longitudinal evidence suggests large gains
Differing perspectives on winners and

                         Sending Country

                        Win          Lose

             Win      Brain Gain   Brain Drain
 Country               Brain
            Lose     Competition
                                   Brain Waste
A simple dynamic framework

   Diaspora Stock   Domestic Stock

   Diaspora Stock   Domestic Stock

   Diaspora Stock   Domestic Stock
Induced Investment

   Diaspora Stock    Domestic Stock
Steady-state human capital stocks

    Diaspora Stock   Domestic Stock

                       Human Capital
       Absent /
     Human Capital
                       Human capital
Some believe educated emigrants will
not be missed?

   Low aggregate return to rising educational

   Skilled emigrants are wasted at home due to
    weak institutions
Emigration and institution building

                   Negative                 Positive

              Reduced supply of and
  Absence /   demand for institution
  Diaspora                                 remittances

                   Potential for       institution building
   Return           conflicts                skills and

              Distorts human capital     Threat of exit →
   Prospect        investments              Leverage
Empirical evidence

   Very limited understanding

   Limited understanding even of the broader
    question of how human capital affects
    institutional development

   Compares unfavorably with recent strides made
    in household-level research
Some suggestive evidence from Li and
McHale (in progress)
   Use of World Bank governance indicators as measures
    of institutional quality

   Allows both domestic and diaspora human capital to
    positively affect institutional quality . . . focus on the
    difference between these effects

   Reverse causality is the key empirical challenge: Bad
    institutions drive good people out

   Instrumental variable results show that skilled emigration
    adversely affects “economic” institutions but not
    “political” institutions
But we need to go much deeper

   Strongest prior: The emigration of health
    professionals in harming health care institutions
    in Africa

   But a careful analysis by Michael Clemens of the
    Center of Global Development does not find a
    negative impact
We also need research that helps us to
better understand the tradeoffs

   Agrawal, Kapur, and McHale (2007) examine
    knowledge spillovers between Indian inventors
    using patent citation data

   Evidence of diaspora effects . . . But they are no
    where near strong enough to overcome the
    thinning of domestic knowledge networks
Policy . . . rich-country recruitment

   Global system already too illiberal . . . we can’t forget the
    large gains to the migrants

   But trend is towards greater skill selectivity . . . witness
    the new Senate compromise

   Need for a development perspective to balance the
    competitiveness/fiscal perspectives that dominate rich-
    country policy debates
Policy . . . reaching out

   Many countries are trying to leverage their
    diasporas . . . but little systematic evidence on
    the effectiveness of these interventions

   Important work being done by World Bank
     Points   to a chicken & egg problem: Successful
      leveraging of the diaspora requires effective
      institutions at home
Policy . . . retention

   Better conditions in public sectors

   But also worth exploring the “Bhagwati tax”
     Narrows   the after-tax income gap
     Maintains incentive to fund public education
     Potentially fair and feasible

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