Human Capital Acquisition and International Migration in a Model of Educational Market

27 Pages Posted: 27 Feb 2009 Last revised: 5 Apr 2012

See all articles by Roman Zakharenko

Roman Zakharenko

National Research University Higher School of Economics

Date Written: November 15, 2011

Abstract

This paper analyzes international high-skilled migration caused by financial frictions in educational market. I develop a model of learning in which acquisition of skill is only possible through personal interaction with a skilled individual; the income of the skilled is sensitive to financial constraints for the unskilled. Cross-country differences in such constraints have a multiplicative effect on the skill premium, causing outmigration of skilled individuals from a less developed country. I study welfare implications of such brain drain for the sending and receiving countries. Although it makes more difficult skill acquisition in the sending country, the unskilled may still be better off: increased cost of skill acquisition is offset by higher income once the skill has been acquired. For the receiving country, I identify a phenomenon of immiserizing immigration: a depletion of the stock of skill in the sending country due to brain drain hinders further production of skill, which may hurt the receiving country. Additionally, I find that increased openness of the sending country to migration and the resultant accelerated brain drain increase the incentives of the country government to reduce financial frictions.

Keywords: skill acquisition, brain drain, immiserizing immigration, financial constraints

JEL Classification: F22, J61, O15

Suggested Citation

Zakharenko, Roman, Human Capital Acquisition and International Migration in a Model of Educational Market (November 15, 2011). Available at SSRN: https://ssrn.com/abstract=1350339 or http://dx.doi.org/10.2139/ssrn.1350339

Roman Zakharenko (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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