Outsourcing, Migration, and Brain Drain in the Global Economy: Issues and Evidence

Abstract

The process of globalization seems to have created two opposing forces, outsourcing and international migration, which are likely to have a balancing impact on the global economy. While the developing countries are losing skilled labor through ‘brain drain’ to their developed counterparts, they are gaining remittance earnings from developed countries. At the same time, offshore outsourcing from the developed countries has created new employment and other opportunities in developing countries. Although the final impact of outsourcing is somewhat controversial, it is very likely that companies will intensify offshoring in future due to substantial cost advantages. The outflow of skilled manpower from developing countries is also likely to increase due to growing demand for ‘replacement migration’ from developed countries. Increasing job gains from outsourcing and the associated benefits on the economies of developing countries are likely to cancel out the perceived negative impact of brain drain, argued in this paper.

Keywords: Globalization, Offshore outsourcing, Migration, Brain drain