Institutional Impact of the Brain Drain, Human Capital and Inequality: A Political Economy Analysis
Posted: 9 Oct 2010
Date Written: October 6, 2010
This paper examines the impact of the brain drain, human capital and inequality on institutions in a country where a rent-seeking elite levies a tax on the residents in migrants’ home country, and where skilled migrants and skilled and unskilled residents can affect the likelihood of regime change by voicing. With all impacts related to institutional quality, the main findings are: i) the impact of the brain drain m is U-shaped, with a maximum when the host country sets its immigration quota equal to zero (m=0); ii) the impact of human capital h is U-shaped as well, and it is U-shaped with respect m; iii) the likelihood institutional quality improves with human capital falls with both domestic and North-South inequality, and the likelihood it improves with the brain drain falls with North-South inequality; and v) a host country’s twin objectives of improving a high-brain-drain country’s institutions and reducing its brain drain cannot be achieved through a small reduction in its immigration quota, though it can be achieved with a sufficiently large reduction in it.
Keywords: rent-seeking, institutions, brain drain, human capital, inequality
JEL Classification: D64, D72, F22, J22
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