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Migration Options for Skilled Labor and Optimal Investment in Human Capital

38 Pages Posted: 3 Dec 2013 Last revised: 28 Mar 2015

Hamed Ghoddusi

Stevens Institute of Technology - School of Business

Baran Siyahhan

Vienna Graduate School of Finance

Date Written: December 2, 2010

Abstract

This paper develops a model of optimal education choice of an agent who has an option to emigrate. Using a real options framework, we analyze the time evolution of human capital in the home country and investigate the role of migration opportunities in the accumulation of different types of human capital. The analysis shows that the accumulation of human capital depends crucially on the level of uncertainty and the transferability of human capital across countries. Government subsidies are an important determinant of the composition of different types of human capital and can be crucial in alleviating the brain drain problem.

Keywords: Human capital investment, Immigration, Real options, Skilled labor

JEL Classification: J24, J61

Suggested Citation

Ghoddusi, Hamed and Siyahhan, Baran, Migration Options for Skilled Labor and Optimal Investment in Human Capital (December 2, 2010). Available at SSRN: https://ssrn.com/abstract=2362227 or http://dx.doi.org/10.2139/ssrn.2362227

Hamed Ghoddusi (Contact Author)

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

HOME PAGE: http://www.ghoddusi.com

Baran Siyahhan

Vienna Graduate School of Finance ( email )

Heiligenstaedter Strasse 46-48
Floor 4/RoomDG1.22
Vienna, Vienna 1190
Austria

HOME PAGE: http://www.vgsf.ac.at/student/siyahhan.htm

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