Migration Options for Skilled Labor and Optimal Investment in Human Capital
38 Pages Posted: 3 Dec 2013 Last revised: 28 Mar 2015
Date Written: December 2, 2010
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: Suggested Citation