Optimal Education Policy and Human Capital Accumulation in the Context of Brain Drain

33 Pages Posted: 24 Sep 2018

See all articles by Slobodan Djajic

Slobodan Djajic

University of Geneva

Frédéric Docquier

Université catholique de Louvain; CREAM, Centre for Research on Environmental Appraisal & Management, UK; IZA Institute of Labor Economics

Michael S. Michael

University of Cyprus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

This paper revisits the question of how brain drain affects the optimal education policy of a developing economy. Our framework of analysis highlights the complementarity between public spending on education and students' efforts to acquire human capital in response to career opportunities at home and abroad. Given this complementarity, we find that brain drain has conflicting effects on the optimal provision of public education. A positive response is called for when the international earning differential with destination countries is large, and when the emigration rate is relatively low.In contrast with the findings in the existing literature, our numerical experiments show that these required conditions are in fact present in a large number of developing countries; they are equivalent to those under which an increase in emigration induces a net brain gain. As a further contribution, we study the interaction between the optimal immigration policy of the host country and education policy of the source country in a game-theoretic framework.

Keywords: migration of skilled workers, immigration policy, education policy

JEL Classification: F22, J24, O15

Suggested Citation

Djajic, Slobodan and Docquier, Frédéric and Michael, Michael S., Optimal Education Policy and Human Capital Accumulation in the Context of Brain Drain. IZA Discussion Paper No. 11806. Available at SSRN: https://ssrn.com/abstract=3253464

Slobodan Djajic (Contact Author)

University of Geneva ( email )

32 rue de Lausanne
CH-1202 Geneva
Switzerland
0041-22-733 3049 (Fax)

Frédéric Docquier

Université catholique de Louvain ( email )

IRES
Place Montesquieu 3
Louvain-la-Neuve, 1348
Belgium

HOME PAGE: http://https://perso.uclouvain.be/frederic.docquier/

CREAM, Centre for Research on Environmental Appraisal & Management, UK

University of Newcastle
NE1 7RU Newcastle Upon Tyne
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael S. Michael

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
357-22892433 (Phone)
357-22892432 (Fax)

HOME PAGE: http://www.econ.ucy.ac.cy/staff/michael.htm

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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