Knowledge Remittances: Does Emigration Foster Innovation?

Abstract

Does the emigration of skilled individuals necessarily result in losses for source countries due to the brain drain? Combining industry-level patenting and migration data from 32 European countries, we show that emigration in fact positively contributes to innovation in source countries. We use changes in the labour mobility legislation within Europe as exogenous variation to establish causality. By analysing patent citation data, we further provide evidence that these positive effects are driven by knowledge flows that are triggered by emigrants. While skilled migrants are not inventing in their home country anymore, they contribute to cross-border knowledge and technology diffusion and thus help less advanced countries to catch up to the technology frontier.

Keywords: migration, innovation, knowledge spillovers, patent citations, EU enlargement

JEL Classification: F220, J610, O330, O310, O520