‘BRAIN DRAIN’ OR ‘BRAIN CIRCULATION’: EVIDENCE FROM OECD'S INTERNATIONAL MIGRATION AND R&D SPILLOVERS
| DOI | http://doi.org/10.1111/j.1467-9485.2008.00468.x |
| Author | Thanh Le |
| Published date | 01 November 2008 |
| Date | 01 November 2008 |
‘BRAIN DRAIN’ OR ‘BRAIN
CIRCULATION’: EVIDENCE FROM
OECD’S INTERNATIONAL MIGRATION
AND R&D SPILLOVERS
Thanh Le
n
Abstract
This paper empirically investigates whether labour mobility can transfer
technology across borders based on the panel cointegration method. Estimates of
specifications on a cross-section of 19 OECD countries during 1980–1990 lend
strong support to this thesis. Data indicate that international labour movement may
help transfer technology across borders in both directions: from donor countries to
host countries and vice versa. This suggests that migration may more likely create
a ‘brain circulation’ rather than a ‘brain drain’. In addition, human capital has a
significant impact on the research and development (R&D) diffusion process as it
enhances a country’s capacity to learn from a foreign technology base.
I Intro ductio n
In studying the impact of international migration on economic development,
many studies (e.g., Haque and Kim, 1995; Wong and Yip, 1999) argue that
international migration negatively affects donor countries through the ‘brain
drain’ of high skilled workers.
1
This brain drain reduces the growth rate of
effective human capital that remains in the economy. Consequently, the growth
rate of per capita income of those countries is retarded.
However, there is another research line that suggests a ‘brain gain’ associated
with that brain drain: a temporary loss of skilled workers may permanently
increase the average level of productivity of the source country. This is based
on the following reasoning: the possibility of migration of qualified educated
people to a higher income country raises the return to education and, hence,
increases the human capital formation which may be greater than the
n
University of Queensland, St Lucia, QLD 4072, Australia
1
According to Beine et al. (2001), ‘brain drain’ not only means the migration of engineers,
physicians, scientists or other very highly skilled professionals but can also be broadly defined
as the emigration of a fraction of the population that is relatively highly educated as compared
with the average.
Scottish Journal of Political Economy, Vol. 55, No. 5, November 2008
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Journal compilation r2008 Scottish Economic Society. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main St, Malden, MA, 02148, USA
618
negative effect of a brain drain (e.g., Mountford, 1997; Vidal, 1998; Beine
et al., 2001).
2
Results in the literature are, therefore, mixed. So far, much of the debate is
based on the impact of migration on the formation of the stock of human
capital. As human capital is embodied in people and contains knowledge about
new technologies and materials, production methods, or organizational skills, it
raises the question of whether the international movement of human capital with
embodied technology will give rise to technology diffusion across countries.
With the existence of bilateral worker flows across economies, foreign workers
who acquire R&D-induced technological knowledge through on-the-job
training and work experience in their home country may contribute to a
productivity increase in the host country. In addition, people are often tied to
their homeland so by maintaining close and frequent contact with people at
home (even visiting home occasionally or regularly), those workers can also
contribute knowledge they obtained in the host country to productivity
improvement in their home country. This suggests a pattern of ‘brain
circulation’ rather than a draining of skills from one country to another.
So far, economic research on this brain circulation issue is limited to a small
number of sectoral case studies, notably within the software industry.
3
These
case studies show that when integrating into the business community, migrants
transfer technical and institutional know-how between distant countries much
faster and more flexibly than most corporations. In addition, migrant
participation in the labour force of the host country may reveal information
about production techniques and productivity in their country of origin.
4
This paper will revisit the issue of brain drain and brain gain from the aspect
of knowledge spillovers. This is achieved by examining the extent to which
international labour migration effectively transmits knowledge across countries.
International R&D spillovers on total factor productivity (TFP) due to worker
flows are tested based on the cointegration method against a cross-country data
set of 19 OECD countries for the period 1980–1990. The paper also empirically
considers the presence of the complementarity between R&D spillovers and
investment in human capital: an increase in the level of human capital improves
the technological ‘absorptive capacity’ in an open economy context. Empirical
findings in this study indicate that worker migration can act as a significant
channel for R&D spillovers. More importantly, the knowledge spillovers may be
bidirectional: from a donor country to a host country and vice versa.
2
Other possible gains include the return migration of ex ante low-skilled workers who are
now equipped with new skills learned abroad (Stark et al., 1997, 1998) and the migrants’
remittances which help alleviate liquidity constraint when financial markets are imperfect (Stark
et al., 1997; Beine et al., 2001).
3
See, for example, Saxenian (2002, 2005).
4
The role of migrant networks in promoting bilateral international trade is also recognized
due to the work of Rauch and Trinidade (2002), Rauch and Casella (2003) among others. For
an analysis of the relationship between migration and foreign direct investment, see for
example, Kugler and Rapoport (2007). However, these issues are beyond the scope of this
paper.
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