Consequences of a tax on the brain drain for unemployment and income inequality in less developed countries

Welfare-theoretical analyses of the brain drain

“…The first paper to consider distortions in a systematic, generalequilibrium framework was by Bhagwati and Hamada (1974 Bhagwati-Hamada (1974) variants, they assume that all educational costs are privately borne (i.e., that there is no policy-imposed distortion via an educational subsidy Further, as the Hamada-Bhagwati (1975) Bhagwati-Hamada (1974), McCulloch-Yellen (1975) and Hamada-Bhagwati (1975).…”

Open Economies, Insider Power and International Migration

“…5 Let µ denote a once-and-for-all fixed real migration cost. 6 Most of the literature on international migration, including McCulloch & Yellen (1975), Baldwin & Venables (1994), and Burda (1993)), assumes that the migration cost is fixed and the same for all migrants. However, as pointed 5 A common assumption of the existing literature on labour migration is that wage differentials between countries generate international labour migration.…”

“…annual payments equivalent to the total lump-sum cost of emigration. See McCulloch & Yellen (1975). 7 See Johnson & Salt (1990) and Molho (1986) for a survey.…”

“…These two stylised facts of today's economies, unemployment and real wage rigidity, should in principle be taken into account in examining the macroeconomic implications of international migration of labour. Few exceptions to full employment treatment of international migration, are the papers by Bhagwati & Hamada (1974), McCulloch & Yellen (1975), Rodriguez (1976, Djajic (1985) and Schmidt (1994). These papers, however, assume either a non market-clearing wage that is set administratively (by, for example, minimum wage legislation) or treat migration flows as exogenous (bounded by government regulations).…”

Education, unemployment and migration

“…Although the emigrants are disproportionally skilled, the share of skilled workers among those staying in the poor region may increase, implying a brain gain. The traditional brain drain literature discusses some elements of this story in models with a traditional and a modern sector (Bhagwati and Hamada, 1974;McCulloch and Yellen, 1975;Rodriguez, 1975), but remains more pessimistic.…”