Brain Drain, Inequality and Growth

This paper provides an additional channel through which inequality may influence growth, when labor migration is taken into account. In fact, we show that human capital distribution is crucial to determine whether allowing migration of the most skilled workers from a developing country may be beneficial for growth, from the perspective of the source economy. The net effect linked to a brain drain is more likely to be negative in the short run if human capital is very unequally distributed. In addition, we find that econometric analysis supports our theoretical claims: the estimation of different growth equations in a cross-section of developing countries, based on a brand new dataset on skilled migration (Docquier and Marfouk, 2004) shows that a brain drain can have a positive impact only when it is associated with low inequality (in income or schooling).