Brain drain and human capital formation in developing countries: winners and losers. Michel Beine, Frédéric Docquier and Hillel Rapoport Abstract: The brain drain has long been viewed as a serious constraint on poor countries' development. However, recent theoretical literature suggests that emigration prospects can raise the expected return to human capital and foster investment in education at home. This paper takes advantage of a new dataset on emigration rates by education level (Docquier and Marfouk, 2006) to examine the impact of brain drain migration on human capital formation in developing countries. We find evidence of a positive effect of skilled migration prospects on gross human capital levels in a cross-section of 127 developing countries. For each country, we then estimate the net effect of the brain drain using counterfactual simulations. We find that countries combining relatively low levels of human capital and low skilled emigration rates are likely to experience a net gain, and conversely. There appears to be more losers than winners, and in addition, the former tend to lose relatively more than what the latter gain. At an aggregate level, however, and given that the largest developing countries are all among the winners, brain drain migration may be seen not only as increasing the number of skilled workers worldwide but also the number of such workers living in developing countries. Keywords: Brain drain, skilled migration, human capital formation, immigration policy, developing countries. Abstract: The term "brain drain" designates the international transfer of resources in the form of human capital and mainly applies to the migration of relatively highly educated individuals from developing to developed countries. Recent comparative data reveal that by 2000 there were 20 millions highly skilled immigrants (i.e., foreign-born workers with tertiary education level) living in the OECD member countries, a 70% increase in ten years against only a 30% increase for unskilled immigrants (Docquier and Marfouk, 2006). Moreover, the vast majority of these highly-skilled immigrants come from developing countries and now represent more than a third of total immigration to the OECD. The causes of this growing brain drain are well known. On the supply-side, the globalization of the world economy has strengthened the tendency for human capital to agglomerate where it is already abundant and contributed to increase positive self-selection among international migrants. And on the demand side, starting with Australia and Canada in the 1980s, host countries have gradually introduced quality-selective immigration policies and are now engaged in what appears as an international competition to attract global talent (ILO, 2006). The consequences for source countries, on the other hand, are less obvious. Early contributions (Grubel and Scott, 1966, Bhagwati and Hamada, 1974, McCulloch and Jellen, 1977)Brain drain and human capital formation in developing countries: winners and losers. Michel Beine, Frédéric Docquier and Hillel Rapoport Abstract: The brain drain has long been viewed as a serious constraint on poor countries' development. However, recent theoretical literature suggests that emigration prospects can raise the expected return to human capital and foster investment in education at home. This paper takes advantage of a new dataset on emigration rates by education level (Docquier and Marfouk, 2006) to examine the impact of brain drain migration on human capital formation in developing countries. We find evidence of a positive effect of skilled migration prospects on gross human capital levels in a cross-section of 127 developing countries. For each country, we then estimate the net effect of the brain drain using counterfactual simulations. We find that countries combining relatively low levels of human capital and low skilled emigration rates are likely to experience a net gain, and conversely. There appears to be more losers than winners, and in addition, the former tend to lose relatively more than what the latter gain. At an aggregate level, however, and given that the largest developing countries are all among the winners, brain drain migration may be seen not only as increasing the number of skilled workers worldwide but also the number of such workers living in developing countries. Keywords: Brain drain, skilled migration, human capital formation, immigration policy, developing countries. Abstract: The term "brain drain" designates the international transfer of resources in the form of human capital and mainly applies to the migration of relatively highly educated individuals from developing to developed countries. Recent comparative data reveal that by 2000 there were 20 millions highly skilled immigrants (i.e., foreign-born workers with tertiary education level) living in the OECD member countries, a 70% increase in ten years against only a 30% increase for unskilled immigrants (Docquier and Marfouk, 2006). Moreover, the vast majority of these highly-skilled immigrants come from developing countries and now represent more than a third of total immigration to the OECD. The causes of this growing brain drain are well known. On the supply-side, the globalization of the world economy has strengthened the tendency for human capital to agglomerate where it is already abundant and contributed to increase positive self-selection among international migrants. And on the demand side, starting with Australia and Canada in the 1980s, host countries have gradually introduced quality-selective immigration policies and are now engaged in what appears as an international competition to attract global talent (ILO, 2006). The consequences for source countries, on the other hand, are less obvious. Early contributions (Grubel and Scott, 1966, Bhagwati and Hamada, 1974, McCulloch and Jellen, 1977)