Financial Liberalization and the Brain Drain: A Panel Data Analysis

26 Pages Posted: 18 Sep 2011

See all articles by Aniruddha Mitra

Aniruddha Mitra

Bard College

James T. Bang

Virginia Military Institute

Phani V. Wunnava

Middlebury College; Institute for the Study of Labor (IZA)

Abstract

This paper explores the impact of financial liberalization on the migration of high skilled labor from 46 countries to the OECD, taken at five year intervals over the period 1985-2000. Using an exploratory factor analysis, we are able to distinguish between two dimensions of financial liberalization, namely the robustness of the markets and their freedom from direct government control. We find that a standard deviation improvement in the robustness of the source country financial sector magnifies the extent of brain drain by a factor of about four percentage points on the average. However, a corresponding increase in the freedom of the source country financial sector from government control has a modest negative impact on the emigration of high skilled labor and the effect is not statistically significant. Further, the impact of improved financial sector robustness on selection is more pronounced for non-OECD economies than for OECD nations, which experience virtually no impact on skilled emigration.

Keywords: immigration, financial liberalization, brain drain, institutions

JEL Classification: F22, O15, P48

Suggested Citation

Mitra, Aniruddha and Bang, James T. and Wunnava, Phani V., Financial Liberalization and the Brain Drain: A Panel Data Analysis. IZA Discussion Paper No. 5953, Available at SSRN: https://ssrn.com/abstract=1929653 or http://dx.doi.org/10.2139/ssrn.1929653

James T. Bang

Virginia Military Institute ( email )

Department of Economics and Business
Scott Shipp Hall
Lexington, VA 24450
United States

Phani V. Wunnava

Middlebury College ( email )

Middlebury, VT 05753
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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