Unknown Talents and the Brain Drain: The Informational Role of Migration

Abstract

This paper shows that the migration of educated workers abroad can convey a positive signal about the ability of native talents. When there is uncertainty about the distribution of talents in the donor country and/or about the effectiveness of its education system, migrants may reveal information about their talents. This may enhance the reputation of the workforce both in the host country and in the donor country. The brain drain can thus act as an information device. The main possible consequences of the brain drain are: (i) higher investment in human capital by the younger generations; and (ii) higher investment in the domestic economy. The out-migration of talented people could be an essential condition for long-run growth in the donor economy.

Keywords: Brain drain, signaling, technology transfers

JEL Classification: D82, J24, O15