Luca Marchiori

Brain Drain in Globalization: A General Equilibrium Analysis from the Sending Countries' Perspective

The paper assesses the global effects of brain drain on developing economies and quantifies the relative sizes of various static and dynamic impacts. By constructing a unified generic framework characterized by overlapping generations dynamics and calibrated to real data, this study incorporates many direct impacts of brain drain whose interactions, along with other indirect effects, are endogenously and dynamically generated. Our findings suggest that the short-run impact of brain drain on resident human capital is extremely crucial, as it does not only determine the number of skilled workers available to domestic production, but it also affects the sending economy’s capacity to innovate or to adopt modern technologies. The latter impact plays an important role particularly in a globalized economy where capital investments are made in places with higher production efficiencies ceteris paribus. Hence, in spite of several empirically documented positive feedback effects, those countries with high skilled emigration rates are the most candid victims to brain drain since they are least likely to benefit from the “brain gain” effect, and thus suffering from declines of their resident human capital.

The impact of MENA-to-EU migration in the context of demographic change

We analyze the consequences of increasing MENA-to-EU migration on both sending and receiving regions. Using a general equilibrium model, we find that increasing MENA-to-EU migration generates significant changes in EU15 tax rates and income per capita. Compared to a non-selective immigration shock, selecting immigrants leads to a moderate reduction in tax rates, but to a greater impact on income per capita in the EU15. Emigration, especially if high-skilled, has a detrimental impact on MENA tax rates. Finally, the negative effects in MENA are mitigated if the brain drain leads to side-effects or is accompanied by increased education attainment at origin.

Revisiting the Brain Drain Literature with Insights from a Dynamic General Equilibrium World Model

The existing brain drain literature has found various mechanisms through which the high‐skilled South‐to‐North migration affects developing economies. However, some of the new‐found effects remain disputable due to limited evidence. This study aims to provide suggestive guidelines for future research by identifying the mechanisms that can generate larger economic impacts at the aggregate. The analysis is based on a dynamic general equilibrium world model that is calibrated to published statistics and incorporates empirical estimates on the effects of brain drain. It simulates short‐ and long‐run impacts of increased brain drain on GDP per capita, GNI per capita, and income inequality. The results suggest that more studies should be conducted to further examine how the brain drain influences human capital formation and technology spillovers. Both have significant impacts on domestic production and national income. A better understanding of different remitting patterns is also desirable to understand how to reduce inequality and promote recipients’ investment in productive assets.

Pension reform in a worst case scenario: public finance versus political feasibility

This paper uses a quantitative overlapping generation model to suggest a pension reform able to sustain a retirement system, in the face of deep demographic changes. We derive the reform design from an optimization program that selects one or more policy instruments – and their values – among a predefined set, to minimize the welfare loss of the median voter while keeping sound public finances, sustaining gross domestic product growth and considering the welfare of the newborn generation. We calibrate the model to the Luxembourg economy. The European Commission (2012) forecasts that, among all euro area countries, Luxembourg will experience the largest increase in pension costs between now and 2060. Our simulations show that a single instrument reform would imply severe backlashes on the rest of the economy. The suggested pension reform instead consists of a policy mix including taxation, benefits and the effective retirement age. We stress the need to design pension reforms based on optimization programs that lead to the achievement of desired targets. Indeed, the reform implemented by the Luxembourg government in 2013, which does not result from an optimization program, will not keep public finances sound over the medium term.

The Impact of Unilateral Commitment on Transboundary Pollution

To reach a common target of environmental quality, countries can choose to commit to a stream of pollution abatement right from the beginning of the game or decide upon abatement at each moment of time. Though most of the previous literature studies homogeneous strategies where no country or all countries commit to a (same) predefined policy, reality goes along a different way: some countries make more efforts than others to reduce pollutant emission. The main novelty of this paper resides in the introduction of this kind of heterogeneous strategic behavior currently observed among large pollution nations. We find that the pollution level can be lower under heterogeneous than under homogeneous strategies. A stringent environmental quality target will induce the committed player to produce an abatement effort that more than compensates the free-riding attitude of the non-committed player.

Immigration, occupational choice and public employment

This paper investigates the theoretical effects of immigration in an occupational choice model with three sectors: a low-skilled, a high-skilled and a public sector. The originality of our approach is to consider (i) intersectoral mobility of labor and (ii) public employment. We highlight the fact that including a public sector is crucial, since omitting it implies that low-skilled immigration unambiguously reduces wages and welfare of all workers. However, when public employment is considered, we demonstrate that immigration increases wages in the high-skilled and the public sectors, provided that the immigrant workforce is not too large and the access to public jobs is not too easy. The average wage of natives may also increase accordingly. Moreover, immigration may improve workers’ welfare in each sector. Finally, the mechanism underlying these results does not require complementarity between natives and immigrants.

Is environmentally induced income variability a driver of human migration

The role of environmentally induced income variability as a determinant of migration has been studied little to none. We provide a theoretical discussion based on a ‘risk aversion channel’ and an overview of the empirical literature on this. We also extend a previous empirical study on 39 sub-Saharan African countries with yearly data from 1960 to 2000 by including income variability and its weather determinants. Our findings lead us to acknowledge that, based on our dataset and methodology, income variability is a negligible driver of migration decisions at the macroeconomic level.

The impact of migration on origin countries: a numerical analysis

The focus of this article is on the impact of high-skilled emigration on fertility and human capital of a sending country within an overlapping generations model where parents choose to finance higher education to a certain number of their children. We assume that high- and low-skilled children emigrate with a certain probability when they reach adulthood and that they send remittances to their parents back home. The model shows that an increase in the intensity of the brain drain induces parents to provide more higher education to their children and to raise less low-skilled children. The impact on fertility and on human capital formation however remains unclear. This is why we run numerical simulations by calibrating our model to a developing country like the Philippines. The calibration results show in particular, that increased brain drain lowers fertility and boosts long-run human capital formation in the sending country.