Michel Beine

Brain Drain and Human Capital Formation in Developing Countries: Winners and Losers*

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.

Climatic Factors as Determinants of International Migration

We examine environmental change as a potential determinant of international migration. We distinguish between unexpected short-run factors, captured by natural disasters, as well as long-run climate change and climate variability captured by deviations and volatilities of temperatures and rainfall from and around their long-run averages. Starting from a simple neo-classical model we use a panel dataset of bilateral migration flows for the period 1960-2000 that allows us to control for numerous time-varying and time invariant factors. We find no direct impact of climatic change on international migration across our entire sample. These results are robust when conditioning on characteristics of origin countries as well as when further considering migrants returning home and the potential endogeneity of our network variable. In contrast, there is evidence of indirect effects of environmental factors going through wages. We further find strong evidence that natural disasters beget greater flows of migrants to urban environs.

The Dark Side of Global Integration: Increasing Tail Dependence

We measure stock market co-exeedances using the methodology of Cappiello, Gerard and Manganelli (2005, ECB Working Paper 501). This method is based on quantile regressions and enables us to measure comovement at each point of the return distribution. First, we construct an annual co-exeedance probability for the 5, 10, 25, 75, 90 and 95 percent return quantiles using daily data from 1974-2006. Next, we explain these probabilities in a panel gravity model framework. This analysis shows that macroeconomic events asymmetrically influence comovement of upper and lower tail returns. Financial liberalization has a positive impact on comovement across the return distribution, but its effect is strongest on the left tail quantiles. Trade competition weakly impact the 5%, 10% and 95% quantiles, but has a stronger influence on the other quantiles. Industrial dissimilarity has a strong effect on both tails, but not on the 25% and 75% quantiles. Exchange rate volatilities have a strong effect only on the 5% and 10% quantiles. However, the introduction of the euro has its most pronounced effect on upper quantile comovement.

Official central bank interventions and exchange rate volatility: Evidence from a regime-switching analysis

In this paper, we investigate the effect of central bank interventions on the weekly returns and volatility of the DEM/USD and YEN/USD exchange rate returns. In contrast with previous analyses, we allow for regime-dependent specifications and investigate whether official interventions can explain the observed volatility regime switches. It is found that, depending on the prevailing volatility level, coordinated central bank interventions can lead to either a stabilizing or a destabilizing effect. Our results lead us to challenge the usual view that such interventions always imply increases in volatility

Central bank interventions and jumps in double long memory models of daily exchange rates

Abstract In this paper, we estimate ARFIMA–FIGARCH models for the major exchange rates (against the US dollar) which have been subject to direct central bank interventions in the last decades. We show that the normality assumption is not adequate due to the occurrence of volatility outliers and its rejection is related to these interventions. Consequently, we rely on a normal mixture distribution that allows for endogenously determined jumps in the process governing the exchange rate dynamics. This distribution performs rather well and is found to be important for the estimation of the persistence of volatility shocks. Introducing a time-varying jump probability associated to central bank interventions, we find that the central bank interventions, conducted in either a coordinated or unilateral way, induce a jump in the process and tend to increase exchange rate volatility.

Conditional covariances and direct central bank interventions in the foreign exchange markets

In this paper, I investigate the effects of central bank interventions (CBIs) on the ex post correlation and covariance of exchange rates. Using a multivariate GARCH model with time-varying conditional covariances, we estimate the effects of CBIs on both the variances and covariance between the yen and the deutsche mark (the Euro) in terms of the U.S. dollar. Our results suggest that coordinated CBIs not only tend to increase the volatility of exchange rates but also explain a significant amount of the covariance between the major currencies. We show that this result can be useful for short-run currency portfolio management.

Does the Canadian economy suffer from Dutch disease

We argue that the failure to disentangle the evolution of the Canadian currency from the U.S. currency leads to potentially incorrect conclusions regarding the case of Dutch disease in Canada. We propose a new approach that is aimed at extracting both currency components and energy- and commodity-price components from observed exchange rates and prices. We first analyze the separate influence of commodity prices on the Canadian and the U.S. currency components. We then estimate the separate impact of the two currency components on the shares of manufacturing employment in Canada. We show that between 33 and 39 per cent of the manufacturing employment loss that was due to exchange rate developments between 2002 and 2007 is related to the Dutch disease phenomenon. The remaining proportion of the employment loss can be ascribed to the weakness of the U.S.

Comparing Immigration Policies: An Overview from the IMPALA Database

This paper introduces a method and preliminary findings from a database that systematically measures the character and stringency of immigration policies. Based on the selection of that data for nine countries between 1999 and 2008, we challenge the idea that any one country is systematically the most or least restrictive toward admissions. The data also reveal trends toward more complex and, often, more restrictive regulation since the 1990s, as well as differential treatment of groups, such as lower requirements for highly skilled than low-skilled labor migrants. These patterns illustrate the IMPALA data and methods but are also of intrinsic importance to understanding immigration regulation.

Skilled migration and the transfer of institutional norms

AbstractWe examine two impacts of international emigration on the evolution of the institutions in the origin countries. The first impact concerns the influence of emigration per se (i.e. people who left the country can voice more or less from abroad). The second impact relates to the transfer of the norms of the host country to the home country. The existence of both impacts is confirmed using different indicators of institutional quality. The effects appear stronger when skilled emigration is considered. The main conclusions are robust to alternative econometric methods and to the use of subsamples involving developing countries only.JEL codesF22, J24, J61, J64.

Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces

This paper looks at whether immigration can mitigate the Dutch disease effects associated with booms in natural resource sectors. We first derive predicted changes in the size of the non-tradable sector from a small general-equilibrium model `a la Obstfeld-Rogoff, supplemented by a resource income and a varying labour supply. Using data for Canadian provinces, we test for the existence of a mitigating effect of immigration in terms of an increase in the size of the non-tradable sector triggered by the positive resource shock in booming regions. We find evidence of such an effect for the aggregate inflow of migrants. Disentangling those flows by type of migrants, we find that the mitigation effect is due mostly to interprovincial migration and temporary international migration. There is no evidence of such an effect for permanent international immigration. Nevertheless, interprovincial migration also results in a spreading effect of Dutch disease from booming to non-booming provinces.