Reconciling the Pattern of Trade with the Pattern of Migration

James Rauch

American Economic Review, 1991, vol. 81, issue 4, 775-96

Abstract: If only skilled (educated) individuals can become managers, then to employ fully its work force, given a distribution of managerial talent, a country in which skilled labor is scarce must use a less talented manager at the margin than a country in which skilled labor is abundant. Wages for unskilled workers and skilled individuals who choose to become employees are then lower in the former country, while incomes of skilled individuals talented enough to become managers are lower (for a given talent level) in the latter. Countries with abundant skilled labor therefore export managers (e.g., through multinational subsidiaries) and skilled-labor-intensive goods yet import skilled employees (the "brain drain"). Copyright 1991 by American Economic Association.

Date: 1991
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