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Does High-Skilled Migration Affect Publicly Financed Investments?

Volker Grossmann () and David Stadelmann

No 6610, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper analyzes the interaction between migration of high-skilled labor and publicly financed investment. We develop a theoretical model with multiple, ex ante identical jurisdictions where individuals decide on education and subsequent emigration. Migration decisions are based on differences in net income across jurisdictions which may occur endogenously. The interaction between income differences and migration flows gives rise to the potential of multiple equilibria: a symmetric equilibrium without migration and an asymmetric equilibrium in which net income levels differ among jurisdictions and trigger migration flows. In the former equilibrium, all jurisdictions have the same public investment level. In the latter one, public investment is high in host economies of skilled expatriates and low in source economies. We empirically test the hypothesis that emigration rates are negatively associated with publicly financed investment levels for OECD countries.

Keywords: publicly financed investment; human capital externalities; high-skilled migration (search for similar items in EconPapers)
JEL-codes: F22 H40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mig, nep-pbe and nep-ure
Date: 2012-05
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Published in: Review of International Economics, 2012, 20 (5), 944-959.

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Related works:
Journal Article: Does High-skilled Migration Affect Publicly Financed Investments? (2012) Downloads
Working Paper: Does High-Skilled Migration Affect Publicly Financed Investments ? (2010) Downloads
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