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Does Aid Induce Brain Drain? The Effect of Foreign Aid on Migration Selection

Darwin Ugarte Ontiveros () and Vincenzo Verardi

No 1012, Working Papers from University of Namur, Department of Economics

Abstract: Recent evidence suggests that aid induces migration. However, total migration is quite general from a policy perspective since what explains the welfare consequences of migration is the extent of emigration selection. In this paper we ask whether skilled or unskilled migration is more sensitive to aid and to the different mechanisms through which aid may affect self-selection among international emigrants. We show that aid induces positive selection. And that the effect on skilled migration is larger than the effect on unskilled migration. As possible mechanisms to explain the relation, we find that aid induces skilled migration by reducing transaction and information costs, by improving the distribution of schooling, and by helping to overcome liquidity constraints.

Keywords: Foreign aid; International migration; Self-selection; Brain drain. (search for similar items in EconPapers)
JEL-codes: C23 F22 F35 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010-12
New Economics Papers: this item is included in nep-mig
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