Economics of Immigration - Chapter 11

Productivity Channel

High-skilled emigrants abroad can return flows of income, investment, and expertise or move back to the source country themselves

What are the main reasons why people send remittances?

1. Altruism (desire to help family) 2. Diversify household earnings and ensure steady flow of income 3. Having a warmer welcome if migrant decides to come home 4. Repay migration costs

What are the Four Main Channels Through Which Brain Drain / Brain Gain Can Occur?

1. Human Capital Channel 2. Productivity Channel 3. Transfer Channel 4. Institutional Channel

Institutional Channel

Allows for feedback onto political, economic, and social institutions in the home country

What are the benefits of high-skilled migration for the sending country?

An outflow of high-skilled workers may increase human capital in the source country via increased transfer or knowledge from abroad and return migration. Migrants also send funds, or remittances, to family members.

What factors are likely to influence how much they remit and their reasons for sending funds home?

Economic conditions in origin - if conditions worsen, people will send more remittances

How can international migration increase human capital levels in sending countries?

Emigration may lead people left behind in the source country to increase their own human capital in an effort to themselves migrate. Source countries could benefit from emigrants returning, which may raise the average level of human capital, or by sending remittances that allow people there to acquire more human capital. There are four main channels through which brain gain may occur: the human capital channel, the productivity channel, the transfer channel, and the institutional channel.

Why would high- and low-skilled immigration be positively related? Negatively related?

High-skilled migration may be correlated with low-skilled migration since high-skilled migrants may bring low-skilled family members with them. In addition, networks in the receiving country may reduce migration costs for both high- and low-skilled migrants alike, while better opportunities may attract both groups.

Why are immigration restrictions that favor workers with high human capital in destination countries beneficial to the origin? That is, how does brain drain lead to brain gain?

Immigration restrictions can lead to brain gain because if some migrants do not anticipate the restriction, some will over invest in human capital. "Over investors" have human capital levels between Ho and Hr. This is beneficial for the origin country as a whole since its population has more human capital, on average.

Human capital channel

Prospect of migrating to a country with a higher return to education can motivate people in sending country to acquire more education

Transfer Channel

Remittances relax households' budget constraints and allow households to increase consumption, investment or savings to pay off loans