Wednesday, December 4, 2013

4/12/2013: Brain Drain and Institutions

A very interesting working paper relating to the issues of human capital and its effects on society and economy, titled "Does Brain Drain Lead to Institutional Gain?" by Li, Xiaoyang and McHale, John (of NUI Galway) and Xuan, Zhou (

Per authors, "A country’s endowment of human capital can affect its institutions through various channels. This raises the possibility that skilled emigration can leave its mark on a country’s institutional development. We combine recent datasets on emigrant stocks and institutional quality to explore the impacts of mobile human capital on home country’s institutional quality."

"Our results indicate that skilled emigrants have a positive effect on political institutions (i.e., voice and accountability, and political stability and absence of violence) but a negative effect on economic institutions at home (i.e., government effectiveness, regulatory quality, and control of corruption). These results are robust to the inclusion of other known determinants of institutional quality."

With some caveats relating to the difficulties involved in assessing causality in a cross-sectional data study: "...we attribute the association to be causal as we use geography-based instruments for emigrant human capital"
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