A theoretical analysis of the beneficial effects of the brain-drain phenomenon

"The primary objective of this paper is to examine the impact of migration, and ultimately remittances on economic development in an LDC [less-developed country] within the context of a two-sector development model. For this purpose we construct a two-period development model wherein the country loses professional workers in the first period, but receives foreign-exchange remittances in the second period. Then we derive the conditions under which the 'brain drain' phenomenon may promote social welfare gains over the two periods horizon." The results indicate that "emigration of skilled labor causes the real rate of return to capital to fall and the real wage to labor in the home country to rise. Emigration of skilled labor unambiguously causes a real income loss in less developed labor-exporting countries in the first period, but may cause a real income gain to the LDC in the long run. We also find that the per capita income in an LDC may rise as a consequence of emigration in the short-run, but in the long run capita income unambiguously rises." (SUMMARY IN FRE)