The economic implications of brain waste for the countries of emigration: transitional countries perspective

Jan P. Brzozowski, Cracow University

The paper shows the potential economic consequences of skilled migration for the sending countries. Special emphasis has been put on the brain waste phenomenon, which has a strong impact on those agents who consider investing in education. The brain waste phenomenon implies that skilled immigrants work abroad in jobs for unskilled labor. The theoretical model developed in the paper shows that brain waste is doubly-detrimental to transitional economies. Firstly, the sending countries lose considerable amount of their human capital as many skilled individuals leave the country. As the human capital stock in these countries is reduced, so is the economic growth. Secondly, there is another negative ex ante effect: the migration perspectives lower the return on investment in human capital, so many individuals give up studying in order to migrate abroad. This “negative brain effect” additionally reduces the growth rate of the home country. Empirical evidence confirming the predictions of the theoretical model is presented.