Monday, September 27, 2010

Brain Drain Brain Gain ?

Matthew Yglesias argues for free immigration for skilled immigrants. He said this is good for everyone, but I don't think he seriously considered the less skilled left behind in the countries of origin.

I wrote a long post below noting that, in standard economic models, allowing highly educated foreigners to immigrate is counter to the interests of less educated foreigners (unless the new policy regime included more foreign aid and increased egalitarian redistribution in foreign countries which makes it a policy fantasy not a policy proposal). The argument in the post is that if money metric welfare is increased, then everyone is better off. In every other context, Yglesias totally rejects this logic. An identical case can be made that marginal income tax rates should be zero. Oh and marginal consumption tax rates too.

Now I want to argue that free immigration of highly educated might be good for those left behind in their home countries. This argument due to (I forget who) is similar to the argument that export oriented growth strategies work better than inner oriented growth strategies. The magic word is quality.

If the highly educated in poor countries have to compete only with each other for the business of serving their trapped non educated country-people, they will provide low quality services (typically collecting taxes and bribes). Only if they have a chance to compete in rich countries, will they gain from, for example, actually studying.

Some will move over-seas (probably the most ambitious and academically successful). Those who don't move over-seas will have actually learned something useful (overseas where they don't get jobs from their uncle). On balance the loss of some skilled people is more than made up for by the fact that those who remain are skilled and not just credentialed and admitted to the ruling elite.

I don't know if I find this argument convincing, but it does mean that free admission of highly skilled immigrants can be good for everyone except for highly credentialed* people in destination countries who are the richest people in the world anyway so we can handle not getting quite so much.

* I write credentialed not skilled since I'm highly credentialed but it's not for me to say if I have any useful skills. And no, I don't think a firm command of standard English spelling and punctuation has much to do with being skilled (hey I'm reading this blog) so it's not for you to say either.

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