Abstract
Brain drain is a major issue for Small Island Developing States (SIDS). Econometric analysis confirms that smallness has a strong positive impact per se on emigration rates. On average, 50 % of the high-skilled labour force in SIDS has left their country, and the brain drain exceeds 75 % in a few cases. In this paper, we document this phenomenon and study the bi-directional links between brain drain and development. We show that these interdependencies can be the source of multiple equilibria and that small states are much more likely to be badly coordinated than other developing countries and settle in a bad equilibrium. The reason is that their elasticity of emigration to economic performance is larger. After calibration, we identify an important number of badly coordinated SIDS and quantify the economic costs of coordination failure. These costs may exceed 100 % of the observed GDP per capita. Badly coordinated small states require appropriate development policies aimed at retaining or repatriating their high-skilled labour force.
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Notes
- 1.
An open trade regime might, under certain conditions, help partly overcome negative aspects of smallness, namely the limited opportunity of creating economies of scale.
- 2.
The regressions where only one political variable is deleted are not shown but the results hold in those cases as well, i.e., the political variables do not constitute robust determinants of high-skilled migration.
- 3.
Although it is made for mathematical simplicity, this assumption is in line with many empirical studies advocating to use a high elasticity of substitution to match data on the skill premium in developing countries.
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de la Croix, D., Docquier, F., Schiff, M. (2014). Brain Drain and Economic Performance in Small Island Developing States. In: Artal-Tur, A., Peri, G., Requena-Silvente, F. (eds) The Socio-Economic Impact of Migration Flows. Population Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-04078-3_6
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