Is migration a good substitute for education subsidies?

Assuming a given educational policy, the recent brain drain literature reveals that skilled migration can boost the average level
<br />of schooling in developing countries. In this paper, we introduce educational subsidies determined by governments concerned by
<br />the number of skilled workers remaining in the country. Our theoretical analysis shows that developing countries can benefit from
<br />skilled emigration when educational subsidies entail high fiscal distortions. However when taxes are not too distortionary, it is
<br />desirable to impede emigration and subsidize education. We then investigate the empirical relationship between educational
<br />subsidies and migration prospects, obtaining a negative relationship for 105 countries. Based on this result, we revisit the country
<br />specific effects of skilled migration upon human capital. We show that the endogeneity of public subsidies reduces the number of
<br />winners and increases the magnitude of the losses.
<br />© 2008 Elsevier B.V. All rights reserved.