Benefits and Costs of Brain and Ability Drain

Ability drain's (𝐴𝐷) impact on host countries is significant: 30 percent of US Nobel laureates since 1906 are immigrants, and they or their children founded 40 percent of Fortune 500 companies. The article first provides a detailed description of the multiple home country benefits generated by the brain and ability drains. Second, as brain drain (𝐵𝐷) and gain (𝐵𝐺) have been studied extensively while 𝐴𝐷 has not, I examine migration's impact on ability (𝑎) as well as on education (ℎ) and productive human capital 𝑠 = 𝑠(𝑎, ℎ), both for home country residents and skilled migrants, under the 'vetting' immigration system (e.g., US H-1B program), which accounts for 𝑠. Findings are: i) Education increases with ability; ii) Migration reduces (raises) home country residents' (migrants') average ability, with an ambiguous (positive) impact on the average level of ℎ and 𝑠; thus, migrants' average ability and education is higher than that of non-migrants; iii) These effects increase with inequality in ability's distribution; iv) The model and empirical studies suggest that 𝐴𝐷 ≥ 𝐵𝐷 for educated US immigrants from 42 developing countries, with an average real income about twice their home country income; v) A net drain or decline in average 𝑠 holds for any net 𝐵𝐷 (𝑁𝐵𝐷 = 𝐵𝐷 − 𝐵𝐺), and for an 𝐴𝐷 that is a fraction of our estimate. Thus, in order to correctly assess the impact of skilled migration, home and host countries' policymakers need to incorporate its effect on average ability in the analysis.