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The migration and development debate redux

David Ellerman | 17 October 2011

Is brain-drain counter-balanced by remittances and returning émigrés?

There has long been a debate about the effects on economic development of the migration of high-skilled (brain drain) and low-skilled people from a less-developed country to the developed world. Is the loss of talented and energetic people in the developing country more than counter-balanced by the reverse flow of remittances and returning émigrés with financial and human capital gained in the developed world?

This old debate that focused on the impact of labor migration on the sending countries has become entwined with the recent debates in the developed world about the influx of labor migrants, e.g., the nativist reaction against illegal aliens in the U.S. and the 'death of multiculturalism' debate in Europe. This has obscured and distorted the migration-and-development debate so there is some need to reframe the public discussion about labor emigration.

But a reframing of the labor emigration debate is particularly difficult because of the political overtones in the developed world. Those reacting against labor migrants coming into a developed country are, generally speaking, cultural-political conservatives while those who are defending this migration tend to be liberal and progressive in their views. This liberal-progressive viewpoint emphasizes the positive economic impact on the receiving country as well as the unquestioned expansion of life opportunities for the families of the migrants. Any findings and arguments that there is a net negative impact on the sending countries would then create considerable cognitive dissonance. Hence there is an all-too-human tendency to play down any such negative impacts and to see any effects on the sending countries through rose-colored glasses. If one can convince oneself that the net impact on the sending country (e.g., remittances and backflows of skills) is also positive, then one has a trifecta of feel-good conclusions; labor emigration is good for the receiving countries, good for the families of the migrants, and even good for the sending countries. 1 How can anyone resist such a wonderful set of conclusions?

A few years ago, when I was still working in the research department of the World Bank, I was tasked with reviewing the literature on migration and development to see what general conclusions emerged. In the resulting review, 2 I concluded that in spite of the great benefits for the migrating families and the benefits for the receiving countries and even in spite of the undoubted poverty reduction due to remittances, the overall effect on economic development was not positive in the sending countries. Indeed, labor migration may even amount to a type of development trap locking a sending country into the role of a long-distance 'bedroom community' for people to do the dirty, dangerous, and difficult jobs in the developed world. 3 For the reasons stated above, these conclusions are strongly resisted by well-meaning development experts both within and outside the World Bank.

One source of disagreement is that many development experts seem to confuse economic development in the sending country with poverty reduction per se—not to mention with increases in (Kaldor-Hicks) "social wealth" across countries. But economic development has to do with the social learning of the skills and knowledge necessary for an industrialized and more modern economy as well as the corresponding institutional infrastructure. Like the discovery of oil, the flow of remittances back to the sending country will increase income levels but that itself does not amount to economic development. In fact, it may have the opposite effect. Many of the resource-curse arguments apply to the 'oil wells' of remittances. The pressure on the governments to facilitate job creation in the sending countries is much reduced when they can export their unemployment problem and even receive a sizable inflow of hard currency in return.

The argument based on overall social wealth emphasizes the unquestioned fact that individuals will be more productive in the developed world due to the whole surrounding network of economic activity and infrastructure. Then the same experts turn around and emphasize that the brain drain may lead to "brain gain" if the now skilled and knowledgeable individuals should perchance return to their native country. But even in the rare cases when the economic émigrés might return prior to retirement, they would be returning to much the same unproductive economic environment that they left years before—where the skills and knowledge acquired in the developed economies would be of little use.

The intellectual level of the migration-and-development debate is not advanced when those who want to view the brain drain through rose-colored glasses crudely caricature the alternative policies in the less developed countries as "trapping" people in those countries, treating them as 'government property', and the like. But intelligent alternative policies are available. For instance, a government might foster the practice of bringing promising graduates into agencies and businesses at an earlier age, and then after establishing and acculturating themselves in the organization and perhaps starting a family, the organization sponsors their graduate training in a developed country. In that manner, the country would increase the chances of the students returning after their graduate training abroad. 4

There is a range of other such policies that a developing country might use. But an exclusive focus on detailed policies might lead experts to miss the forest for the trees. One should always keep in mind the overall point that economic development is a cooperative effort requiring the extended "team effort" and "esprit de crops" of people in the developing country—a cooperative effort as in the East Asian countries over the last half century. In more technical terms, it is a multi-person cooperative game such as the prisoners' dilemma game where the payoffs if all or most people cooperate exceed the payoffs if few cooperate. But the dilemma is that the payoffs to individuals who defect (e.g., emigrate) are greater still than if they and others continued to cooperate. Hence the cooperative solution always tends to be undermined by the talented and energetic individuals who defect in order to get the larger payoffs to themselves and their families.

This cooperative game analysis of the development efforts in a developing country sheds a different light on the well-meaning development experts (in advanced countries) who promote policies that will facilitate defections and thus will tend to break down the cooperative solution to a developing country's development efforts.

1 For instance, see: Clemens, Michael A. 2011. Economics and Emigration: Trillion Dollar Bills on the Sidewalk? Journal of Economic Perspectives. 25 (3 Summer): 83-106.

2 Ellerman, David 2003. Policy Research on Migration and Development. In World Bank Policy Research Working Paper #3117, Washington DC: World Bank. Downloadable here.

3 Ellerman, David 2005. Labour migration: a developmental path or a low-level trap? Development in Practice. 15 (5 August): 617-30. Downloadable here.

4 This idea and similar ones can be gleaned from: Dore, Ronald 1976. The Diploma Disease: Education, Qualification and Development. Berkeley: University of California Press.

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David Ellerman

David P. Ellerman works in the fields of economics and political economy, social theory and philo...

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