International Migration, Remittances, and The Brain Drain

Author:   Çaglar Özden and Schiff, Maurice
Publisher:   Palgrave Macmillan
Reviewer:   Rakesh Ranjan
Designation:   Research Scholar, Centre for the Study of Social System, Jawaharlal Nehru University, New Delhi

Özden, Çaglar And Schiff, Maurice (2006), International Migration, Remittances, and The Brain Drain, New York: Palgrave Macmillan. ISBN-10: 0-8213-6372-7, Pages: XIII+279

International migration has made a very significant impact on the economies of both developed and developing countries.  More than 215 million people (app. 3% of the world's population) live outside their countries of birth. This constitutes the most active population that contributes to the economy through skills and knowledge, remittances etc and impacting the development process.

International migrant remittances are perhaps the largest source of external finance in developing countries in recent years. Officially recorded remittance flows to developing countries exceeded US$406 billion in 2004 according to the World Bank (2012), making them the second largest source of development finance after foreign direct investment. Though the issues of remittance and its impact have been discussed by many scholars, many of them skewed towards economic development. However, this book is more broadbased and going beyond the economic impact. The book is an outcome of a research project “International Migration and Development Research Programme” by World Bank (Development Economics Research Group).

The volume's aims are multiple: the impact of migration and remittances on development indicators, including poverty and inequality, investment (in both human and physical capital), entrepreneurship, and entry into capital-intensive activities; the brain drain; temporary migration, and the links between migration, trade, and foreign direct investment (FDI). Some of the questions the research program aims to answer are as follows: How does migration affect poverty and growth, especially in the sending countries? Who are the main beneficiaries of migration and main recipients of remittances—the poor who have the most to gain or the middle classes who are more likely to have the resources needed to migrate? What are the effects of migration and remittances on investment in both physical and human capital? What are the determinants of the migration of the highly skilled workers and the effects on destination and source countries?

Chapter 1 by Jorge Mora and J. Edward Taylor (Determinants of Migration, Destination, and Sector Choice: Disentangling Individual, Household, and Community Effects) contributes to the existing literature in two important dimensions by incorporating alternative destinations (internal or international) and sectors of employment (farm or nonfarm) for migrants from rural Mexico, and by including new community variables as determinants of migration. Using the 2003 National Rural Household Survey of Mexico, Mora and Taylor include individual, family, and community variables in their estimation. Authors have extended their arguments with a case study of Mexico along with other countries, thus providing a very rich comparative perspective. Although author’s arguments about determinants of internal migration such as school migration, network migration as less effective factors seams unsatisfactory in a broader perspective. In chapter 4, David J.McKenzie finds that migrant networks raise the probability that other community members migrate internationally. Using the 1997 National Survey of Demographic Dynamics for Mexico, McKenzie finds that the effect of networks varies across the wealth distribution. The chapter has tries to move beyond remittance with broader discussion about different effect and influence of migration.

Chapter 3 by Dean Yang and Claudia A.Martínez exploits an exogenous event, namely the exchange rate shocks that occurred during Asia’s currency crisis in the late 1990s, to examine the impact on poverty in the Philippines. They find that an appreciation of the currency in destination countries relative to the Filipino peso leads to an increase in remittance received by the related households and to a reduction in their poverty. They also find spillover effects to other households, including to those without migrant members, whose poverty falls as well. Some additional discussion of aggregate remittance impact was discussed by Richerd H. Adams Jr. (Remittance, Poverty and Investment in Guatemala) in the next chapter. Richerd H. focuses on how the receipt of internal and international remittances (from the United States) affects the marginal spending behavior of households on various consumption and investment goods. Adams finds that households receiving remittances spend more on investments (such as education, health, and housing) and less on consumption (food and consumer goods, durables) than do households receiving no remittances.

Part 2 of the volume focuses on the effects of migration of educated and skilled people from developing to developed countries (the brain drain). The phenomenon of brain drain is one of the most recognizable phrases in the development literature and policy debates. In chapter 6, Maurice Schiff provides a critical examination of the main findings of the new brain-drain literature. The new brain-drain literature argues that, because skilled wages are typically higher in destination countries, the brain drain raises the expected benefit from education and induces additional investment in education. In chapter 6, Schiff also examines the brain-gain issue from a general equilibrium viewpoint, which also finds a smaller impact on the brain gain and on welfare and growth. Chapter 7 by Özden deals with the brain drain to the United States. He finds striking differences in the labor market placement among highly educated immigrants from different countries, even after controlling for their age, experience, and education. Specifically, immigrants from Latin America and Eastern Europe are more likely to end up in unskilled jobs in the United States compared with immigrants from Asia, the Middle East, and Sub-Saharan Africa. In chapter 8, Gnanaraj Chellaraj, Keith E. Maskus, and Aaditya Mattoo examine the impact of international students and skilled immigration in the United States on innovative activity. The main specification is based on a three-equation model of idea generation in which the dependent variables are total patent applications, patents awarded to U.S. universities, and patents awarded to other U.S. entities, each scaled by the domestic labor force. Results indicate that international graduate students have a significant and positive impact on future patent applications, as well as on future patents awarded to university and nonuniversity institutions, and that skilled immigrants have a similar although substantially smaller impact.

The book has included numerous econometric analyses with the use of different data sets.  This reflects the fact that a high proportion of contributors to the volume are banker’s data and surveys in financial and payment systems. But there is a scarcity of recommendations illuminated by the microeconomics of remittance senders and recipients. Although chapters by Richerd Adams and Dean Yang discussed the issues at the micro level, but it could have made more qualitative analysis. While new empirical work on international migration and remittances from the developing country standpoint is deeply needed, this book unfortunately does little to help fill the gap. The pieces in the book sorely lack the micro-level empirical analysis that would have strengthened the knowledge related to remittances and their impact on recipient households. Overall the book presents a good number of case studies related to remittance and its influence worldwide.

 

Rakesh Ranjan, Research Scholar, Centre for the Study of Social System, Jawaharlal Nehru University, New Delhi, 

Publication Date:   Friday, Oct 04, 2013
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