The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit...
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Transcript of The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit...
![Page 1: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/1.jpg)
The Brain Drain: Evidence from U.S. European Expatriates
Gilles Saint-PaulMunich Economic Summit
June 5 2008
![Page 2: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/2.jpg)
The Concern
• Europe has pledged to become the most advanced knowledge society in the world 2 years from now (!)
• For this it is crucial to retain the most talented individuals: entrepreneurs, innovators, researchers, designers, artists…
• Yet it is observed that these top people quite often move to the United States
![Page 3: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/3.jpg)
The suspects
• High marginal tax rates• High tax on wealth in some countries• Regulatory barriers put a drain on creative
activities:– Product market regulation– Labor market regulation– Large state involvement in education, media…
![Page 4: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/4.jpg)
How serious is the problem ?
• I will look at the characteristics of European expatriates in the United States
• I will compare them to their non-expat compatriots, as well as the U.S. labor market
• I will do my best to approximmate « Exceptional » individuals
![Page 5: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/5.jpg)
Data:
• U.S. census, 1990 and 2000• Country of birth used as defining variable– Potential measurement error due to Americans
born abroad
• Look at 6 countries: UK, Belgium, France, Germany, Italy, Spain
![Page 6: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/6.jpg)
How many people?
![Page 7: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/7.jpg)
Is that significant?
• Brain drain affects GDP per capita and the distribution of income in the home country if migrants have different characteristics from non-migrants
• Otherwise, only effect is on total population• But then it would not be called a brain drain• …unless Europe were only populated by
brains
![Page 8: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/8.jpg)
Example
• 10 % of the workforce is “Skilled”• They earn 30 % of total wages• Assume 1 % of the population emigrates• Assume 30 % of them are “Skilled”• The wage gap between the two would go up
by 2.2 %, with +1.6 % for the skilled, -0.6 % for the unskilled
• GDP per capita = -0.4 %
![Page 9: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/9.jpg)
Example II
• Assume now that the exodus is highly concentrated among the skilled (100 %)
• The inequality measure would increase by 10 %
• Skilled: + 7 %, Unskilled -3 %• GDP per capita: -2.1 %
![Page 10: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/10.jpg)
Do people eventually return?
![Page 11: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/11.jpg)
Expats are highly employable
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![Page 13: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/13.jpg)
Expats are highly educated
![Page 14: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/14.jpg)
Skilled workers are more represented, the higher the skill level
![Page 15: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/15.jpg)
The process of skill concentration is accelerating:
![Page 16: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/16.jpg)
So what ?
• Assume 0.5 % of the population has a PH.D.• Assume 1 % of the population goes to the U.S.• Assume 10 % of them have a Ph.D.• 1 out of 5 Ph.Ds work in the U.S.• Key question: are they the best ones ?
![Page 17: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/17.jpg)
An extrapolation
• Since emigration rates are larger, the larger the education level, we can assume that the best Ph.Ds are more likely to emigrate
• According to Zucker et al. (2003), the top 5 % Ph.Ds. are critical for innovation and growth
• Assume the fraction of expatriates is twice higher in the top quartile of any skill range
• This would imply that 40-80 % of the “stars” are in the U.S.
![Page 18: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/18.jpg)
The European Wage Premium:
![Page 19: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/19.jpg)
The wage premium is higher for highly educated Europeans
![Page 20: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/20.jpg)
Implication
• We know that highly educated workers are overrepresented
• Within each education group, highly talented workers are also over represented
• Furthermore, such overrepresentation is stronger for the highly educated
![Page 21: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/21.jpg)
Expatriates are more likely to be entrepreneurs than Americans…
![Page 22: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/22.jpg)
…and much more likely than their fellows left at home
• According to the Global Entrepreneurship Monitor, the fraction of entrepreneurs in Europe is around 4-5 %, about half its level in the U.S.
![Page 23: The Brain Drain: Evidence from U.S. European Expatriates Gilles Saint-Paul Munich Economic Summit June 5 2008.](https://reader030.fdocuments.us/reader030/viewer/2022032704/56649d5e5503460f94a3ebd1/html5/thumbnails/23.jpg)
Conclusion
• The skill composition of expatriates is much better than in the source countries.
• Moderate consequences:– +2-3 % in the relative wage of the skilled – -0.5-0.7 % GDP per capita
• But effects could be much larger if “superstars” matter• The loss in such individuals could be as high as 50 %• The long-term growth potential of Europe would be
reduced substantially