Brain drain and distance to frontier

In this paper we investigate the effects of emigration on growth in developing countries. We present a model in which productivity increases either through imitation or innovation, and both activities use the same types of human capital as inputs, albeit with different intensities. Heterogenous agents accumulate human capital responding to economic incentives, and might be able to emigrate. When no migration of skilled workers is allowed, backwards countries converge to the technological frontier. The possibility of migration, however, distorts the optimal accumulation of human capital and slows down, or even hinders, development. This effect is stronger the farther away a developing country is from the technological frontier. Thus, technologically backward countries are more likely to suffer from a negative brain drain effect. Among these countries, those which implement appropriate policies, subsidizing the accumulation of the most useful type of human capital, improve their growth performance. They converge faster, and possibly to a higher productivity level than countries where such policies are neglected.