Reflections on the present state of the brain drain and a suggested remedy

Reflections on the Present State of the Brain Drain and a Suggested Remedy HERBERT G GRUBEL PUBLIC attention to the problems raised by the international migration of highly skilled persons, which came to be called the "brain drain ", has fluctuated During the 1960s newspapers and other publications often carried stories about the brain drain Governments and international organisations, such as the United Nations, were induced to gather information on the magnitude of the problem and to propose policies for dealing with it However, after the economic recession of 1971 in the United States, the accelerating inflation in Western countries and the increase in the price of oil, the brain drain appeared to have ceased to exist as an issue of broad public concern Then, in 1974 two major official documents concerning the brain drain were published) suggesting that there remain grounds for continued public concern In February 1975, a conference was held in Bellagio, Italy, under the chairmanship of Professor Jagdish Bhagwati of the Massachusetts Institute of Technology on "The Brain Drain and Income Taxation ", to discuss the merits of imposing an income tax surcharge on highly skilled persons from poor countries resident in industrial countries The revenue from this tax surcharge was to be passed on either to an international agency, such as the United Nations, or to the governments of the countries of origin of the highly skilled migrants) The renewed interest in the brain drain expressed in these recent publications and conference has prompted me to reflect on the issues in the light of some empirical observations and theories which were developed in the 1960s, but which have not become widely known Evidence of the Magnitude of the Brain Drain During the 1960s when public concern with the brain drain was at its peak, the most readily available, seemingly reliable and comprehensive statistics on the flow of highly skilled persons to the United States were those published by the United States Immigration and Naturalization United Nations Conference on Trade and Development, " The Reverse Transfer of Technology: Economic Effects of the Outflow of Trained Personnel from Developing Countries " (Geneva: U N C T A D Trade and Development Board) GE74-45088, 15 July, 1974 (mimeographed); U.S House of Representatives, Committee on Foreign Affairs, Brain Drain: A Study of the Persistent Issue o] International Scientific Mobility (Washington: U.S Government Printing Office, 1974) The papers presented at the Bellagio Conference have been published in a special issue of World Development, Vol III, 10 (November 1975), pp 677-763; and in Bhagwati, J N and Partington, M (ed.), Taxing the Brain: A Proposal (Amsterdam: North Holland Publishing Company, 1976), and The Brain Drain and Taxation : Theory and Empirical Evidence (Amsterdam: North Holland Publishing Company, 1976) The proposal for the brain drain tax was first made by Bhagwati, Jagdish and Dellalfar, William, " The Brain Drain and Income Taxation ", World Development, I, and (February 1973), pp 91-98 210 Herbert G Grubel Service ~; these were used in the reports published by the United States National Science Foundation? They continue to be used uncritically by many analysts and they play a key role in the publications of the United Nations Conference oll Trade and Development of 1974 and the United States House of Representatives ~ Yet, these statistics are very misleading; they overstate to a significant degree the gains of the United States and the losses of the rest of the world in migrants human capital because they not include information about re-migration or the place where the skilled person received his education The reasons for this omission are simple The United States immigration authorities not keep a record of highly skilled persons leaving the United States and they not distinguish in their records between persons who were educated in the United States or abroad Similarly, foreign governments not record the return of native-born persons who in most countries can re-enter simply by showing their passports In order to obtain reliable statistics on re-migration from the United States, investigators in some Western European countries had to engage in expensive and painstaking search of other records, for example, records of church registration in Sweden, military records in Switzerland, and special computation by the United Kingdom Ministry of Technology, in order to obtain information about returned emigrants, z On the basis of these investigations, re-migration into certain countries during the period from 1958 to 1969 accounts for between 40 and 90 per cent of recorded gross migrations, s In the case of Dutch engineers, in a two-year period more returned to Holland from the United States than left for the United States Probably immigration into the United States is still overestimated because during the period flows were increasing rapidly and immigrants tended to stay a number of years in the United States To count only inflows and outflows over a given period neglects the possible re-migration of the larger numbers in subsequent years Even if net immigration were zero, rising gross flows and a sojourn of several years in the United States would show a net gain for the United States within any given period of time Many highly skilled Swedish migrants are very mobile internationally, adhering to a pattern which Dr, Grran Friborg has called a ~ yo-yo" movement, by which he means that some individuals enter and depart several times within a given period These in the past For an excellent collection of information on sources of data for the estimation of brain drain flows see Friborg, G~Sran (ed.), Brain Drain Statistics: Empirical Evidence and Guidelines, Report (Stockholm: Research Council, Committee on Research E c o n o m i c s - - F E K , 1975); and Organisation for Economic Cooperation and Development, The Utilization of Highly Qualified Personnel, Venice Conference, 25-27 October, 1971 (Paris: OECD, 1973) National Science Foundation, Scientists, Engineers, and Physicians from Abroad: Trends through Fiscal Years (Washington: National Science Foundation, various years) Ibid Ibid r For more details on these studies see Friborg, G., op cit., and The Utilization of Highly Qualified Personnel s Ibid The Present State of the Brain Drain 211 have sometimes been counted each time as immigrants, but never as emigrants from the United States There is every reason to believe that for many of the poorer countries also net flows are much smaller than gross flows.~ FIGURE Flows of Foreign High-Level Scientific and Technical Personnel to and Jrom North America (Selected countries, years and occupations) FROM AND TO T H E UNITED KINGDOM 1961-69 (All QSE) ENGINEERS rZERLAND 0to55) 5~ ENGINEERS # 25 All graduatt FROM AND TO S (Swedish and fore 435 ~TURAL SCIENTISTS FISTS ztz 323 ENGINEERS 1963-64 FROM AND TO THE NETHERLANDS (Dutch and fereigners) SOURCE: Organisation for Economic Cooperation and Development, The Utilization of Highly Qualified Personnel, Venice Conference, 25-27 October, 1971 (Paris: OECD, 1973), p 34 The magnitude of losses of human capital incurred through the emigration of highly skilled persons to the United States is over-stated by United States statistics of immigration by the further fact that they not include the country where the immigrant was educated The immigration to the Friborg, G6ran, A First Preliminary Report concerning an Investigation by the Committee regarding the Migration of Scientists to and Jrom Sweden (Stockholm: Research Council, Committee on Research Economics, 1968), Report 20 212 Herbert G Grubel United States of a person wholly educated abroad and of a person whose education was undertaken in and perhaps even paid for by the United States should be treated differently Despite the deficiency of American statistics on this matter, there are some indirect clues to the relative magnitude of the foreign and American education of immigrants to the United States In 1970, of the 13,337 scientists and engineers who received immigrant visas, 5,470, or 41 per cent., were in the United States at the time they had their visas changed from visitors', students' and other classes of visa 1~ The overwhelming proportion of these changes in type of visa were for students who had received a significant and the most expensive part of their education in the United States, Furthermore, some of the remaining 59 per cent received their advanced training in the United States but applied for immigrant status while abroad because of the particular requirements of the type of visa under which they had entered the United States initially as students Others received their higher education in another industrial country such as Canada, Great Britain or Western Germany With the notable exception of scientists from the United Kingdom and Switzerland, between 30 and 85 per cent of foreign-born holders of doctorates in the United States received at least their final degree in the United States In the case of the poorer countries in the list, for example, Greece and Turkey, the proportion of doctorates acquired in the United States is above three quarters (Table I), I not deny that there might be a "brain drain problem" deserving the attention of economists and politicians It is quite possible that the migration of highly educated persons should be controlled, even though more accurate analysis of the statistical data shows that the amount of permanent emigration by such highly educated persons is smaller than is often said on the basis of uncorrected statistics However, any specific policies for controlling the brain drain involve some social costs These costs should be compared rationally with the gains derived from reductions of the brain drain through these policies Certain costs considered to be wo,rth incurring at a certain level of the brain drain may no,t be worth incurring below that level Measuring the Costs in Welfare of the Brain Drain On the basis of careful statistical techniques and using data on the composition by age of immigrants to the United States and on earnings of professional persons in the United States, an estimate of the value of the personal incomes earned by the highly educated immigrants from poor countries to the United States in the year 1970 came to $3"6 billion in one year alone, n Another estimate of the "replacement cost" of the "human lo T h e 11 T h e Utilization oJ Highly Qualified Personnel Reverse Trans[er o/ Technology The Present State of the Brain Drain 213 TABLE I Place of Doctoral Study of Foreign-Born Scientists with Doctorates in the United States in 1966 (%) Country United Kingdom Japan Germany Italy France Switzerland Austria Netherlands Sweden Finland Belgium Canada Denmark Norway Spain Yugoslavia Ireland Greece Turkey Area Home Country 72.5 60"9 60"5 60'4 30"8 76.1 59.8 57.9 58.2 42-2 35.7 23.7 34.0 28.8 53.9 26.8 21.6 6.8 5.7 of Award Other United States 5.5 22.0 1"3 37"9 8"1 31"4 5"2 34 10"0 59"3 4.0 19-9 7.3 32"9 3"2 38-8 2.3 39-5 7"8 50"0 5"3 59"0 3-2 73-1 7"4 58"6 17.5 53.7 11"0 35.1 24.7 48.5 27.4 51"0 7-6 85"7 24.3 74-9 SOURCE: Organisation for Economic Cooperation and Development, The Utilization o] Highly Qualified Personnel, Venice Conference, 25-27 October, 1971 (Paris: OECD, 1973) capital stock" acquired by the United States through the immigration of highly educated persons from poor countries during the 1960s came to more than $2 billion I~ It is however, wrong to put these figures forward as equivalent to gains in welfare for the United States, as these estimates It is especially misleading to compare these statistics with the figures of American aid to poor countries in the past and to argue that the United States has "saved" an equivalent amount of investment in human capital In the calculus of welfare, it is important to consider the most fundamental fact that nearly all of the earnings of the "brain drain" immigrants in the United States were received by them as individuals, to be consumed or disposed of as they saw fit Similarly, the value of the human capital embodied in the highly educated immigrants yielded a return which accrued to its holders As a 12 Reubens, Edwin J., " Professional Migration from the Less Developed Countries: Recent Trends, Relative Magnitudes, Economic Significance ", paper presented at the the Bellagio Conference (mimeographed) 214 Herbert G Grubel result, residents of the United States received no direct benefits from the earnings of the highly skilled immigrants from poor countries While it is true that the work of highly educated persons may result in externalities, that is, benefits accruing to other residents of the United States for which they are not compensated, the importance of these externalities is often exaggerated For example, in the case of externalities associated with pure and therefore non-patentable knowledge produced by scientists, the benefits know no borders and are available to the migrants' countries of origin and of residence Highly educated persons also tend to pay proportionately more taxes than they claim in government services, thus contributing to the subsidy of recipients of low incomes in their new country of residence, while making such subsidies more difficult in their country of emigration While the migration of highly skilled persons tends to create benefits of this sort in the countries receiving them and costs in the countries which they have left, the magnitude of these benefits is surely equal only to a small fraction of the migrants' incomes or the value of their education Although the preceding argumeaats about the nature of the effects of the brain drain on wdfare and about their measurements have been discussed widely and well in the literature produced during the 1960s,~3 the studies produced by the United Nations Conference on Trade and Development as well as by Dr Edwin Reubens, which were published in the middle of the 1970s, are evidence of the fact that many persons still misinterpret existing statistics and overestimate by a very large margin the cost of the brain drain Such overestimates can lead to the insrtutio,n of policies which will attempt to stop the brain drain or alleviate its effects and which will involve costs exceeding their benefits Geometrical Analysis of Effects on Welfare o] Migration of Human Capital i~ An analysis of the effects on welfare of migration, or the flow of human capital, shows that, under a reasonable set of assumptions and using some rough empirical estimates, it is possible that in the case of some countries with large populations the emigration of highly educated persons may raise rather than lower the incomes per caput of the remaining population Assuming the absence of externalities, my analysis is conducted without relying on the theory of the marginal productivity of wages For this purpose, consider Figure in which Quadrant I shows the production function between labour and physical capital, represented in the conventional manner by isoquants Y0, Y1 and Y~ The production 13 T h e U n i t e d States G o v e r n m e n t p u b l i c a t i o n B r a i n D r a i n : A S t u d y o[ t h e P e r s i s t e n t Scientific M o b i l i t y , c o n t a i n s a n u p - t o - d a t e set o f r e f e r e n c e s t o this l i t e r a t u r e ~a T h e analysis in this section d r a w s o n a n u n p u b l i s h e d m a n u s c r i p t w h i c h I h a v e w r i t t e n w i t h A D Scott Issue of International 215 The Present State of the Brain Drain function is assumed to be linearly homogeneous The innovation of the present approach lies in its view of the determination of output on the assumption that labour can perform its tasks only by cooperation with a certain number of engineers, and that the education of labourers into engineers requires the use of human capital which, according to the Fisherian view of capital, is part of the country's capital stock Quadrant II of Figure measures the number of engineers on vertical axis and shows the number of engineers required per unit of labour as the slope of the line OF The total labour force is assumed to be equal to O-TLo, which is efficiently allocated by having OLo labourers and OE0 engineers In Quadrant III the horizontal axis measures units of human capital and the line OG expresses the number of units of human capital required to make an FIGURE The Efficient Allocation of Human and Physical Capital Physical Capital TK~ t Yo M~ ' M+ 9y~ Y; Y+ TK,, Lli TKt Human Co c / / :i / Capital TLI III TLo [ Engineers Physical Capital L0i TLI TLo Labour 216 Herbert G Grubel engineer out of a labourer The OEo engineers require OC0 units of human capital With total capital given as O-TKo, the amount of physical capital left ovei" to equip labour is OK0, giving us the combination of inputs: A, in Quadrant I, which must lie on an isoquant such as YoYo Now consider the effect of the emigration of TL1-TL0 units of labour from this country In the long-run equilibrium the new amount of labour is OL1, of engineers is OE1 and since the capital stock has remained unchanged and fewer engineers and therefore fewer units of human capital are required, the physical capital per worker is raised to OK1 The new point in the combination of factors is B which must be on an isoquant such as Y~Y~ below YoYo because the reduction in the factor input of labour combined with unchanged capital necessarily lowers output under the assumption of a linearly homogeneous production function Now turn to the analysis of the effect of the emigration of TL1-TLo engineers The main difference between this and the preceding case is that emigration of engineers removes human capital and therefore reduces the country's total capital stock This latter fact is shown as the inward shift of the total capital line to TK1-TK, Under the assumption of a fixed engineer-labour coefficient, the emigration of the engineers in the new equilibrium leads to further output point D in Quandrant I, which must lie on an isoquant such as Y2Y2, which must be below Y~Y1 because at point D the country has as much labour but less physical capital than at point B Under the assumption of a linear homogeneous production function, output at D must be below that at B This model of the effects of migration on total output shows the nature of the brain drain facing all countries, whether they have a market economy or a planrted economy, in the sense that it discloses the role of skilled manpower in the determination of the productivity of labour and capital It shows the way in which social capital can be distributed between either human or physical capital and it demonstrates that the total output of a country falls more when a skilled person leaves than when an unskilled one does so The model has a number of applications, such as the demonstration of the cases of short-run adjustment arising from the emigration of skilled and unskilled labour, and it could readily be expanded to permit variable ratios ,of engineers to workers and human capital for different requirements of human capital by engineers The line OM0 in Quadrant I of Figure indicates the country's ratio of total capital to total work-force in the initial situation of equilibrium since the point M0 is the co-ordinate of O-TL0 and O-TK0, the total work-force and capital stocks, respectively Figure shows that generally output per worker is an increasing function PoPo of the ratio of capital to workers in a country This functional relationship does not need to be modified in the present analyses of human capital and two types of labour as long as the specified criteria of efficiency are met It may be assumed that initially therefore the country's output per worker is (Y/W)0 at the capital-worker The Present State of the Brain Drain 217 ratio (K/W)o equal to O-TK0/O-TL in Figure Now when TL1-TL0 labourers leave, in the new equilibrium the capital-labour ratio rises to OM1 Using this fact in Figure it follows clearly that the emigration of labour raises income per caput, even though it lowers aggregate income Since it is accepted generally that welfare is an increasing function of income per caput, emigrating workers taking along no capital raise the welfare of the people remaining behind as well as their own and for this reason there is normally in most countries no opposition to general emigration Consider now the case where engineers emigrate and take along some of the country's capital stock This form of migration may either raise or lower income per caput of those remaining behind, depending on the relationship between the human capital per engineer and the country's ratio of capital to labour Figure shows a situation where the units of capital required to train an engineer are fewer than the country's average stock of capital per worker This property holds geometrically whenever the angle labelled a and expressing the average capital-labour ratio is smaller than the angle h, the human capital per engineer, assuming equality of units of measurement of both forms of capital and labour and engineers For this reason the ratio OM2 in Quadrant I is between OMo and OM1 Another way of describing this property is that in the case shown in Figure the proportionate decrease in labour (TL1-TLo)/O-TLo is necessarily greater than the proportionate decrease in capital (TK1-TK0)/O-TKo, so that OM2 must be steeper than OM0 The level of education at which the emigration of educated persons raises rather than lowers the average worker's endowment with capital is an important question for analysis I have made an attempt to solve this question for India? In about 1963 in India the average value of physical capital per worker was $1,197 and of human capital $66, giving a total average capital stock of $1,263 The cost of education was $28 per year for primary and $189 per year for secondary education, counting both the direct costs and earning foregone in about 1960-66 Under the: assumption that each Indian student spends six years at primary and six more at secondary school, the human capital embodied in a high school graduate is $1,302 These estimates are subject to a large margin of error and not too much faith should be placed in them Nevertheless, these results suggest that during the 1960s the emigration of an Indian student who had completed his secondary school education left unchanged the income per caput of those who remained behind There are two reasons for believing that actually his emigration may raise Indian income per caput For one thing, our calculations dealt with the average costs of education and marginal cost is likely to be much lower The following estimates draw on basic data found in Psacharopoulos, George, with K Hinchliffe, Returns to Education: An International Comparison (Amsterdam: Elsevier Scientific Publishing Company, 1973) 218 Herbert G Grubel FIGURE Capital-Labour Ratios and Output per Caput Output/Worker ~176176 Po (Y/W)~ (Y~W)~ ;., ,,.::: :~ (Y/W)~ oo~ ~j# Po ) Total Capital/Worker FIGURE Optimum Population Income/Caput (Y/Cap)* (Y/Cap), P* P~ Population The Present State of the Brain Drain 219 Rationally, in the face of a steady loss of educated persons, India simply should increase its rate of output, taking advantage of lower marginal costs and preventing domestic stortages of skilled personnel Second, it is possible that India's population is greater than optimal It is a widely accepted theoretical proposition that the curve of income per caput tends at first to increase with population and then to decrease The population OP* in Figure associated with the maximum output (O-Y/Cap)* generally is known as optimum population No one knows with certainty whether India is at a point such as OP~ beyond the optimal level If we assume that it is, emigration from India shifts upwards the PoP0 schedule in Figure to P~P~ The common-sense explanation o{ this shift is that reduced crowding permits the workers remaining after the emigrants have left to work more efficiently If this happens, it is possible that even if the emigrants take along so much human capital as to lower the average ratio of capital to worker (K/W)2 in Figure 3, output per caput of those remaining behind is increased The assumptions and data underlying this analysis may require drastic revision in the light of further research However, if they not, the following very important conclusion is reached India, which cannot fred acceptance in the rest of the world for its uneducated emigrants, but which can find acceptance for its educated emigrants, should devote a certain part of its resources to the production of educated persons for emigration Benefits accrue to the country of emigration from the emigration of persons with no more than a completed secondary school education, although probably the crucial level is higher Instead of lamenting the brain drain, Indians whe discuss it should welcome it as an o,pportunity to raise the standard of those who remain in India as well as of those who emigrate But even if the assumptions and data are biased systematically towards understating the influence of emigration on India's stock of capital per caput, as long as India's population is greater than optimal, the losses to those remaining from the emigration of educated persons must be smaller than the capital calculations above suggest It should be noted here that the population of the countries receiving the educated persons from India may also benefit, because it is possible and perhaps even likely that the value of the migrants' human capital evaluated at the factor costs characteristic of the rich countries is so high that the receiving country's endowment per caput with capital is raised It is these mutual benefits from international exchange which underlie the economic argument for free trade and the free flow of migration Some Thoughts on the Bellagio Conference In February 1975, a conference of specialists met at the Rockefeller Co,nference Center in Bellagk), to discuss the merits of a proposal 1~ to 16 This proposal was first advanced in Bhagwati, J and Dellalfar, W., op dt 220 Herbert G GrubeI impose a tax on highly skilled persons from developing countries who are resident in developing countries This proposal was considered by the Rockefeller Foundation to be important enough to, warrant sponso.rship and support of the conference and it is highly likely that it will receive world-wide attention as a result of the publication of the proceedings of the conference, lr For this reason, I would like to present my own views on the merit of this tax-proposal, as they developed in reflecting on the discussions at the Bellagio conference In so doing, I will consider only the brain drain of persons other than physicians and nurses to the United States, and will disregard the special problems raised by the immigration of physicians and nurses from some poorer countries to North America and Britain My reflections are based on information gathered by talking to individuals in governments, international organisations and universities, who are in intimate and direct contact with the problems of the brain drain My reflections are not supported here by precise documentation and they should be treated with a certain amount of scepticism At the same time, however, it is also important to realise that official representations by governments in international organisations, such as the United Nations or UNCTAD, cannot be taken at face value as indication of the seriousness of the problem of the brain drain from developing countries It is well known that such agencies to some extent serve as a forum for political pronouncements and efforts by poor countries to bring about transfers of income from industrial countries The issue of the brain drain appeals to ethical ideas and sentiments and lends itself well to the attainment of these objectives The spokesmen for poor countries have every incentive to exaggerate and none to understate the seriousness of the problem of the brain drain In a longer perspective, it is obvious that there was an abnormally large flow of highly skilled persons into the United States in the 1960s and that this large flow has now ended This cycle has been produced by the interaction of many factors During the 1960s the economy of the United States was expanding greatly and its government embarked on several large-scale scientific and engineering projects simultaneously These included the programme of the exploration of outer space, very large and growing expenditures on basic research in physics, chemistry and medicine, scientific and engineering expenditures connected with the war in Vietnam, and increased support for the expansion of higher education which required many more teachers in many fields During this period, foreign students came to American universities in vast numbers, some attracted by the prestige and achievements of American science and engineering at the time and by the opportunities for financial support On graduation, many of these students easily found lucrative employment in the United States l r See fn above The Present State of the Brain Drain 221 Since the 1960s, conditions have changed United States governmental expenditures on space, fundamental and military research have fallen in real terms University enrolment has ceased to expand and in many fields there are unemployed or underemployed graduates with advanced degrees American science and enginering have lost some of their lustre Urban disorders have tarnished the image of the United States as a paradise on earth At the same time, many other countries of the world are enjoying relatively stable economic growth with concomitant opportunities for educated persons to find satisfactory employment in their own countries As a result, the net migration of highly educated persons has been reduced to such an extent that the issue of the brain drain has all but disappeared from public and governmental discussions European governments, which once were very much concerned about the problem, have used their influence to bring an end to all further research on the topic in the OECD I have been told by informed sources that there are practically no representations from Latin American governments to the United States Department of State, such as there were during the 1960s In Asia, there appear to be only two countries with persistent problems resulting from the brain drain, the Philippines and India In the former case, a long, traditional tie with the United States has created special conditions and it has been said there that unilateral action by the United States government to resist the flow of physicians and nurses to the United States would not be welcomed Such action would in effect amount to the outside interference with a deliberate Philippine policy of producing more doctors and nurses than are required domestically, in part in order to create the opportunity for some to have a successful career in medical science in the United States According to some observers, the solution to this problem if it is a problem must be found in Philippine domestic policies and it is not the business and even less the responsibility of the United States to intervene in the matter As far as India is concerned, many analysts of Indian conditions have concluded that India has overinvested in education since the end o,f the Second World War and has produced too many university graduates, and as a result a large number of these have sought employment abroad 18 Such emigration is economically rational and efficient from the point of view of both the emigrating individual and of his country If the Indian Government considers this "brain drain" undesirable socially, then it should cease the production of an excess of highly skilled persons or it should impose controls on emigration The income tax on emigrants which was proposed by Drs Bhagwati and Dellalfar would reduce the need for the Government of India to choose between politically unpopular policies but it would not deal with the situation of which the brain drain is only a result 18 For a documentation of this proposition see Blaug, M., Layard, P R G and Woodhall, M., The Causes o] Graduate Unemployment in India (London: Allen Lane, 1969) 222 Herbert G GrubeI Such a tax would have many costs It would be difficult to obtain the necessary legislation in the Congress of the United States and it would probably face a test of constitutionality in the Supreme Court; it would also be costly and difficult to administer and it would reduce otherwise highly desirable international mobility of highly educated persons and students throughout the world Very importantly, as Dr C Diaz-Alejandro observed during the discussion at the Bellagio Conference, the existence of such a tax would in principle enable governmental officials to raise the tax rate to a level high enough to prevent all migration if they considered it to be in the national interest at the moment Given these costs of the tax for the entire world and the fact that in recent years the problem of the brain drain concerns only a few countries, there should be serious doubts as to the desirability of instituting such a tax The Bellagio Conference did not deal only with the practical problem of taxing brain drain migrants, it also devoted considerable time to the discussion of a model of how the brain drain affects the welfare of the population in the countries which the emigrants leave, even if these migrants tend to be paid their marginal social product and the effects of taxation and income redistribution not exist This model has become known as the "emulation model" and was first presented in the paper by Drs Bhagwati and Dellalfar t9 in which they also propounded the proposal for the tax Because of the originality and potential use of the emulation model as an argument for the imposition of the tax on migrants, it may be useful to discuss briefly the nature and empirical validity of this model According to the emulation model, the emigration of some highly educated persons from a country causes costs to fall on those who remain as a result of the fact that the opportunity to emigrate and to earn a higher income abroad increases the expected rate of return from higher education for all graduates It strengthens the hands of university graduates in bargaining for higher salaries on the grounds that unless such higher salaries are paid further large and potentially catastrophic emigration will take place As a result of such bargaining, the salaries of highly skilled persons in countries "emulating" the foreign salaries are raised Together with the already higher salary expected from emigration, incentives are created for more persons to seek higher education The resulting shortage of places at universities are met by the politically popular establishment of more universities The increased supply of university graduates, ceteris paribus, further increases emigration, which in turn leads to more emulation and so it goes in a vicions circle of increasing waste and inefficiency Drs Bhagwati and Dellalfar then conclude that if there had been no brain drain, emulation could not occur and the country which suffers from emulation would not be faced with the waste entailed in the overproduction of higMy educated persons The model implies that if the 19 See Bhagwati, J N and Dellalfar, W., op cit The Present State of the Brain Drain 223 brain drain could be reduced or stopped through some policy such as a tax on emigrants, the social cost of emulation could be lowered or eliminated The emulation model is an attractive intellectual construction, but I think that it is unrealistic In the case o,f India, the historical facts not correspond to the emulation model The salaries of Indian civil servants who had a higher education have been at a disequilibrately high level, relative to other wages, ever since Independence, primarily because the new Government of India simply accepted the structure of remuneration which had been followed by the Government of India during the period of British rule? ~ Salaries paid to Indian university graduates made for a high demand for more places in universities and to the rapid expansion of Indian universities after the end of the Second World War The excessive supply of Indian university graduates occurred earlier than the brain drain and caused it The conflict between these two competing interpretations of the cause of the Indian overproduction o~ university graduates can be resolved only by an empirical test Even if one were to, accept the Bhagwati-Dellalfar emulation model as correct, there is no good reason for thinking that it is in the interest of emulating countries or any others to expend valuable intellectual and administrative resources, on a tax o,n brain drain emigrants It wo,uld be better to try to persuade the public in emulating countries to accept a more realistic view of the suppo,sed bertefits o~ higher education There is some evidence that economically wasteful processes harming a large segment of a country's population can ultimately be brought under control if they are explained properly and fuIly discussed in public Judgments on the relative efficacy of using a given amount of resources for the purpose of instituting a world-wide income tax on migrants for the breaking of the cycle of emulation are difficult to make at best, but a thorough discussion of these issues is needed A n Alternative to the Tax on Migrants While I believe that the magnitude and the effects on welfare of the brain drain from poor countries not warrant the institution of a tax on the income of highly skilled migrants in their new countries of residence, there remains a general case for the transfer of resources from industrial to poor countries simply on humanitarian grounds Politically, such aid programmes have run into much opposition in the industrial countries However, this opposition might be diminished if the transfer of resources were brought about as the by-product of a private programme of foreign assistance by groups of residents or citizens of the rich countries In this spirit, Professor Oliver Oldman o~ the Harvard University Law School proposed that highly educated immigrants working in the United States should contribute voluntarily to a tax-exempt foundation in the United so This argument has been made by Blaug, M., et al., op cit 224 Herbert G Grubel States, the receipts of which could be used for charitable or other public purposes in the countries of their origin Under this scheme, the American taxpayer would in effect nearly match the amounts of money donated by the migrants since contributions to such foundations may be deducted from taxable income Thus, when a migrant donates from taxable income $100, he reduces his income after taxation by only $50, assuming a marginal rate of 50 per cent.; the $50, which in the absence of the foundation would have accrued as revenue to the United States Treasury and public, would be available as compensation to the "brain-drained" country abroad According to Dr Oldman, such a foundation could be established with relative ease and there appear to be numerous precedents to suggest that such programmes of assistance might be acceptable to the American public The programme would not "solve" the problem of the brain drain, which is the overproduction of university graduates and the attendant pressure for emulation Such a programme would permit the migrants themselves to " r e p a y " the obligations they might believe themselves to have towards their native country's investment in their education, and it would lead to additional transfers, justifiable on humanitarian grounds and through a mechanism which might also be acceptable to American opinion  ... statistical techniques and using data on the composition by age of immigrants to the United States and on earnings of professional persons in the United States, an estimate of the value of the. .. fraction of the migrants' incomes or the value of their education Although the preceding argumeaats about the nature of the effects of the brain drain on wdfare and about their measurements have... Effects on Welfare o] Migration of Human Capital i~ An analysis of the effects on welfare of migration, or the flow of human capital, shows that, under a reasonable set of assumptions and using