A Quantitative General Equilibrium Approach to Migration, Remittances and Brain Drain

Developing countries have experienced an outstanding outflow of skilled workers (brain- drain) over the last several decades. Additionally, migrants tend to be tied to their country of birth, since they send a large amount of remittances to their relatives. Furthermore, migration is not permanent, since a considerable number of workers return to their country of birth after a migration spell. In this paper we develop a model that is consistent with these facts. We use our model to address some important issues in the migration literature from a theoretical perspective. We study the general equilibrium effects of migration, its long-term effects, and its welfare effects, and we see whether the joint effect of return migration and remittances is strong enough to offset the effects of skilled migration. Finally, we evaluate the effectiveness of policy interventions that attempts to offset the effects of a brain drain.