Human capital acquisition and international migration in a model of local interactions

I propose a model of learning centered on the idea that acquisition of skill is only possible through personal interaction with an individual already possessing such skill. In this environment, the fact that unskilled individuals learn from skilled individuals increases the income of the latter, which increases the willingness of the unskilled to acquire skill. The steady-state income of skilled individuals (teachers) is thus very sensitive to the ability of unskilled individuals (students) to fund their education. Cross-country differences in such ability have a multiplicative effect on the skill premium, which becomes a cause of international migration of the skilled from less developed countries (i.e. those with poorer access to educational credit) to more developed countries. Additionally, I study the welfare implications of such brain drain for a less developed country. Although brain drain reduces the number of skilled individuals in the country and thus makes acquisition of skill more difficult, unskilled individuals may still be better off: the increased difficulty of skill acquisition is offset by a higher skill premium once the skill has been acquired. Also, I find that increased openness of less developed countries to migration and the resultant accelerated brain drain increase the incentives for national governments to improve access of unskilled individuals to education.