Ability drain: size, impact, and comparison with brain drain under alternative immigration policies

Abstract

Abstract Ability drain’s (AD) impact seems economically significant, with 30% of US Nobel laureates since 1906 being immigrants, and immigrants or their children founding 40% of Fortune 500 companies. Nonetheless, while brain drain (BD) and gain (BG) have been studied extensively, AD has not. I examine migration’s impact on ability (a), education (h), and productive human capital or “skill” s =s(a, h), for source country residents and migrants under (a) the points system (PS) which accounts for h and (b) the “vetting” system (VS) which accounts for s (e.g., US H-1B program). The findings are as follows: (i) Migration reduces (raises) residents’ (migrants’) average ability, with an ambiguous (positive) impact on average education and skill, and net skill drain, SD, likelier than net BD; (ii) these effects increase with ability’s inequality or variance, are greater under VS than PS, and hurt source countries; (iii) the model and two empirical studies suggest average AD ≥ BD for educated US immigrants, with real income about twice the home country income; and (iv) SD holds for any BD and for a very small AD (7.4% of our estimate). Policy implications are provided.