"The International "The International Migration of Migration of

Knowledge Workers: Knowledge Workers: When is Brain Drain When is Brain Drain

Beneficial?"Beneficial?" Peter J. Kuhn, UC Santa Peter J. Kuhn, UC Santa

BarbaraBarbara

Carol McAusland, U Carol McAusland, U MarylandMaryland

The Idea behind the The Idea behind the Product:Product:

Quiksilver Hooligan S/S T-Shirt

Price  $24.50 

1 5280 Hanes 5.5 oz Heavyweight Cotton Tee 100% ComfortSoft ™ cotton • 5.5-oz….Type in the quantity for each color and size that you want, and click the "add to cart" button White:S: $1.54 M: $1.79 L: $1.79 XL: $1.79 XXL: $2.79

Other ‘ideas’ reproducible Other ‘ideas’ reproducible at very low marginal cost:at very low marginal cost:

Movies, books, music, video gamesMovies, books, music, video games A sports performanceA sports performance A formula for a drug or vaccineA formula for a drug or vaccine SoftwareSoftware A scientific discoveryA scientific discovery A better or more A better or more

appealing/marketable design for any appealing/marketable design for any productproduct

Some features of “knowledge Some features of “knowledge goods”:goods”:

Market size mattersMarket size matters Many knowledge goods suffer Many knowledge goods suffer

“losses in translation” if produced “losses in translation” if produced and consumed in different places:and consumed in different places: Close to zero for orchestral music, Close to zero for orchestral music,

Stata, AIDS vaccine?Stata, AIDS vaccine? Close to one for income tax software, Close to one for income tax software,

comedy? comedy?

What are the implications What are the implications of this for international of this for international

labor mobility?labor mobility? Unless translation costs are zero, Unless translation costs are zero,

“Knowledge Producers” (Brains?) “Knowledge Producers” (Brains?) will want to live in large markets.will want to live in large markets.

Lots of knowledge producers have Lots of knowledge producers have migrated to the U.S.:migrated to the U.S.:

David Frum

John Roebling

Igor I. Sikorsky

Paul Anka

Dan Aykroyd

Jim Carrey

Celine Dion

Alanis Morissette

Diana Krall

Vladimir Kosma Zworykin Mike Myers

Alexander Graham Bell

Peter Jennings

Plus of course: Plus of course: Prof Yongmiao

Hong Visiting Tan Chin Tuan Professor 23 April - 18 May 2007 Prof Hong is Professor of

Economics and of Statistical Science at

Cornell University. He has served on the editorial

boards of several major journals in

econometrics….

Questions in this paper:Questions in this paper:

Who gains/loses from knowledge Who gains/loses from knowledge worker mobility (sending country, worker mobility (sending country, receiving country, brains)?receiving country, brains)?

How does this depend on:How does this depend on: Relative market sizesRelative market sizes ““Translation costs”Translation costs” Intellectual Property Rights (IPR) PolicyIntellectual Property Rights (IPR) Policy

Our answer:Our answer: Brain Drain Brain Drain maymay be Pareto-Improving. be Pareto-Improving. Why? Since knowledge workers produce Why? Since knowledge workers produce

a public good, consumers in their native a public good, consumers in their native countries can still benefit from their countries can still benefit from their efforts. efforts.

The net gain depends on the balance The net gain depends on the balance between knowledge creation and between knowledge creation and knowledge diffusion caused by knowledge diffusion caused by emigration.emigration.

Neither of these effects are captured in Neither of these effects are captured in any existing models of the “brain drain”. any existing models of the “brain drain”.

Brain Drain LiteratureBrain Drain Literature

Survey: Commander, Kangasniemi, Survey: Commander, Kangasniemi, Winters (2004)Winters (2004)

Earliest literatureEarliest literature Modelled “brain drain” as just another Modelled “brain drain” as just another

international factor flow (e.g. Berry and Soligo international factor flow (e.g. Berry and Soligo 1969, Jones, Coelho and Easton 1986). 1969, Jones, Coelho and Easton 1986).

In the simplest model (small, undistorted In the simplest model (small, undistorted economy), any factor outflow that doesn’t economy), any factor outflow that doesn’t exactly mirror the existing factor endowment exactly mirror the existing factor endowment ratio hurts remaining residents. ratio hurts remaining residents.

Exceptions do exist: Exceptions do exist: large economies (when terms of trade are affected)large economies (when terms of trade are affected) when there are at least as many traded goods as when there are at least as many traded goods as

factors of production (then the effect is zero). factors of production (then the effect is zero).

Factors that accentuate Factors that accentuate harm from draining brainsharm from draining brains

Fiscal externalities:Fiscal externalities: with publicly- with publicly-financed education and progressive financed education and progressive taxation, skilled emigrants create a taxation, skilled emigrants create a fiscal loss (Bhagwati and Hamada fiscal loss (Bhagwati and Hamada 1974). 1974).

Education and Endogenous Growth:Education and Endogenous Growth: If skilled workers raise the sending If skilled workers raise the sending country’s growth rate, very large long-country’s growth rate, very large long-term losses can result (Miyagawa 1991, term losses can result (Miyagawa 1991, Wong and Yip 1999). Wong and Yip 1999).

Factors that might create Factors that might create “Beneficial Brain Drain “Beneficial Brain Drain

(BBD)(BBD) ““Social safety valveSocial safety valve” for unemployed skilled ” for unemployed skilled

workers (Bhagwati and Rodriguez 1975)workers (Bhagwati and Rodriguez 1975) RemittancesRemittances (Ozden and Schiff 2006) (Ozden and Schiff 2006) Return migrationReturn migration (DeVoretz 2005) (DeVoretz 2005) Education incentives provided by an Education incentives provided by an

““emigration lotteryemigration lottery” (Stark, Helmenstein ” (Stark, Helmenstein and Prskawetz 1997, 1998; Mountford 1997)and Prskawetz 1997, 1998; Mountford 1997)

DisciplineDiscipline on sending countries’ on sending countries’ tax tax authorityauthority (Haupt and Janeba 2004, (Haupt and Janeba 2004, Bucovetsky 2003) Bucovetsky 2003)

Note:Note:

None of these papers model consumer None of these papers model consumer utility explicitly, and certainly not utility explicitly, and certainly not product product qualityquality..

Yet quality is precisely how ‘knowledge Yet quality is precisely how ‘knowledge work’ affects production and utility.work’ affects production and utility.

As a result, existing work has missed an As a result, existing work has missed an important potential benefit to all important potential benefit to all consumers from brain drain. consumers from brain drain.

Our PaperOur Paper

““Brains” produce knowledge goods Brains” produce knowledge goods that can have a “public good” aspectthat can have a “public good” aspect

Inventors produce higher quality Inventors produce higher quality when the returns are higherwhen the returns are higher

Demand for knowledge goods Demand for knowledge goods exhibits “Home Bias”exhibits “Home Bias”

ModelModel

ProductionProduction

Focus on representative “artist,” Focus on representative “artist,” a.k.a. researcher, inventor, a.k.a. researcher, inventor, knowledge worker knowledge worker

Artist produces a prototype of Artist produces a prototype of quality quality ρρ at cost c(ρ)at cost c(ρ) c’(ρ)>0, c’’(ρ)>0c’(ρ)>0, c’’(ρ)>0

Reproductions are costlessReproductions are costless

DemandDemand q=per capita consumption q=per capita consumption Individual inverse demand = tρp(q)Individual inverse demand = tρp(q) p(q) = base demandp(q) = base demand

with ε = elasticity of “base” demandwith ε = elasticity of “base” demand

assume ε decreasing in qassume ε decreasing in q ρ=qualityρ=quality t=“relevance”t=“relevance”

q

qp

dqqdp

)(1)(

““Relevance”Relevance”

Armington (1969): goods Armington (1969): goods differentiated by country of origindifferentiated by country of origin

Trefler (1995): Home BiasTrefler (1995): Home Bias Some knowledge goods don’t survive Some knowledge goods don’t survive

translation well at all: political writingtranslation well at all: political writing Others are universal: laws of physicsOthers are universal: laws of physics Most goods are in between: cultural Most goods are in between: cultural

goods (literature, movies, pop music), goods (literature, movies, pop music), medicine, product designmedicine, product design

Lost in translationLost in translation

τ=fraction of value surviving τ=fraction of value surviving translationtranslation

1-τ=iceberg translation cost1-τ=iceberg translation cost Suppose a prototype is produced in Suppose a prototype is produced in

market jmarket j Relevance of this product to consumer Relevance of this product to consumer

living in market living in market ii is t is tijij

ttijij=1 if i=j=1 if i=j ttijij=τ ≤ 0 if i≠j=τ ≤ 0 if i≠j

Artist’s DecisionsArtist’s Decisions

Where to live/work?Where to live/work? Source country Source country SS Recipient country Recipient country RR

Which quality to produce?Which quality to produce? What price to charge?What price to charge?

PricingPricing

Assume markets are segmentedAssume markets are segmented Full intellectual property rights Full intellectual property rights

protection*—artist has monopoly protection*—artist has monopoly powerpower

ππii≡max p≡max pii(q)q(q)q=maximum base profits in market i=maximum base profits in market i

Note: ε=1 at profit maximizing base Note: ε=1 at profit maximizing base price/quantityprice/quantity

Total profits from market Total profits from market ii = N = Niiρtρtijijππii

Total profitsTotal profits

DefinitionsDefinitions XXii=N=Niiππii — effective size of market — effective size of market ii MMjj=t=tSjSjXXSS+t+tRjRjXXR R — the artist’s — the artist’s global global

effective market when she lives/works effective market when she lives/works in country in country j.j.

Total global operating profits when Total global operating profits when artist lives/works in country artist lives/works in country ii

==NNSSρtρtSjSjππSS +N +NRRρtρtRjRjππRR

=ρM=ρMjj

Which quality to Which quality to produce?produce?

At a price, artist can raise the At a price, artist can raise the quality of her quality of her prototype/reproductionsprototype/reproductions hire complementary inputshire complementary inputs acquire additional training/skillsacquire additional training/skills work longer hourswork longer hours

Assume quality cost function is Assume quality cost function is identical regardless of production identical regardless of production locationlocation

Suppose Artist lives/works in country Suppose Artist lives/works in country jj. . She chooses quality ρ to maximize ρMShe chooses quality ρ to maximize ρM jj-c(ρ)-c(ρ) First order condition: First order condition:

MMjj=c’(ρ) =c’(ρ) (1) (1)

Equation (1) implicitly defines equilibrium Equation (1) implicitly defines equilibrium quality — ρ(Mquality — ρ(Mjj) — as a function of effective ) — as a function of effective market size, and hence, of residencymarket size, and hence, of residency

with dρ/dMj=1/c’’>0

Where to live/work?Where to live/work?

Assume relocation is costless.Assume relocation is costless.

Lemma 0 (not in paper): Absent Lemma 0 (not in paper): Absent translation costs (i.e. τ=1) the artist is translation costs (i.e. τ=1) the artist is indifferent about where she lives.indifferent about where she lives.

Lemma 1: If translation costs are non-Lemma 1: If translation costs are non-zero (i.e. τ<1), the artist emigrates if zero (i.e. τ<1), the artist emigrates if and only if Xand only if XSS<X<XRR..

Restrict attention to cases Restrict attention to cases where Xwhere XRR<X<XSS

Just focus on cases where voluntary Just focus on cases where voluntary emigration would occur if allowedemigration would occur if allowed

Knowledge CreationKnowledge Creation

Define any increase in prototype Define any increase in prototype quality as “knowledge creation” quality as “knowledge creation” (more, or better, (more, or better, songs/theorems/vaccines)songs/theorems/vaccines)

Proposition 1Proposition 1

Voluntary emigration induces Voluntary emigration induces knowledge creationknowledge creation

Proof: by Lemma 1, artist emigrates Proof: by Lemma 1, artist emigrates iff Xiff XRR>X>XSS and τ<1, i.e. iff M and τ<1, i.e. iff MRR>M>MSS. . Because dρ/dM=1/c’’>0 , Because dρ/dM=1/c’’>0 , ρ(Mρ(MRR)>ρ(M)>ρ(MSS). ).

Who benefits from Brain Who benefits from Brain Drain?Drain?

Artist—revealed preferenceArtist—revealed preference Consumers in Recipient country?Consumers in Recipient country? Consumers in Source country?Consumers in Source country?

Consumer SurplusConsumer Surplus

Define CSDefine CSijij=N=NiittijijρρФФii where where

is “base” consumer surplus when is “base” consumer surplus when

qqii=argmax p=argmax pii(q)q(q)q

iiqi qqpdqqpi

)()(0

iiqi qqpdqqpi

)()(0

Lemma 2Lemma 2

Consumers in country Consumers in country ii are better off are better off when the artist voluntarily migrates when the artist voluntarily migrates iff iff

ttiSiSρ(Mρ(MSS)<t)<tiRiRρ(Mρ(MRR). ). (2) (2)

Proof: Because NProof: Because Nii and and ФФii are are independent of ρ, CSindependent of ρ, CSiRiR>CS>CSij ij iff (2) iff (2) holds.holds.

Proposition 2 (a)Proposition 2 (a)

Recipient consumers are always Recipient consumers are always made better off by the artist’s made better off by the artist’s voluntary migrationvoluntary migration

Proof: Because tProof: Because tRSRS=τ<t=τ<tSSSS=1 and =1 and ρ(Mρ(MSS)<ρ(M)<ρ(MRR), (2) always holds. ), (2) always holds.

Source Consumers?Source Consumers?

““Knowledge diversion” hurts Source Knowledge diversion” hurts Source consumers:consumers: Absent emigration, Artist’s product is Absent emigration, Artist’s product is

fully relevant to Source consumersfully relevant to Source consumers Once Artist moves/lives abroad, only Once Artist moves/lives abroad, only

fraction τ of product survives fraction τ of product survives translation. translation.

= translation/survival rate

Figure 1: knowledge creation versus knowledge diversion

1

(MR)-(MS)(MR)

0 1

(MR)-(MS)(MR)

=rate of knowledge creation(NSS)(NRR)

1-

= translation/survival rate

1

(MR)-(MS)(MR)

0 1

(MR)-(MS)(MR)

=rate of knowledge diversion (translation loss)

=rate of knowledge creation(NSS)(NRR)

1-

Figure 1: knowledge creation versus knowledge diversion

= translation/survival rate

1

(MR)-(MS)(MR)

0

Beneficial Brain Drain

1

=rate of knowledge creation

=rate of knowledge diversion (translation loss)

(MR)-(MS)(MR)

(NSS)(NRR)

1-

Figure 1: knowledge creation versus knowledge diversion

Proposition 2(b)Proposition 2(b)

If If

ΛΨΛΨ(ρ(X(ρ(XRR+X+XSS))>1, ))>1, (3) (3)

— — where measures the where measures the difference in relative market size and difference in relative market size and equals the elasticity of quality equals the elasticity of quality with respect to market size — then with respect to market size — then Source consumers gain from the artist’s Source consumers gain from the artist’s voluntary migration if τ is not too small.voluntary migration if τ is not too small.

SR

SR

XX

XX

SR

SR

XX

XX

)(''

)(')(c

c

)(''

)(')(c

c

)(1)()()(1

RRSR MMMMd

d

Sketch of proof: Sketch of proof:

Look at the Look at the graph: if graph: if knowledge knowledge diversion line is diversion line is flatter than flatter than knowledge knowledge creation curve at creation curve at τ=1 then clearly τ=1 then clearly BD is beneficial BD is beneficial for some τ<1.for some τ<1.

Proposition 2(c)Proposition 2(c) A1. so A1. so ΨΨ is is

a constant*.a constant*.

If A1 and (3) each If A1 and (3) each hold there exists a hold there exists a such that Brain such that Brain Drain is neutral for Drain is neutral for τ=1 or τ= , Brain τ=1 or τ= , Brain Drain is beneficial Drain is beneficial to Source to Source Consumers for τ Consumers for τ , and harmful if τ< , and harmful if τ< . .

_

_

_

_

)1,(_

_

1

c

1

c

*Paper contains typo on p. 5

ObservationsObservations

emigration definitely hurts Source’s emigration definitely hurts Source’s consumers when τ=0: if τ consumers when τ=0: if τ sufficiently low then BD lowers sufficiently low then BD lowers Source welfare. Source welfare.

-> If translation costs are sufficiently -> If translation costs are sufficiently high, BD hurts Home consumers.high, BD hurts Home consumers.

ΨΨ is one over the elasticity of is one over the elasticity of marginal quality costsmarginal quality costs, or, , or, equivalently, the elasticity of quality equivalently, the elasticity of quality with respect to market size.with respect to market size.

ΨΨ > > 1 is a necessary condition for 1 is a necessary condition for (3).(3).

-> If quality inelastic to market size, -> If quality inelastic to market size, i.e. i.e. ΨΨ < < 1, BD harmful even for high 1, BD harmful even for high knowledge survival rates.knowledge survival rates.

Proposition 3: the interval of survival Proposition 3: the interval of survival rates rates

( , 1) at which BD benefits Source ( , 1) at which BD benefits Source consumers is larger the bigger the consumers is larger the bigger the gap between effective market sizes. gap between effective market sizes.

->BBD more likely when Source is ->BBD more likely when Source is small relative to recipient.small relative to recipient.

_

RecapRecap

If If marginal investment costs don’t rise too marginal investment costs don’t rise too

quickly with quality, quickly with quality, translation costs aren’t prohibitive, translation costs aren’t prohibitive, and overseas market sufficiently bigger and overseas market sufficiently bigger

than sending market, than sending market,

then Brain Drain benefits consumers then Brain Drain benefits consumers in Source country.in Source country.

Endogenous Intellectual Endogenous Intellectual Property RightsProperty Rights

Effective market size depends on Effective market size depends on population size, income level, and population size, income level, and strength of IPRsstrength of IPRs

Emigration may change Emigration may change governments IPR calculusgovernments IPR calculus

PiratesPirates

Introduce a competitive fringe also capable Introduce a competitive fringe also capable of reproducing artist’s prototype at zero of reproducing artist’s prototype at zero cost.cost.

Assume expected penalty for distributing Assume expected penalty for distributing pirated goods is proportional to the price pirated goods is proportional to the price premium tρ.premium tρ.

Generates (expected) marginal cost dGenerates (expected) marginal cost dijij=β=βiittijijρ ρ where βwhere βii is increasing in the strength of is increasing in the strength of country country ii’s IPRs.’s IPRs.

β also equals the base price of pirated goodsβ also equals the base price of pirated goods

Define β-dependent Define β-dependent equivalent of variablesequivalent of variables

β*≡p(qβ*≡p(qii), i.e. β* is price uncontested ), i.e. β* is price uncontested monopolist would chargemonopolist would charge

π*≡π(β*) (uncontested monopoly profits)π*≡π(β*) (uncontested monopoly profits) pp-1-1(β) (contested per capita output)(β) (contested per capita output) XXii(β)≡N(β)≡Niiππii(β(βii) (effective market size)) (effective market size) (base consumer (base consumer

surplus)surplus) CSCSSjSj(β)=N(β)=NSSttSjSj(β)=N(β)=NSSttSjSjρρФФSS(β(βSS) )

(7) (7)

)(

0

11

)()()(

p

pdqqp

Lemma 3: Under A1, CSLemma 3: Under A1, CSSjSj is strictly is strictly (locally) concave in β.(locally) concave in β.

Government’s IPR policy Government’s IPR policy choicechoice

A2. XA2. XSS(β*)<X(β*)<XRR, i.e. Artist emigrates if , i.e. Artist emigrates if allowed allowed

Government can permit or prohibit Government can permit or prohibit emigration exit (emigration exit (OOpen vs. pen vs. CClosed losed door)door)

Define Define ββOO=argmax CS=argmax CSSRSR ββCC=argmax CS=argmax CSSSSS

Proposition 4Proposition 4

Under A1 and A2Under A1 and A2

(a) if Source offers any IPR protection at (a) if Source offers any IPR protection at all, it offers weaker policy when its exits all, it offers weaker policy when its exits are open than closed. Specifically, βare open than closed. Specifically, βOO<β<βCC iffiff

; ; (10) (10)

if (10) fails then βif (10) fails then βOO=β=βCC=0.=0.

(b) Source never offers full IPR protection: (b) Source never offers full IPR protection: ββOO≤β≤βCC<β<β*.*.

1)0()]0(1[

RR

S

N

N

1)0()]0(1[

RR

S

N

N

(Sketch of) Proof of Part (Sketch of) Proof of Part (b)(b)

If artist’s residency is fixed, then If artist’s residency is fixed, then Source Gov’t only worries about Source Gov’t only worries about impact of weak IPRs on CSimpact of weak IPRs on CSSjSj via via lower domestic prices and weaker lower domestic prices and weaker quality. quality.

Under A2, residency depends only Under A2, residency depends only on exit policy. on exit policy.

At βAt βSS=β* (full IPRs), dCS=β* (full IPRs), dCSSjSj/dβ<0, so /dβ<0, so always set βalways set βSS<β<β**..

IntuitionIntuition

at β*, weakening IPRs lowers at β*, weakening IPRs lowers consumer prices but has negligible consumer prices but has negligible effect on qualityeffect on quality

Part (a) - IntuitionPart (a) - Intuition

Lowering βLowering βSS impacts CS impacts CSSS through two through two channels:channels: direct: lower prices for Source consumersdirect: lower prices for Source consumers indirect: shrink global market, reducing indirect: shrink global market, reducing

Artist’s incentives to invest in high qualityArtist’s incentives to invest in high quality Indirect effect is smaller when doors Indirect effect is smaller when doors

open because, after Artist emigrates, open because, after Artist emigrates, Source market’s contribution to Artist’s Source market’s contribution to Artist’s effective global market is relatively effective global market is relatively smaller. smaller.

ImplicationImplication

When the artist emigrates, link When the artist emigrates, link between Source market size and between Source market size and investment decisions weakened. This investment decisions weakened. This liberates Source government to set liberates Source government to set weaker policy.weaker policy.

-> Open exit policy in small countries -> Open exit policy in small countries weakensweakens IPR discipline IPR discipline

Proposition 5; BBD with Proposition 5; BBD with endogenous IPRsendogenous IPRs

Suppose Source’s IPRs are set Suppose Source’s IPRs are set optimally given exit policy, i.e. β=βoptimally given exit policy, i.e. β=βOO and β=βand β=βCC when Source’s exits are when Source’s exits are open and closed respectively. open and closed respectively.

Define Define

as the non-unity value of τ at which as the non-unity value of τ at which

..

)(_

)(_

))((

))((RS

RS

XX

XX

))((

))((RS

RS

XX

XX

1)(

)(

CSR

CSR

XX

XX

Under A1 and A2, Under A1 and A2,

(a) (a) (11) (11)

is a sufficient condition for Source to prefer is a sufficient condition for Source to prefer an open-exit policy i lieu of closed-exits an open-exit policy i lieu of closed-exits for some non-empty range (τfor some non-empty range (τ11,1) of ,1) of translation coststranslation costs

(b) if condition (10) holds then τ(b) if condition (10) holds then τ11< .< .

1)(

)(

CSR

CSR

XX

XX

)(_

C

)(_

C

IntuitionIntuition

With endogenous IPRs, Source can With endogenous IPRs, Source can redirect some of the benefits from redirect some of the benefits from Knowledge Creation to consumers Knowledge Creation to consumers via lower base pricesvia lower base prices

ConclusionsConclusions

In the late 20In the late 20thth century: century: Knowledge goods production concentrated Knowledge goods production concentrated

in a single country (US) with large domestic in a single country (US) with large domestic marketmarket

A significant share of those goods was A significant share of those goods was produced by immigrantsproduced by immigrants

IPR protection was stronger in the US than IPR protection was stronger in the US than in the “brain-sending” countriesin the “brain-sending” countries

All the above features could be in the mutual interests of the host country, the Sending countries, and the “brains”

In particular:In particular: Brain Drain may benefit sending country Brain Drain may benefit sending country

if:if: Emigrants produce knowledge/public goodsEmigrants produce knowledge/public goods quality responsive to market sizequality responsive to market size source market is sufficiently small relative source market is sufficiently small relative

to recipient marketto recipient market translation costs are low (but not zero)translation costs are low (but not zero)

BBD even more likely if IPRs BBD even more likely if IPRs endogenousendogenous Free emigration has negative “disciplining” Free emigration has negative “disciplining”

effect on IPRseffect on IPRs

Noteworthy Model Noteworthy Model Features:Features:

BBD is compatible with full IPR BBD is compatible with full IPR protection.protection.

The model incorporates the declining The model incorporates the declining cultural relevance of knowledge cultural relevance of knowledge produced for the foreign market.produced for the foreign market.

Sending country places no welfare Sending country places no welfare weight on the utility of its expatriates.weight on the utility of its expatriates.

As translation costs fall, the model As translation costs fall, the model predicts that “gains from drain” will predicts that “gains from drain” will first rise, then first rise, then fall.fall.

Caveats & ExtensionsCaveats & Extensions

Extra “effort” is probably not the Extra “effort” is probably not the main reason brains produce higher main reason brains produce higher quality abroad. An expanded quality abroad. An expanded treatment would incorporate treatment would incorporate dynamically-created agglomeration dynamically-created agglomeration economies. economies.

An expanded model would also have An expanded model would also have multiple knowledge producers, and multiple knowledge producers, and competition among them. competition among them.

In case you ask...In case you ask...

How important are skilled How important are skilled immigrants to the U.S.?immigrants to the U.S.?

““Nearly a quarter of all active U.S. Nearly a quarter of all active U.S. physicians are international medical physicians are international medical graduates (IMGs)—physicians trained graduates (IMGs)—physicians trained outside the United States and Canada.” outside the United States and Canada.” (Hart et al 2007, p.1159)(Hart et al 2007, p.1159)

Foreign born Scientists and Engineers Foreign born Scientists and Engineers (S&E) make up 16.6% of US S&E labor (S&E) make up 16.6% of US S&E labor force (approx 7 million) and 23% of US force (approx 7 million) and 23% of US S&E academics. (NSF S&E academics. (NSF Science and Science and Engineering Indicators 2006Engineering Indicators 2006))

Does the U.S. produce the Does the U.S. produce the most “knowledge”?most “knowledge”?

In 2000, more patents taken out by US In 2000, more patents taken out by US residents than by residents of any other residents than by residents of any other countrycountry(In 2000, 34.3% of Triadic Patent Families (defined (In 2000, 34.3% of Triadic Patent Families (defined

by the OECD as “patents taken out at the European by the OECD as “patents taken out at the European Patent Office (EPO), the Japanese Patent Office Patent Office (EPO), the Japanese Patent Office (JPO) and the US Patent & Trademark Office (JPO) and the US Patent & Trademark Office ( USPTO) that share one or more priorities”) were ( USPTO) that share one or more priorities”) were taken out by American residents. The comparable taken out by American residents. The comparable proportions for residents of Japan and the EU are proportions for residents of Japan and the EU are 26.9 and 31.4 (Source: OECD, Patent Database, 26.9 and 31.4 (Source: OECD, Patent Database, September 2004.) September 2004.)

Does skilled emigration Does skilled emigration vary with country size?vary with country size?

Carrington & Detragiache (1999) Carrington & Detragiache (1999) Use 1990 data to show out-migration Use 1990 data to show out-migration

rates (to USA) of skilled workers tends rates (to USA) of skilled workers tends to be higher for small countries to be higher for small countries 77% for Guyana77% for Guyana 67% for Jamaica67% for Jamaica 1.1% for India1.1% for India 1.4% for China1.4% for China

Are IPRs weaker outside Are IPRs weaker outside the U.S.?the U.S.?

““borrowing a musical tape from a borrowing a musical tape from a friend to copy onto a blank tape for friend to copy onto a blank tape for private use” (Canadian Intellectual private use” (Canadian Intellectual Property Office 2005, p.6) is not Property Office 2005, p.6) is not considered copyright infringement. considered copyright infringement.

Pharmaceutical pricingPharmaceutical pricing