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

Abstract

Immigrants or their children founded over 40% of the Fortune 500 US companies. This suggests that 'ability drain' is economically significant. While brain drain associated with migration also induces a brain gain, this cannot occur with ability drain. This paper examines migration's impact on ability, education, and productive human capital or 'skill' (which includes both ability and education) for source country residents and migrants, under three different regimes: (i) a points system that accounts for educational attainment; (ii) a 'vetting' system that accounts for both ability and education or skill (e.g., the US H1-B visa program); and (iii) a points system that combines the points and vetting systems (as in Canada since 2015). It finds that migration reduces (raises) source country residents' (migrants') average ability and has an ambiguous (positive) impact on their average education and skill, with a net skill drain more likely than a net brain drain. These effects increase the more unequal is ability, i.e., the higher the variance in ability. The average ability drain for highly educated US immigrants from 42 developing source countries is 84 percent of the brain drain, a ratio that increases with source countries' income and is greater than one for most Latin American and Caribbean countries. Heterogeneity in ability is the ultimate cause of both ability and brain drain (as they are equal to zero under homogeneous ability). Policy implications are provided.