Since 1995, America has grown faster while enjoying lower unemployment than Europe. Adding to Europe's growth angst are worries about aging populations, its inability to adapt to technical change, the burden of its welfare state, and the pains of labour market deregulation. A particular worry is that Europe is losing its most talented workers to the US. Stories of succesfull expatriates in Silicon Valley and top academic departments abound. European politicians and businesses complain that they cannot compete with the US due to taxes and regulations (François-Poncet 1999, Mahroum 1999).
Is this brain drain for real? While Becker et al. (2002) look at data on the brain drain from Italy to the rest of Europe, this column draws on my research using US census data for 1990 and 2000 to measure the characteristics of European expatriates and see how they fare in the US labour market (Saint-Paul 2004, 2008).
The fractal nature of the brain drain
People who believe the brain drain is not a big problem argue that it is quantitatively modest relative to the size of the source economy. Furthermore, in many European countries the outflow of brains is often matched by an inflow. Yet when one looks at the problem from the inside (i.e. the French economics profession as far as I am concerned), we see that the inflow does not match the outflow in terms of quality, since the latter easily accounts for say 50% of the brightest French economists. Furthermore – though it is very difficult to measure and to extrapolate to other sectors – the problem is even more significant if one takes into account the importance of their publications. Thus losing 2% of graduates may seem unimportant at face value but it could be critical if those 2% are the bulk of innovators.
Indeed, the available evidence suggests that the brain drain appears fractal. That is, on average the best are more likely to leave regardless of which slice of the population is used to form the average. The brain drain becomes more severe as one looks at increasingly “select” segments of the population. That is, the brain drain intensifies as one moves from say BAs to masters to PhDs. While it is not possible to go further and select the top PhDs, extrapolations suggest that concerns about growth and innovation are not unfounded.
Table 1 reports the number of US citizens of working age (25–64 years) born in six European countries in the two US censuses, and their share of the working age-population in their country of origin. These fractions vary from a small 0.36% in Spain to 1.66% in the UK. That suggests that the macreconomic effects of the brain drain are not likely to be very large, but they need not be insignificant either.
Table 1. The European-born population aged 25-64 in the US.
|Country||Number||% of home pop.||Number||% of home pop.|
A comparison between the two census years also reveals that the drain is accelerating (though not dramatically) in all countries except Italy, reflecting the phasing out of low-skilled migration from Italy to the US. These numbers suggest that there is no strong acceleration in the latter part of nineties, and that the phenomenon is of the same order of magnitude as in the eighties.
The next two tables compare the employment rates of expatriates with those of other US residents and labourers in their countries of birth. We find that for men, employment rates for European expatriates are higher than average in the US labour market, and therefore substantially higher than in their home countries. For women, the employment rate is higher than in their home countries but lower than in the US labour market.
These results are not surprising: one does not emigrate to a country like the US if one does not have good employment prospects there. But, to the extent that it signals greater employability of expatriates relative to those staying behind, that effect should also be added when computing the adverse effects of the brain drain of GDP per capita.
Table 2. Employment rates
|US residents||Home country||US||Home|
|US residents||Home country||US||Home|
Table 3 lists the share of expatriate population with tertiary education, i.e. highly skilled people with the most advanced degrees. As can be seen, it is far larger than in the US labour market at large and even larger than in the corresponding home country. For example, in 2000, 56% of French-born workers living in the US had a college degree, against 2 % in France. Most remarkably, the education level of the expatriates seems to have improved during the nineties at an even higher pace than in the source countries.
Table 3. Fraction of the expatriate population with tertiary education, vs. corresponding fraction in home country and whole US census.
|US census||Home country||US census||Home country|
These data confirm that the expatriates are heavily selected among the most educated workers. This skewness increases when one moves up the skill ladder as seen in Table 4 which reports the fraction of expatriates who have a PhD and compares it to the average US workers.
Table 4. Proportion of expatriates with a PhD versus US labour market
Europeans also earn more than their counterparts in the US labour market. Table 5 reports the ''European premium'' which is uniformly positive and significant, ranging from 2% to 16%.
Table 5. Wage premia for European expatriates, percentage
In light of the view that the brain drain is a matter of concern because a number of expatriates are exceptional individuals, we may ask whether entrepreneurs are over-represented among expatriates. Table 6 reports the proportion of workers who have an entrepreneurial activity, and compares it to the US labour market.
Table 6. The proportion of entrepreneurs (%).
The proportion of entrepreneurs among expatriates is slightly higher than among Americans and is stable over time. The Global Entrepreneurship Monitor (2002) suggests that European entrepreneurship is about half that of the US. If one takes that proportion seriously, then European expatriates are a bit more than twice as likely to be entrepreneurs than those who remain in Europe.
The data confirm the presumption that the skill composition of expatriates is much better than the source countries' general population. The quantitative significance of that, however, is open to debate, as the total number of expatriates ranges between 0.5% and 1% of the population. If one takes the view that labour is a small number of homogeneous inputs, such as skilled labour and unskilled labour, then our back-of-the envelope computations suggests a moderate adverse effect of the brain drain on inequality and income in home countries, with say a 2-3% increase in the relative wage of the skilled and a 0.5-0.7% decline in GDP per capita. On the other hand, if one assumes that labour is not a collection of homogeneous inputs, but instead that very talented individuals are crucial for innovation, business formation, and management1, the loss could be considerably bigger, though much harder to estimate (an interesting first step is Zucker et al. 2003). My speculative extrapolations suggest that the proportion of Europeans who ‘’matter’’ and who are in the US could be as high as 50%; that is huge and could in principle have dramatic consequences for Europe’s growth potential – while such a number can be disputed, casual observation suggests that in my field (research in economics), it is about right.
Becker, S., A. Ichino and G. Peri (2002), ''How large is the brain drain from Italy?'', Munich University Working Paper.
Borjas, George J. (1987), ''Self-Selection and the Earnings of Immigrants'', American Economic Review, Volume 77, Issue 4, September 1987, Pages 531-553.
François-Poncet, J. (1999), ''La fuite des cerveaux : mythe ou réalité ?'' Report to the French Senate
Global Entrepreneurship Monitor Consortium (2002), Global Entrepreneurship Monitor.
Mahroum, S. (1999) ''Europe and the challenge of the brain drain'', IPTS Report 29.
Saint-Paul, Gilles (2004), “The Brain Drain: Some Evidence from European Expatriates in the US”, CEPR Discussion Paper 4680, reprinted in Saint-Paul (2008), CES-Ifo Forum 3/2008, 19-27
Stephan, P. and S.G. Levin (1999), ''Exceptional contributions to US Science by the foreign-born and foreign-educated'', Science, 285.
Zucker, Lynne G.; Darby, Michael R.; Brewer, Marilynn B (1998), ''Intellectual Human Capital and the Birth of U.S. Biotechnology Enterprises'', American Economic Review, Volume 88, Issue 1, March 1998, Pages 290-306.
1 Stephan and Levin (1999) document the exceptional contributions to US science by foreign-born researchers.