The Impact Of Brain Drain On Economic Growth: Addressing Diaspora Externalities

Abstract

This study aims at empirically estimating the impact of brain drain on economic growth and the impact of brain drain's externalities on this relation.  This study used a two-way fixed effects model as an estimation methodology based on data from 140 developing countries from 2007 to 2022.The study find that brain drain has a positive impact on economic growth. This is confirmed by the impact of talent migration, which is assessed by the values of case studies (‘The Human Flight and Brain Drain’ sub-index Fragile States Index). In addition to, there were linear relationship between brain drain and economic growth and non-dynamic relationship between them, Furthermore, the study examined the impact of income levels and regions on the relation.  It finds that the lower the income, the greater the positive impacts of brain drain. Also, it finds that brain drain has a positive effect in some regions and a negative effect in other regions, and it has no effect in other regions. Moreover, the study used interaction variables or moderator variables to examine the impact of brain drain through its externalities on economic growth. The study concluded that brain drain still has a positive impact on economic growth; however, the impact of brain drains externalities is negative. This reflects the great importance of remittances, which are excluded from the brain drain's ‘externalities due to their inclusion in the brain drain index. Remittances play an important role in the most developing countries, especially low-income countries.