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Brain Drain, Fiscal Competition, and Public Education Expenditure

Author : Egger, H., Falkinger,J., & Grossmann, V.

Year: 2008

Acc. No: 252-S

Category: Soft Documents

Type of Resource: Brain drain, Educational choice, Public education policy, Locational competition

ISBN: English

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This paper uses a two-country model with integrated markets for high-skilled labor to analyze the opportunities and incentives for national governments to provide higher education. Countries can di er in productivity, and education is nanced through a wage tax, so that brain drain a ects the tax base and has agglomeration e ects. As these may give rise to multiplicity of economic equilibria, we carefully take into account alternative belief structures of mobile high-skilled workers. We study unilateral possibilities for triggering or avoiding brain drain and compare education policies and migration patterns in non-cooperative political equilibria with the consequences of bilateral cooperation between countries. We thereby demonstrate that bilateral coordination tends to increase public education expenditure compared to non-cooperation. At the same time, it aims at preventing migration. This is not necessarily desirable from the point of view of a social planner who takes account of the interests of migrants.
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