Skilled migration and education policies: Is there still scope for a Bhagwati tax?

Scalera, Domenico (2009): Skilled migration and education policies: Is there still scope for a Bhagwati tax?

Abstract

The Bhagwati brain drain tax proposal dating back to more than thirty years ago has been criticized from different viewpoints. In particular, recent literature has pointed out that this tax would hamper accumulation of human capital by reducing gains from skilled migration. In this paper, it is argued that when taking into account social externalities of human capital, and optimal policies implemented by a government caring only for left behind residents, a brain drain tax tends rather to foster the investment in human capital and increase residents’ income and welfare. The Bhagwati tax could even be universally welfare improving. In fact, if the tax is paid by migrants in addition to the ordinary income taxation, their larger fiscal burden might be outweighed by a higher human capital and gross income. Alternatively, if the transfer is financed by the destination country, its fiscal losses might be outweighed by the advantage of more skilled immigrants.

• Item Type: MPRA Paper
• Language: English
• Keywords: Skilled migration, education policies, Bhagwati tax
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; H - Public Economics > H5 - National Government Expenditures and Related Policies > H52 - Government Expenditures and Education

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