Brain gain from return migration: evidence from Egypt

2182

Nelly Elmallakh and
Jackline Wahba
December 19, 2017

Far from causing ‘brain drain’ in the developing world, temporary migration can lead to a ‘brain gain’ for the sending countries. This column reports research on Egypt showing that migrants acquire significant human capital while they are overseas, which increases their probability of upward occupational mobility when they return home. This provides a potential source of economic growth for their country of origin.

In a nutshell

Temporary migration provides an opportunity for workers to acquire physical capital, to accumulate savings and assets and, most importantly, to acquire new skills and knowledge.

Evidence from Egypt indicates that return migrants are more likely to climb up the occupational ladder compared with non-migrants.

The most educated returnees seem to gain more skills from their overseas work experience and climb the ladder furthest.

For many poor developing countries, the emigration of the high skilled workers is a source of concern. The so-called ‘brain drain’ is seen as a negative consequence of international emigration.

But international migration can also lead to ‘brain gain’ when the aspiration of emigration increases the incentives to get education, as this increases the possibility of emigration. Another channel through which the emigration of high skilled workers results in a brain gain is return migration, when returnees acquire new skills overseas and return to their origin countries with enhanced human capital.

As such, temporary migration provides an opportunity for workers to acquire physical capital, to accumulate savings and assets and, most importantly, to acquire new skills and knowledge. On returning to their home country, migrants represent an inflow of both human capital and financial capital. The return of migrants can be a potential source of economic growth for the origin country through increased productivity and knowledge diffusion.

Overall, the evidence suggests that there is a positive wage premium associated with overseas work migration for returnees in developing countries.

Another measure of the acquisition of human capital of temporary migrants is their skill upgrading or occupational mobility. Whether migrants acquire human capital while they are overseas is an important issue for the economic development of their home countries, especially since public debate tends to underscore the potentially negative impact of high skilled emigration, resulting in a brain drain for sending countries.

My study with Nelly El Mallakh provides new evidence on the impact of temporary migration experiences on the human capital accumulation of returnees (El Mallakh and Wahba, 2016). We do so by examining the occupational mobility of return migrants vis-à-vis working-age individuals who have never migrated, controlling for the non-random nature of migration.

Unlike studies of wage premia in which the wages of returnees are only observed at the time of the survey, we are able to construct data on individuals’ occupational mobility based on their first job and current occupation.

Furthermore, we adopt a novel approach to identifying the impact of overseas migration by constructing cohort groups who entered the labour market in the same decade. This makes it possible for us to control for the initial labour market conditions and examine current occupational mobility relative to their first job.

This research question is important for two reasons. On the one hand, the answer to this question is not straightforward. Temporary migrants might acquire additional human capital due to their work experience abroad and hence, the human capital accumulated abroad might help those temporary migrants to find occupations higher in the skill and remuneration ladder on returning home.

Conversely, it might be the case that temporary migration experience is motivated by the shortage of unskilled labour in destination countries and subsequently, the positive effects of temporary migration on human capital and occupational mobility might be contested.

Whether temporary emigration and overseas work experience enhance human capital accumulation is an important question. In particular, whether temporary migration can provide a way to promote the economic development of sending countries and compensate for the loss of human capital due to outward migration through the returnees’ higher human capital remains an understudied issue.

Our results show that returnees are more likely to climb up the occupational ladder compared with non-migrants. In particular, the most educated returnees seem to gain more skills from their overseas work experience and climb the ladder furthest. The evidence from our research underscores that return migration can lead to a brain gain for the countries of origin.

Further reading

El-Mallakh, Nelly, and Jackline Wahba (2016) ‘Upward or Downward: Occupational Mobility and Return Migration’, ERF Working Paper No. 1010.

Tags: Egypt, Human Capital, Occupational Mobility, return migration, temporary migration

Lebanon’s new leadership confronts daunting economic challenges amid geopolitical tensions across the wider region. As this column explains, understanding what has happened over the past decade to citizens’ trust in key public institutions – parliament, the government and the armed forces – will be a crucial part of the policy response.

A Macroeconomic Accounting of Unemployment in Jordan: Unemployment is mainly an issue for adults and men

Since unemployment rates in Jordan are higher among young people and women than other groups, unemployment is commonly characterised as a youth and gender issue. However, the majority of the country’s unemployed are adults and men. This suggests that unemployment is primarily a macroeconomic issue challenge for the entire labour market. The appropriate response therefore is coordinated fiscal, monetary, structural and institutional policies, while more targeted measures can still benefit specific groups.

Tunisia’s energy transition: the key role of small businesses

Micro, small and medium-sized enterprises (MSMEs) play a critical role in Tunisia’s economy, contributing significantly to GDP and employment. As this column explains, they are also essential for advancing the country’s ambitions to make a successful transition from reliance on fossil fuels to more widespread use of renewable energy sources. A fair distribution of the transition’s benefits across all regions and communities will secure a future where MSMEs thrive as leaders in a prosperous, inclusive and sustainable Tunisia.

The green energy transition: employment pathways for MENA

The potential employment impacts of green and renewable energy in the Middle East and North Africa are multifaceted and promising. As this column explains, embracing renewable energy technologies presents an opportunity for the region to diversify its economy, mitigate the possible negative impacts of digitalisation on existing jobs, reduce its carbon footprint and create significant levels of employment across a variety of sectors. Green energy is not just an environmental imperative but an economic necessity.

Drivers of renewable energy adoption in Egyptian firms

How can policy-makers encourage small and medium-sized enterprises to adopt renewable energy sources in their production processes? This column reports evidence from Egypt, where gender and youth play a key role within firms in encouraging practices that are more positive for the environment and can help to mitigate climate change.

The hidden potential of Jordan’s small firms for driving a green transition

For Jordan, a green transition represents an enormous transformative opportunity. But a decade-long increase in the use of renewable energy has not freed the country of its economic woes. This column explores the currently underused yet potentially powerful force of micro, small and medium-sized enterprises – and proposes policies that could improve the investment climate and clear legislative and regulatory barriers.

Global value chains and sustainable development

What is the role of exchange rate undervaluation in promoting participation in global value chains by firms in developing countries? What is the impact of the stringency of national environmental regulations on firms’ GVC participation? And how do firms’ political connections affect their participation in GVCs? These questions will be explored for the MENA region at a special session of the ERF annual conference, which takes place in Cairo in April 2025.

The Forum ERF

ERF