Curse of low-skilled emigration on human capital formation: Evidence from the migration surge of the 2000s

• This paper documents a large increase in the number of low-skilled (LS) migrants in OECD countries in the 2000s. • This paper examines the disincentive effect of the prospect of LS emigration on human capital formation in the migrant-sending countries. • This disincentive effect is found to reduce both the average years of schooling and the human capital index in migrant-sending countries. • The disincentive effect on overall human capital formation is manifested through a substantial reduction in tertiary educational attainment. • This adverse effect of LS emigration significantly impacts middle- and high-income countries, but not low-income countries. Low-skilled emigration is generally construed as benign and even beneficial for the migrant-sending countries. However, it can also lead to a disincentive effect on human capital formation in the source countries. Using a panel bilateral migration dataset that captures the surge of low-skill migrants in OECD countries in the 2000s, we study how low-skilled emigration affects human capital formation in the migrant-sending countries. We find that the expected returns to low-skilled emigration reduce long-run human capital formation as measured by the average years of schooling and the human capital index of the migrant-sending countries in the subsequent decade. This negative effect on overall human capital formation is manifested through a substantial reduction in tertiary educational attainment, which is both statistically significant and robust to various sensitivity tests and alternative model specifications. Additionally, there is some evidence of a positive association between the expected returns to low-skilled emigration and secondary educational attainment in the subsequent decade. An important qualification is that only middle- and high-income countries are strongly affected by low-skilled emigration, while low-income countries show little to no disincentive effect.