Losing Minds, Losing Growth? The Economics Consequences of Brain Drain in OECD and Non-OECD Countries.

The following study analyzes the impact of skilled worker emigration on economic growth in OECD and non-OECD countries, accounting for voluntary departures for opportunity and forced displacement due to instability. The research compiled panel data from 17 years (2006-2023) for 172 countries worldwide. Additionally, a case study of the 2014 invasion of Crimea is conducted to analyze the effect of the emigration of skilled workers following political instability. After running Ordinary Least Squares Regressions (OLS), the results show that the brain drain index negatively impacts economic growth as it lowers the Gross Domestic Product (GDP) per capita. The effect of the brain drain on its own is insignificant and depends on the level of development of the country. While the brain drain does not have an effect in non-OECD countries, it is highly significant and negative in OECD countries. This suggests that economic growth in OECD countries suffers more from the effect of brain drain compared to non-OECD countries due to higher GDP per capita. The regressions also show that remittances have too small an impact on the GDP per capita to completely offset the cost of the brain drain. A Difference-in-Differences analysis is conducted for the case study. Results show that the 2014 invasion of Crimea led to a lower brain drain index in Ukraine. As the population grew in Ukraine at a faster rate than the GDP, GDP per capita decreased. Skilled individuals emigrated from Crimea to the Ukrainian mainland, thereby reducing Ukraine's overall brain drain and lowering GDP per capita. The case study concludes that political instability reduces economic growth by accelerating the brain drain. The rest of the paper assesses the implications of the brain drain relative to the importance of human capital.