Brain drain, informality and inequality: a search-and-matching model for sub-Saharan Africa

This paper revisits the effect of the brain drain on development and inequality using a two-sector model with formal and informal labor markets. Contrary to existing studies, we use a search-and-matching setting that is consistent with the income and employment patterns of poor countries. Theoretically, the brain drain induces ambiguous welfare effects for those left behind. We thus parameterize our model on 33 sub-Saharan African countries and produce comparative results for each of them. We find that skilled emigration induces heterogeneous welfare losses for the low-skilled population. The size of these losses varies between 0.2 and 8%, and is influenced by country characteristics such as the productivity gap between sectors and the education technology. The results are fairly robust to identifying assumptions, to the inclusion of technological externalities, and to the endogenization of training decisions