"Skilled emigrants build trade and investment ties."
Not always. Just as fears about possible negative effects of brain drain are typically overblown, so is the hype over the ability of countries to tap their diaspora to set up trade and investment. The well-known case of emigrants in Silicon Valley facilitating the growth of the Taiwanese, Chinese and Indian information technology industries is an important example demonstrating that high-skilled workers abroad can have transformative impacts on home country industry. But unfortunately, this is the exception rather than the rule.
In particular, skilled migrants from small islands and from sub-Saharan Africa, where highly skilled emigration rates are the highest, are not likely to be engaging in trade or investment. New surveys find that less than 5 percent of skilled migrants from Tonga, Micronesia and Ghana have ever helped a home country firm in a trade deal, and when they have, the amounts of such deals have been modest. Few migrants from these countries had made investments in their home countries -- at most they had sent back amounts of US$2,000-3,000 to finance small enterprises.
However, skilled workers do engage with their home countries in a number of other ways apart from remittances. They can be an important source of tourism for their home countries; more than 500,000 visitors to the Dominican Republic each year are Dominicans living abroad. They are also tourism promoters: 60-80 percent of skilled migrants from four Pacific countries and Ghana advise others about traveling to their home countries. They indirectly spur trade, through consuming their home country's products, and they transfer knowledge about study and work options abroad. The lack of involvement in trade and investment therefore largely reflects a lack of productive opportunities at home, not a lack of interest on the part of migrants in helping their home countries.
Conventional wisdom once held that the wealth of a country declined when it imported foreign goods, since obviously cash was wealth and obviously buying foreign goods sent cash abroad. Adam Smith argued that economic development -- or the "wealth of nations" -- depends not a country's stock of cash but on structural changes that international exchange could encourage. In today's information age, the view has taken hold that human capital now rules the wealth of nations, and that its departure in any circumstance must harm a country's development. But economic development is much more complex than that.
But thanks to new research, we have learned that the international movement of educated people changes the incentives to acquire education, sends enormous quantities of money across borders, leads to movements back and forth, and can contribute to the spread of trade, investment, technology, and ideas. All of this fits very uncomfortably in a rhyming phrase like "brain drain," a caricature that would be best discarded in favor of a richer view of the links between human movement and development.