Cross-border financial capital flows have transformed the global economic and political landscape over the last fifty years. As financial capital mobility has increased, the ability to attract foreign capital and manage its impact on domestic structures has emerged as a central concern for policymakers in developed and developing countries. The premise of this research proposal is that cross-border flows of human capital are likely to play an equally influential role in shaping the political and economic landscape over the next fifty years, driven by structural factors, both demographic and technological, in both developing and developed countries.
The evidence of the scope and scale of these cross-border human capital flows and their impact on source countries is beginning to surface. Although the flight of human capital appears particularly pronounced in countries suffering from civil conflict and economic stagnation where human capital is scarce, the phenomenon is much more encompassing. It stretches beyond the archetypal images of Mexican farm labor or Indian software professionals coming to the U.S. to North African workers in Southern Europe, Chinese researchers in Japan and East Europeans in Germany.
Demographic shifts and a continued imbalance between the demand and supply of skilled workers in developed countries are likely to loosen the constraints on global migratory flows set by the current restrictive practices of developed countries. These demographic changes and consequent fiscal stresses will affect immigration policy in developed countries in three critical ways:
In contrast to the voluminous literature on the impacts of immigration on developed countries, the consequences of the potentially large cross-border flows of human capital on source countries have received scant attention from economists and political scientists (though the pioneering work of Bhagwati and others on the welfare implications of human capital flows from poor to rich countries beginning in the mid-1970s is a notable exception).
Our proposed research is aimed at filling this void. It has three main elements: