Global Competition for Attracting Talents and the World Economy

Abstract This paper studies the effect of liberalising the international mobility of college-educated workers on the world economy. First, we combine data on effective and desired migration to identify the net pool of foreign talents (NPFT) of selected high-income countries. So far, the EU-15 has poorly benefited from its NPFT while the US has mobilised a large portion of it. Second, we use a micro-founded model to simulate the effects of skill-selective liberalisation shocks. In our benchmark model, a worldwide liberalisation induces larger long-run income gains for the EU-15 (+8.8 per cent) than for the US (+5.9 per cent). However, less attractive EU countries such as Austria, Belgium, Germany, Greece, Luxembourg and the Netherlands benefit less than the US. In addition, liberalising high-skilled migration decreases income per worker by 2.5 per cent in developing countries. Overall, it increases efficiency (+6.2 per cent in the worldwide average level of income per capita) and inequality (+1.2 percentage points in the Theil inequality index). Much greater effects can be obtained if total factor productivity varies with human capital.