Inducing Human Capital Formation: Migration as a Substitute for Subsidies

Stark, Oded and Wang, Yong (April 2001) Inducing Human Capital Formation: Migration as a Substitute for Subsidies. Former Series > Working Paper Series > IHS Economics Series 100


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Abstract: When productivity is fostered by an individual's own human capital as well as by the economy-wide average level of human capital, individuals under-invest in human capital. The provision of subsidies for the formation of human capital, conditional on the subsidy being self-financed by tax revenues, can bring the economy to its socially optimal level of human capital. Yet a strictly positive probability of migration to a richer country, by raising both the level of human capital formedby optimizing individuals in the home country and the average level of human capital of non-migrants in the country, can enhance welfare and nudge the economy toward the social optimum. Indeed, under a well-controlled, restrictive migration policy the welfare of all workers is higher than in the absence of this policy.;

Item Type: IHS Series
Keywords: 'Migration' 'Human capital formation' 'Externalities' 'Social welfare'
Classification Codes (e.g. JEL): F22, H23, I30, J24, J61
Date Deposited: 26 Sep 2014 10:37
Last Modified: 27 Sep 2019 06:46
ISBN: 1605-7996

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