Nber Working Paper Series Brain Drain or Brain Bank? the Impact of Skilled Emigration on Poor-country Innovation

The development prospects of a poor country depend in part on its capacity for innovation. The productivity of its innovators depends in turn on their access to technological knowledge. The emigration of highly skilled individuals weakens local knowledge networks (brain drain), but may also help remaining innovators access valuable knowledge accumulated abroad (brain bank). We develop a model in which the size of the optimal innovator diaspora depends on the competing strengths of co-location and diaspora effects for accessing knowledge. Then, using patent citation data associated with inventions from India, we estimate the key co-location and diaspora parameters; the net effect of innovator emigration is to harm domestic knowledge access, on average. However, knowledge access conferred by the diaspora is particularly valuable in the production of India's most important inventions as measured by citations received. Thus, our findings imply that the optimal emigration level may depend, at least partly, on the relative value resulting from the most cited compared to average inventions. Ajay Agrawal Rotman School of Management University of Toronto 105 St. George Street Toronto, Ontario M5S 3E6 CANADA and NBER [email protected] Devesh Kapur 3600 Market Street, Suite 560 Centre for Advanced Study of India University of Pennsylvania [email protected] John McHale Queen's School of Business Goodes Hall 143 Union Street Kingston, Ontario Canada K7L 3N6 [email protected]