The Fiscal Impact of High Skilled Emigration: Flows of Indians to the U.S

What are the fiscal consequences of high-skilled emigration for source countries? This paper develops methodologies for inferring these consequences and applies them to the recent sizable emigration of high-skilled workers from India to the U.S. This wave of emigration from India to the U.S. is shown to be unusually concentrated amongst the prime-age work force, the highly educated and high earners. In order to calculate the fiscal losses associated with these emigrants, estimates of their counterfactual earnings distributions are generated using two distinct methods and integrated with a model of the Indian fiscal system to calculate fiscal consequences. Conservative estimates indicate that the annual net fiscal impact to India of high-skilled emigration to the U.S.is one-half of one percent of gross national income (or 2.5 percent of total fiscal revenues). The sensitivity of these results to the method of predicting counterfactual incomes and the implications of these estimates for other developing countries is discussed in detail. JEL Classifications: F22, H24, J31, J82 a/ Mihir A. Desai b/ Devesh Kapur c/ John McHale d/ Keith Rogers Harvard Business School Center for the Advanced Study of India Queen’s School of Business Queen’s School of Business Harvard University University of Pennsylvania Queen’s University Queen’s University Baker 265, Soldiers Field 3600 Market Street, Suite 560 Goodes Hall 328, Union Street Goodes Hall, Union Street Boston, MA 02163 Philadelphia, PA 19104 Kingston, ON, K7L 3N6 Kingston, ON, K7L 3N6 [email protected] [email protected] [email protected] [email protected] Corresponding author: John McHale, Tel. (613) 533 2832. Fax. (613) 533 6847