Can economic freedom cure medical brain drain?

Author:Yakovlev, Pavel
  1. Introduction

    Brain drain, a loss of human capital due to the emigration of skilled labor, has received a great deal of attention from scholars and policymakers for a very good reason. Inadequate domestic supply of skilled labor can impede the economic development of a country. Most research so far has focused on the overall level of brain drain. However, Bhargava and Docquier (2007) claim that studying the overall brain drain hides substantial heterogeneity across industry sectors from country to country, citing as examples the emigration of nurses from the Philippines and information technology professionals from India. Mensah (2008) argues that extra attention should be paid to the loss of medical professionals because of their disproportional effects on economic development: the loss of just one trained physician can leave an entire village without access to healthcare in many developing countries. Badwe, Giri, and Latti (2012) argue that medical brain drain is especially harmful for economic development given the strong connection between health and economic growth. While scientific brain drain can slow long-term growth, medical brain drain can lower economic and health outcomes in both the short and long term.

    This study analyzes the determinants of medical brain drain using medical physician flows from 144 origin (sending) to 18 destination (receiving) countries over the 1995-2004 period. The key variables of interest in this study are the factors that ought to be pertinent to medical professionals: economic freedom, public share of health spending, and health spending per capita. It could be argued that freer and more private healthcare systems may offer migrating physicians better-paying jobs and benefits compared with more government-controlled healthcare systems. A case study by Phua and Barraclough (2011) finds that a reform of Malaysia's healthcare system has led to a drain of specialized doctors from the public to the private sector. Our findings are generally consistent with this logic and indicate that physician flows are sensitive to changes in economic freedom and health spending per capita, among other factors. II.

  2. Literature Review

    MacPhee and Hassan (1990) define brain drain as an outmigration of skilled workers from developing to developed countries. However, Docquier, Lohest, and Marfouk (2007) and Beine, Docquier, and Rapoport (2008) argue for altering the brain drain definition to include the loss of skilled labor from any country, developed or not. More recent papers have moved the focus toward analyzing migrant flows, as opposed to migrant stocks as in older studies, in a gravity-type model (Ashby 2007, 2010; Gubert and Nordman 2009). Gravity models explain bilateral flows between origin and destination countries based on the "distance" between country characteristics. Some gravity models take into account both "push" characteristics of the origin country and "pull" characteristics of the destination country. Push and pull factors may sometimes overlap and include inadequate compensation, poor working conditions, lack of career opportunities, safer environment, political stability, and increased career security (Omaswa 2008; Rutten 2009).

    Based on Tiebout's (1956) seminal paper, it could be argued that the same "voting with your feet" logic applies to international migration flows, albeit with more restrictions and higher moving costs. Ashby (2007) asserts that the decision to emigrate is consistent with the utility maximization framework because preferences are manifested through revealed actions such as the decision to emigrate. He argues that individuals will choose to emigrate if their perceived utility from doing so is higher than the perceived utility of not emigrating. Similarly, Douglas (1997) contends that cross-migration rates are indicative of the relative attractiveness of different locations. He argues that idiosyncratic characteristics will cancel themselves out, but the destination attributes, like higher income levels that attract migrants, will be reflected in the migration patterns.

    Grubel and Scott (1966), Johnson (1967), Bhagwati and Hamada (1974), and Kwok and Leland (1982) argue that skilled worker emigration is detrimental to the origin country based on the notion that migrants' contributions to the destination economy are greater than their marginal product. Beine, Docquier, and Rapoport (2001) arrive at a similar conclusion, noting that skilled workers possess valuable human capital, which is a significant contributor to long-term economic growth. Docquier and Marfouk (2005) note that skilled worker migration is increasing in importance as the world becomes more integrated.

    MacPhee and Hassan (1990) claim that dynamic labor market shortages are responsible for some brain drain experienced by developing countries. Like Sen (1973), they conclude that income may not be a significant determinant of brain drain once other factors have been taken into account. Contrary to MacPhee and Hassan (1990), Gani and Ward's (1995) study of skilled labor migration from Fiji to New Zealand finds that income and various economic incentives are significant determinants of brain drain.

    Docquier, Lohest, and Marfouk (2007) and Beine, Docquier, and Rapoport (2008) analyze migration flows between countries during the 1990-2000 period and find that country size, religious fractionalization, political instability, geographic proximity to major OECD countries, and colonial links are among the significant determinants of overall brain drain.

    Bhargava and Docquier (2007) recommend that future studies focus on industry-level brain drain because the overall level of brain drain hides dramatic heterogeneity that exists across various industries. In other words, one country may need to focus on curbing scientific brain drain, while another may need to focus on reducing information technology brain drain. This insight would not be possible without industry-level studies.

    Mensah (2008) and Badwe, Giri, and Latti (2012) argue that medical brain drain is perhaps the most important type of brain drain because of the wide variety of people who are affected by it. Badwe, Giri, and Latti (2012) note a significant effect of medical brain drain on economic development because of the strong connection between health and economic growth. Yet, the current state of research on medical brain drain is scarce in comparison with the overall brain drain literature.

    Rutten (2009), Eastwood et al. (2005), and Clark, Stewart, and Clark (2006) recognize that medical migration has increased worldwide in recent years. Eastwood et al. introduce the idea of an incomplete carousel of medical personnel that does not fully turn: medical personnel move from developing countries to more developed countries and then to higher developed countries, leaving the poorest countries with medical personnel shortages.

    Bhargava and Docquier (2008) estimate a macroeconomic model of medical brain drain using a longitudinal panel of 181 countries from 1991 through 2004. They find that lower wages and higher HIV prevalence increase brain drain. Clemens (2007) finds that the outmigration of health workers is unrelated to healthcare outcomes, but Bhargava, Docquier, and Moullan (2011) note that medical outmigration leads to higher disease prevalence.

    Brown and Connell (2003) analyze a survey of 251 doctors from Fiji, Samoa, and Tonga. They find that income differentials, home or business ownership, and family ties are important determinants of migration decisions. Similar to Brown and Connell (2003), Gibson and McKenzie (2009) analyze three Pacific island countries in which migrants are defined as having worked or studied abroad after finishing secondary school. They conclude that marginal changes in income or tax rates do not cause migration decisions and that career opportunity is more important to doctors' migration decisions than salary levels.

    Much of the reviewed medical brain drain literature is...

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