HRSDC-IC-SSHRC Skills Research Initiative

Working Paper Series

Brain Drain and Return: The Effects on Individuals' Earnings

by Ross Finnie.

• Request this document

Abstract

The infamous "brain drain" was a much-discussed issue in Canada – as elsewhere – in the latter part of the 1990s, although recent empirical evidence shows that it was not such a widespread phenomenon after all, and that rates of leaving have declined substantially in recent years. One aspect of the brain drain brain/return literature that has not yet been addressed, however, is the effect of leaving the country and then returning on individuals' earnings. Do those who leave and then return to Canada subsequently have higher earnings levels or greater earnings growth than they otherwise would have had? In short, is spending time out of the country generally a good career investment? The lack of empirical evidence on this issue stems from the unavailability of the kind of data required for such an analysis. The contribution of this paper is to exploit the unique strengths of a massive longitudinal micro file constructed from individuals' tax records to present evidence on how leaving and returning to Canada affects individuals' earnings. Models are estimated to allow for the comparisons of earnings profiles of leavers and non-leavers, and basically use movers' (relative) pre-move profiles as the basis of comparison for their post-move (relative) earnings patterns in order to control for any pre-existing differences in the earnings profiles of movers and non-movers. Overall, leaver-returners have higher earnings than non-movers, but this holds in the pre-move period as well as after. In terms of net earnings growth, individuals who were away 2 to 5 years seem to enjoy moderate gains in their earnings levels (in the range of 12 percent) upon their returns, while those who leave for shorter or longer periods do not do as well. Interestingly, these gains seem to be concentrated among those who had the lowest pre-move earnings levels, while those higher up the earnings ladder generally had negligible gains in earnings or even experienced losses.