Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71203
Authors: 
Stark, Oded
Wang, Yong
Year of Publication: 
2001
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 100
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 formed by 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.
Subjects: 
migration
human capital formation
externalities
social welfare
JEL: 
F22
H23
I30
J24
J61
Document Type: 
Working Paper

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