Brain Drain and Brain Gain in Europe: An Evaluation of the East-European Migration to Germany.

This article seeks empirically for some effects in the migration flows from East European countries to Germany. Using previously unpublished Eurostat data we find that highly qualified persons tend to immigrate overproportionally into Germany so that the stock of human capital within the sending countries is reduced. With the help of a panel data analysis we then estimate a European production function and find that the share of highly qualified persons in the population has a significant and positive effect on the explanation of income differentials across the EU(12) countries. Using the obtained parameters of the production function for the East European countries we calibrate the welfare effects of the brain drain. Our major findings are: First, Germany gains from migration from Eastern Europe whereas Eastern European countries lose from free migration because the average stock of human capital is lowered. Second, the overall increase in income is positive, thus international welfare increases. Third, taking remittances into account does not alter the qualitative findings.