This paper theoretically explores regional firms’ competition in attracting mobile workers under spending cost to evaluate workers’ skills. Using the tax competition literature, we construct a two-region model that expenses on evaluation increase the regional firm productivity. The model...

The paper shows that in a reasonable production structure for a developing economy a brain drain of skilled labour may raise the welfare of the economy while an emigration of unskilled labour is welfare reducing. Also an emigration of skilled/unskilled labour lowers the urban unemployment of...