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This paper constructs a two-sector
overlapping-generations model of endogenous growth to
study the effects of brain drain on growth, education and
income distribution. The engine of growth is human
capital accumulation through education and
intergenerational spillover. Brain drain reduces both the
economic growth rate and the wage rate of the unskilled,
but raises the wage rate of the skilled. Brain drain,
however, generally hurts the non-emigrants through the
static income distributional effects and also the dynamic
damage on economic growth and human capital accumulation.
If the initial rate of human capital accumulation is
relatively low, brain drain could deteriorate both the
sum of discounted income and lifetime discounted utility
of a representative non-emigrant. Finally, we show that
the government can choose to spend more on education in
order to counter the detrimental impacts of brain
drain on economic growth.