The Impact of International Trade on Migration by Skill Levels and Gender in Developing Countries

This study conducts an empirical investigation of the effect of skilled migration on income inequality in the origin countries. Developing countries are low-skilled labour abundant and high-skilled labour scarce. Emigration of high-skilled labour increases the relative supply of low-skilled labour in the country. Excess supply of low-skilled labour depresses the wage rate of these countries while the wage rate of the highly skilled increases leading, to the Gulf of inequality, at least in the short-run. Complementarity between high-skilled and low-skilled labour could be another channel. Consequently, skilled migration is usually seen as inducing losses for the low-skilled left behind. Using a panel of 110 developing countries from 1980-2010, the study finds robust results to different econometrics specifications and subsamples that high-skilled migration increases income inequality in the short-run while there appears to be no effect of low-skilled migration on inequality. A clearer understanding of the channels through which high-skilled migration will be detrimental for income inequality in developing countries may assist policymakers to craft appropriate policies to curtail high-skilled migration, which would serve to improve equality, hence reducing social and political unrest.