| Human capital flight is usually thought of as causing harmful effects for the source country. Due to emigration, a country loses human capital and, hence, parts of its productive capacity. Mitigating these harmful effects, emigration often times creates the opportunity for the source country to receive remittances. They have become a crucial source of finance capital for many developing countries.;Remittances are money produced and saved by emigrant workers, and sent back home. In that sense, remittances are a “by-product” of emigration. Consequently, in order to establish the impacts of remittances, one should study both remittances and emigration hand in hand.;My research explores both the impacts of human capital flight and the potential gains in finance capital resulting from remittances on the source country's, welfare in a context of unemployment.;I adopt a continuous-time optimal control model where optimality is defined in the sense of Pareto. I incorporate two representative consumers, skilled and unskilled, remittances, emigration and unemployment. Having skilled emigration allows a proper definition of brain drain and a precise analysis of its impacts.;In addition, I perform simulations to do comparative dynamics. I parameterize the economy of Colombia. This computational exploration is based on the discrete time version of the model. I evaluate the impacts of changes in remittances, emigration, emigration and remittances, and unemployment.;When considered alone, as expected, emigration has a negative effect on welfare, the well-known brain drain. In spite of the loss, I find emigration has a “brighter” side than brain drain. Indeed, remittances produce benefits that offset human capital flight (when increases in both remittances and initial emigration flow are considered, welfare increases). Additionally, I find that “exporting” former unemployed brings a welfare boost.;In summary, results in this research suggest there are net gains from emigration. I, however, offer a word of caution. Once an economy has both emigration and remittances, improving the status quo when there are continuous flows of emigration implies the need for higher remittances.;Both the discussion and results of this research could become important analytical tools for countries experiencing labor outflows. |
