by
Mr Nguyen Duc Thanh
(PhD Candidate, GRIPS)

Summary

In this workshop, Mr. Nguyen Duc Thanh presented his paper on the behavior of skilled workers in making decisions of whether returning their home country or not after a training and/or working period in the more economically-advanced countries (thereafter, the receiving countries). This is one part of his PhD dissertation at GRIPS.

Mr. Thanh began the presentation by providing basic concepts and pictures of the return migration at global level. According to him, it is necessary to distinguish concepts of brain drain and brain circulation as they reflected different nature of migration, and he noted the participants that his theoretical model was focused on the latter, i.e. brain circulation. The data from various regions and countries showed three stylized facts about brain circulation, in which the higher possibility of return might be associated: (i) the smaller income gap between the home and the receiving countries, (ii) the more stable or developed the political/economic/business environment in the home country, and (iii) the bigger the difference between cultures of the two countries.

Continuing his presentation, Mr. Thanh explained his theoretical model. This model was closed to Levi and Tsur (2000) by adapting their idea for the return migration, meaning that it considered the decisions of a person to move back from a richer country to a poorer but quickly growing one. The main frame was life-time income maximization objective with considerations of risky factors in both home and receiving countries. It is shown that different combinations of these parameters may affect a person’s decision to return home immediately, work for some years, or stay permanently in the receiving countries.

[For more information about the model’s assumptions and solutions, please see the presentation slides uploaded with this summary].

Furthermore, Mr. Thanh showed the possible directions of migration with heterogeneous human capital between advanced and less developed countries, which based on possible different degrees of risky factors in his model. At the end of the presentation, he also introduced assimilation costs to the model in order to analyze the effect of noneconomic factors, such as cultural difference and language fluency. Additionally, he argued that the transferability of skills might also be significant factor influencing the skilled workers’ decision of returning or not, and his further research would consider this. The presentation was concluded by a plain model of economic growth with presence of brain drain and brain circulation. It suggested that brain circulation might foster the economic convergence, and those country that failed to create this process may be trapped in a divergent path

Mr. Hisaki Kono (Institute of Developing Economies, JETRO) ignited the discussion section by raising the questions about model assumptions and obvious difference between advanced and less developed countries in term of labour market. He suggested Mr. Thanh divide the economy into production and services sectors as they needed labour at different skill levels. Moreover, he was concerned about the applicability of the model to two countries, which were very different in economic and political systems since they would have different human resource structures as well as labour market motivation. In addition to that, Mr. Phuc (All Vietnam Consulting, Tokyo) suggested Mr. Thanh use utility function rather than life-time income function to analyze the problem because, in his opinion, life satisfaction would be significant for the skilled workers to make decision, given their income levels. In his response, Mr. Thanh said that the model focused only on brain circulation with skilled workers so that it focused on the labour market as a whole. Moreover, his model considered merely economic determinants so that life-time income maximization was used as the objective function was quite traditional, and may maintain the simplicity of the model without loss of generality. The inclusion of taste (for example, prefer homeland’s food to others, prefer living with closed relatives, etc.) only played as a factor shifting the effective domestic income curve, then could be reduced to the income level.

Sharing attention to wage as one of the most significant determinants for the skilled workers to return home as presented in the model, Mr. Ninh (Tokyo Institute of Technology) and Mr. Long (GRIPS & VDF Tokyo) mentioned the different wage growth rates between developing and advanced countries, say Vietnam and Japan, and they wondered how the skilled workers make decisions if (s)he took into account numerous factors such as cost of living and working environment. Moreover, Mr. Hisaki Kono said that many returnees would make wage rate of the emerging sector lower in the future, and it in turn would make that sector less attractive to the skilled workers. For him, sector-based analysis would help to make the model more interesting. Mr. Thanh replied that wage differentials were already considered in real terms (PPP adjusted), and explained that these differentials were understandable as wage rate was equal to labor’s (human capital) marginal product, which may differentiate due to the labor-capital ratio of each economy. For the effect of human capital density (Mr. Hisaki Kono), the answer was that such issue would require general equilibrium analysis to find at the same time the equilibrium rate of human capital as its wage in each economy. But this was beyond his current analysis.

Mr. Hoang (Yokohama National University & VDF Tokyo) raised the question of whether the model could explain the fact that different people had different manner toward returning their country (patriotism for example), and thus they would have different incentives returning home. Mr. Thanh said that this issue may again be considered in a framework of “tastes” that had been discussed. In other words, the model tended to control for such non-economic factors first, and then analyze the economic factors only. It was clearly admitted that a model could not explain or illustrate all the cases of the real world.

Listening to all comments, Prof. Kenichi Ohno made some complementary suggestions as well as asked Mr. Thanh to consider more about policy implications of the model. About the model, he said that people were mostly risk-averse, and they were continuously making decisions of staying or returning over time rather than once at the beginning, and thus the risk-related coefficients in the model should be revised to make more meaningful implications. Furthermore, he pointed out a crucial weakness of the model is that it could not shown why a highly skilled would choose his home country to return. According to Thanh’s model, the worker would choose any country maximizing his expected life income (including risk factor). Thanh agreed with Prof. Ohno, but went on discussing that the riskiness should be noted as subjective, and for a person this riskiness would be substantially reduced if he turn back to his homeland.

Prof. Ohno advised that relating to this issue, it must be more interesting if we consider the significance of social network (or relation), which the worker had advantage at home but not abroad. Therefore, while benefits of working abroad could be financial and human capitals, the cost was a gradually loss of social capital (relational resource in a sense). If he chose to maximize his income by combining all these factors, he might choose to return at a optimal point of time. In other words, each person possessed his/her own portfolio of human, financial and social capitals which could be optimized with various decisions, including returning home.

Focusing more on the decision to return home of people in developing and quickly growing economies like Vietnam, he suggested Mr. Thanh find the answers for the fact that most of Vietnamese people returned to work in Vietnam, not in other regional countries such as China or Korea. This question indicated that non-economic factors needed to be considered in the model. In addition, he emphasized the role of government in human resource utilization by saying that  some countries had large human capital, but did not have industrial development, and therefore its people did not return after getting professional/vocational training overseas.

At the end of the workshop, as usual, we had an informal meeting, in which some new participants introduced themselves and their research interests. The workshop lasted longer than expected since participants interestingly exchanged views and experience on human development in their own countries.

Abstract (PDF74KB) | Slides (PDF1,1MB)

(By Giang Thanh Long)