Brain drain and optimal funding of education in developing countries

Ousmane Faye, Université de Liège
Frédéric Docquier, Université Catholique de Louvain
Gwanael Piaser, Université Catholique de Louvain

In this paper, we argue that a framework with fiscal competition and a static comparative analysis of first best solution are not appropriated to examine the impact of brain drain on developing countries education policy. We show that in a second best world, the public funding of higher education should increased with brain drain. Our results rely on two major assumptions. First, high perception costs impedes first best optimal policy . Second, education or migration decisions are not directly controlled by governments