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Effects of Brain Drain on
Azerbaijani Economy
Research-based project assignment

East or West, Home is Best

Bünyamin Mustafa & Hüsən Pirmuradov

"developing" societies. suffering from declines of their resident human capital. Because except to “development”. access to advanced technology and more stable political conditions in different places worldwide. Brain Drain is defined as the migration of high-skilled personals in search of the better standard of living and quality of life. because it does not only determine the number of skilled workers who available to domestic production. Modernization in Economic sense requires having not only high-technological equipment. and emphasizes on value of individuals. These societies have different priorities and importance of each development. As we know. In spite of several experimental recognized positive response effects. Introduction Today. it is based on the system that mainly rejects the traditional status. there is no other way for Azerbaijan as a developing country for adapting to the everlasting economic and social changes in the world. and supporting their talent and success.Effects of Brain Drain on Azerbaijani Economy Abstract The paper assesses the global effects of Brain Drain on Azerbaijan economy and quantifies the relative sizes of various static and dynamic impacts. there are in great need of trained and skilled manpower in . but it also affects the sending economy’s capacity to innovate or to implement modern technologies. higher salaries. those countries. in other word. Development can be seen as a process of involving along to the economic and social modernization. whereas Modernization in Social sense suggests modern values rather than Medieval values. high level administration and management style. as a result. For the realization of such development. including Azerbaijan with high skilled emigration rates are the most pure victims of Brain Drain until they are less likely to benefit from the “Brain Gain” effect. However. but also specialized knowledge. and. it is trying and striving to some development. Azerbaijan is included the group of developing countries. Our findings suggest that the short-run impact of brain drain on resident human capital is extremely crucial. latter impact also plays an important role particularly in a globalized economy where capital investments are made in places with higher production efficiencies while other variables are constant. more than half of the groups of people in the world are member of "underdeveloped" or with a softer word .

In graph 2..5 thousands inhabitant left the country with duration of more than 6 month. including Azerbaijan as well. Look at Graph 2. As mentioned. out-migration of skilled Azerbaijanis people. So. these political and economic reforms were unrealistic due to the ongoing war between Azerbaijan and Armenia in these years.A. and it is leading to an external brain drain – or. political and economic reforms for create power economy. So. After Azerbaijan declared its independence. C. . after 70 years of Soviet domination. with Economical facilities. particularly after the experience of back to back economic crises that have led to increased unemployment among highly educated young. 1964. this process continues. the emigration of skilled individuals from Azerbaijan has gained more attention in recent years. However. With this aim. especially. in other word. sometimes we’ve considered Brain Drain as a whole and also used some experiences of other developing countries about this tendency. 77. Therefore Harbison and Myers call high quality manpower as "Strategic Human Capital”1. such a high-quality work force is increasingly transferring from developing countries to developed countries or more advanced countries.different areas of Azerbaijani economy. It may be remarkable that how “Brain Drain” process began in our country. there was a need social. In that year. as we know. Education. and also the loss of previous Soviet economic connections.Frederick Myers. we tried to research effects of Brain Drain on our economy. This rate reached its maximum point at beginning of 1990s because of some reasons which we mentioned in up. This tendency that called as “Brain Drain”. Afterwards. This number was more than rate of last recent years. Iran and also Western European countries and the United States for searching of jobs or other purposes. New-York. and Economic Growth: Strategies Of Human Resource Development. is carrying great emphasis for developing societies. It shows main impact of economic crises on Brain Drain process. According to a report issued by State Migration Service of the Azerbaijan Republic (see Chart 1) “Brain Drain” in Azerbaijan is mainly to near countries. Manpower. To illustrate impact of Brain Drain on Azerbaijan economy as a comparative way and clearly. In this case. especially to Russia (65%). Azerbaijan declared its independence in 1991. Big Crises in 2008 can be good example for this discourse. Turkey. we can see that number of emigrants of Azerbaijani people in 2008 is more than figures of approximately last decade. One of the argumentative issues is that a “Brain Drain” from a small or low-wage economy hurt or helps the remaining residents of that economy? 1 Harbison . As a result. thousands of educated and skilled Azerbaijanis became unemployed in this period of time. all of these factors hurt Azerbaijani economy and created crises in all sectors.

main results are summarized and followed by a detailed analysis. where the dominant channels are identified through which brain drain impacts Azerbaijan economy. it is getting more talkative issue for Azerbaijan (also all developing countries) 2 (Berry. medical. Actually in Azerbaijan brain drain has not been researched enough because of some known causes (such as less developed non-oil sector. skills and innovative capacities and thereby improving the economic development of their countryAzerbaijan. Nowadays. These are following. including Azerbaijan that occurs when its brains move to an environment where they produce higher-quality knowledge goods. Since that time brain drain has been actual issue. the brain gain effect that can arise through migration can be strengthened or weakened with the introduction of occupational choices. financial and other sectors are negatively or positively? What policies can be implemented to stop or reduce such movements from developing countries to developed countries? And lastly. network effects (Kanbur and Rapoport. In continuation of article. we’re trying to explain main questions about our research. In Section 3. Section 4 concludes. “Some Welfare Aspects of International Migration”). less research centers. not actuality of topic). this article reveals main problems. Brain drain is researching within different aspects in specific areas. According to Docquier and Rapoport (2012). It was used to describe migration of highly qualified specialist from UK to The US. So it is getting more significant to research on this issue. Journal of Political Economy. The term “Brain drain” has entered scientific literature by the British Royal Society in 1962. Soligo 1969. whereas recent contributions have identified a number of factors that could give rise to beneficial brain drain. such as Azerbaijan. education subsidies and so on. Finally. brain drain is increasing very quickly. in this paper we’ll try to disclose another aspect of brain drain: the direct benefit to sending-country consumers. That’s why. productivity. . identify key issues and provide solutions which would facilitate immigrant skilled professionals to share their knowledge. pages 787-790. Literature review All over the world. and the conditions are explained under which each channel generates positive or negative impacts. R. As structural. consequences of such migrations on the educational. Section 2 shows existing Literature review and its explanation about our research topic. 2005).The earliest economics literature2 on this question suggested that harm was likely. the rest of the paper is organized as follows.A and R. 77.

some searchers show that it is not generally true. it allows us to incorporate many essential channels. Thus. For the destination country of migration. it reduces the incentives of individuals to acquire education and it weakens the possibility of brain gain to arise. whereas they are usually not studied in a less comprehensive partial equilibrium setting. (See Figure 11. Therefore. On recent literature this was so. the impacts working through the technology channel on production efficiencies are magnified in the open economy where capital investments conform to international arbitrage. Garcia Pires compares Brain Drain with Brain Waste. Furthermore. through which brain drain may impact the developing economies in a direct or an indirect manner. Moreover. it follows that. Armando J. For instance. However he also added that his findings will need to be confirmed by research at the household level. economies in all the sending regions become very much worse off (see Figure 11. thus their propensity to remit is relative lower and they are likely to bring their most close relatives in the host country. it undermines the chances of a positive self-selection of skilled migrants. Northern American countries) may be source of brain drain. such as age structure and capital flows. a). when the incentive effect on human capital formation is absent. when flows of physical capital are restricted. And most time developed countries require skilled people so it becomes phenomenon for developing countries. only 12 million migrants from Mexico are living in USA. However.2006. it is observed that those regions experiencing positive impacts on GDP per capita now enjoy more limited benefits. He stated that developing countries which are located near developing countries (EU. In addition. Thus Azerbaijan is potential country for migration of specialists to EU. For the origin country of migration. whereas the regions suffering from slowdowns in technological progress are more insulated from foreign capital retreat and native capital flight. He stated that the brain waste scenario has several negative effects. In article of “Brain Drain and Brain Waste”. Luca Marchiori and Frederic Docquier have construct a unified generic framework that is capable of combining many direct impacts of brain drain. their interactions and other indirect effects are also comprehensively and dynamically generated.Dr. Riccardo Faini (IZA group. moreover. In report of “Brain drain in globalization and a general equilibrium analysis from the sending countries’ perspective”. an education policy that subsidizes students has less chances of . b) Some economists believe that remittances prevent negative effect of the brain drain.IZA DP NO:2155) have shown that most time skilled migrants come from relatively wealthy families . Gurbanov Sarvar in his article aims to attract attention to this topic.

However. the migration of skilled individuals from developing countries (including Azerbaijan) may be viewed as a costly subsidy from the poor nations to the rich. Generally. about 3200 people get opportunity to study in abroad. The other part of those students has stopped their education due to unknown reasons. this tendency is an emotional issue for Azerbaijan. but do not return to their home country (Azerbaijan). totally. In these years. there are so many people that studying abroad with own-capital. don’t work in Azerbaijan. Result and Analysis In this section of the paper. but immigrate to the other countries for higher wages or better opportunities.. if an education policy also increases the international transferability of skills. and a threat to their economic development. So. Statistic 3 show that 42% of people who studied in abroad. This statistic included both students who studied abroad by state program and private way. Azerbaijan suffers from necessary qualified human resources for the development. But we have to consider that these numbers show people who educated by the state line. we present and discoursed the considerable results of the Brain Drain on overall economic sectors of Azerbaijan with using and analyzing some specific data and graphs that are very recent and based on reliable sources. The Author showed that in the early years of independence migration occurs as a result of political. who study abroad and complete their education in abroad. According to Graph 3 that issued by Ministry of Education of Azerbaijan Republic. Nowadays migration occurs causes of economic situations. 26% of these students (about 830) have graduated and 73% of them are studying now. the efficiency of the education policy increases. Azerbaijan has invested lots of money in the education and training of these young professionals. Also. or when individuals educated in their home country. The book titled “Migration policy in modern Azerbaijan and international cooperation” (Abdullayev F. national and ethnic character of country. On the other hand.increasing the human capital stock in the origin migration country under the brain waste scenario than under the no brain waste scenario. First is when individuals. “Brain Drain” can occur because of two reasons. number of the people who studied or studying in abroad mainly has been increased since 2007. 2009) is stated main features of migration processes in Azerbaijan republic. Due to “Brain Drain”. In the framework of “State Program for education of Azerbaijan youth abroad in the years of 3 Based on report that issued by Ministry of Labor and Social Protection of Population of the Republic of the Azerbaijan . As is known to everyone.

there is a need the buildings for organized these competitions or projects. The President of State Migration Service of Azerbaijan Republic Fridun Nabiyev represent "Brain Drain" as transmitted illness among the young and called it-emigration of graduates. National Gymnastic Arena and Baku Aquatic Centre and so on. For example. and we can trust only them. And government had signed contract with French company “Bouygues Travaux Publics. Young. World Cup of Women footballers. whereas with the direct benefit accruing to the recipient states who have not paid the cost of educating them. European Championships in men’s and women’s artistic gymnastic. such as Olympic Stadium. Let’s look at this graph… As one example. number of the people who . Nowadays. like Azerbaijani government want reduce "Brain Drain". let's look last 5 years. 34. Turkish Company «Tekfen Construction» manages the construction of Olympic Stadium. Formula 1 competitions and also we know that this summer First European Olympic Games will be happen. registration fee and etc. They are ten years that we take advantage from potential of the foreigner companies and foreigner specialists in big project and big investment. for construction of Cristal Hall. LLS” for construction of new tunnel in 28 May station. And also you know that for the First European Olympic Games so many buildings are making. German "Alpine Bau Deutschland AG" company was invited. This is of growing concern because of its impact on the health systems in Azerbaijan. We can easily see that in all construction of these buildings foreign architects or specialist were used. they are already 10 years that construction boom continues in our country. such as Eurovision Song Contest. Azerbaijan has hosted a lot of competitions and big projects. but we have been late during this time to bring up or educated own local stuff and own cadre in this sector. This translates into a loss of considerable resources for Azerbaijan when these people migrate to other countries. visa.7 mln) was spent to accommodation and living conditions. shortage of stuff and personals are the most hurting problem of our day in Azerbaijan in the most areas. In these years.2% ($29.6 mln) to tuition fee. living in foreign countries is a dream of most of young people in Azerbaijan. We are able to extend this list. Of course. construction of new metro stations. Although having modern equipment in hospitals. Governments. well-educated. As one example. Again we are seeing that foreign companies are controlling this process.4 million for education of 3200 students. healthy individuals are most likely to migrate. other part was used for travelling. due to lack of educational and quality cadre in medicine area and high cost. medical insurance. especially in pursuit of higher education and economic improvement. For example.2007-2015” Azerbaijan government allocated $86. 61% of this amount ($52. In other example. So.

"Brain Drain" of high skilled students and doctors to the foreign countries influence negatively to the other generations of society. Until Azerbaijan doesn’t determine wider or long-run perspective solutions.6 mln). One of the long-term 4 Red line represents Infant mortality rates in Azerbaijan. this process will continue. Last year.21) in 2014. Compared to 2013 ($663. rate in Azerbaijan (27. According to CIA World Fact-book 2014. As a result. whereas mortality in Armenia was 41. bearing in mind the current political and economic situations of Azerbaijan and globalization. Compare to Graph 5. On the other hand. This graph which is based on data issued by CIA World Fact-book 2014. whereas it is +23. including Azerbaijan. Moreover. people continued to went abroad for their healthy. Let’s take Armenia for comparison. where blue line represents Armenia’s. Although total rate of infant mortality has decreased since 2001 in both countries. So. totally 81625 people left country. education of future generation mainly depends on these high educational people. shows differentiation between Armenia and Azerbaijan’s infant mortality rates4 since 2001.goes abroad for treatment mainly increased in recent years. Situation in Maternal mortality rates is same as infant mortality rates. and Germany. But in contrast. people are more likely to go abroad for treatment. Although amount of money that spent for medicine sector has increased since 2009. See Graph 6.51) is again high than Armenia (18. Is it possible to do so? The current reality says not. rate of maternal infant rate is mainly increasing year to year.3 mln) government has spent additionally $56. See Graph 4 that based on report of the State Customs Committee of the Republic of Azerbaijan. percentage of increasing in maternal mortality rate in Azerbaijan is +36. In these years.3 million to health sector in 2014 ($725. we can easily see that situation in Azerbaijan is so dangerous. due to not qualified healthy personals. This is 9% more than 2013 (76121). infant mortality rate in Azerbaijan is significantly high compare to same zone countries.2 mln. since 2009.2%. we can see that there is positive relationship between number of people who left country for treatment and invested money to healthy sectors. . These citizens mostly are going to Iran. Total amount of money that Armenian government allocates to healthy sector for one year is about $29. decision-makers in Azerbaijan are searching for policy options to slow down and even reverse the outflow of skilled individuals and achieve Brain Gain. Consider to recent years. This is so high rate for country that invests a lot of money for healthy sectors every year.4 mln in Azerbaijan.4% in Armenia. Turkey.41) in 2001. Because. rate in Azerbaijan reached its high point (83.48 point in that year. The increasing demand for skilled personal in the higher income countries attracts educational people from developing countries. whereas it is $56.

it will be very cheaper than students’. and K. Rethinking the brain drain. Conclusion As mentioned in the overall paper. Scale economies in education and the brian drain problem. 116-118. In that case. “Can a Brain drain be Good for Growth in the Source Country?” Journal of Development Economics53. A. 2004. Population and Development Review.3 mln on average to provide some students (bachelors. Firstly.solution plans that can help to prevent emigration of educational manpower. Hamada .“The Brain Drain.) to study abroad every year. Redistribution. we have analyzed that mainly where and whom Brain Drain process arises from. However. masters. A gendered assessment of highly skilled emigration.  Azarnert.. June 2009  Mountford. F. References. But if we try to bring professors and teachers who have experiences of European education system. healthy sectors and etc. Why not establish our own universities where will be teach by both foreign and our teachers. A. we tried to show its significant effects on different sectors Azerbaijani economy and lifestyle. 2009. L. at least reduce negative effects of Brain Drain and also achieve Brain Gain tendency. 11.” Journal of Development Economics. 743–759  Haupt. At the end our paper opens some roads for future plans that if we can implement.. International Economic Review 32 (3).  Docquier. and E. Brain Drain is situation in which large numbers of educated and very skilled people leave their own country to live and work in another one where pay and conditions are better. Azerbaijan can be turn country that exports knowledge. especially students. (2010a). professors from high developed countries.. This is one of the important strategies that Azerbaijan has to do. So. K.. As we mentioned in up.. we will be able to solve or. and the Threat of Brain Drain”. B.  Bhagwati. J.  Miyagiwa. it is spent $11. 1. “Education. International Integration of Markets for Professionals and Unemployment. L. World Development 32 (1) . Azerbaijan can develop and accomplish better places among the world countries. 19-43. Lowell. we have revealed main problems of this tendency on some sectors. Janeba. “Is Skilled Immigration Always Good for Growth in the Receiving Economy?” Economics Letters. In this case. Marfouk.. A. O. in press. Secondly. such as construction. is to success of immigration of high educational and technical teachers. we concluded that it caused emigration of students. NBER working paper no 10618. PhDs and etc. 287-303  Stark. especially bachelor and masters. and show its impact on government’s capital. 108.

 Vidal.-P. Journal of Population Economics 11 (4) . J. The effect of emigration on human capital formation.