Does working abroad cause less unemployment however small?

The context of this question arises from people in third world countries going abroad to work. Often they are seen as money-hungry people who don't love their country (unless they are, say, physicists who do research abroad due to poor facilities or something like that).

I was thinking that those people help their country through foreign remittances. I later additionally thought another help done is that whatever job they would have done in the country is likely (probably the key word here) going to be replaced by someone else who would otherwise have been unemployed or underemployed would have that job which in turn likely (hooray key words) means that someone else who would otherwise have been unemployed or underemployed would have that job, etc.

• If the answer is no, under what kinds of situations might this be the case?
• If the answer is no due to geographical variations, you may consider third world countries.

2 Answers

On remittances:

It is not unusual to hear about income being sent home by, say, US immigrants. However, the product of their labor and the side effects of their intellectual capital, sometimes called positive spillover, do not occur in the home country. As such, they are not as beneficial as some counterfactual world where an equally profitable job existed at home.

There may be a class of menial labor which results in a net benefit to the county from moving, but this strikes me as profoundly rare. Necessary conditions for this would be that is a job with low positive spillover, likely one with low education, and a tremendous gap in wages between countries, perhaps caused by a world with huge stocks of fixed-location capital.

On unemployment:

Unemployment is calculated as $\frac{Number \space of \space employed}{Population}$. If we reduce the population, then the denominator decreases, $$\frac{Number \space of \space employed}{Population-Immigration \space out \space of \space country}$$, suggesting lower unemployment after immigration out of the country.

• youtube.com/watch?v=z6azSHCHwPc I'm not sure I understand. You're saying it may cause (however small) less unemployment for menial jobs but not so much for non-menial jobs? – BCLC May 12 '15 at 8:14
• The benefit I was thinking of is from increased consumption from foreign remittances. If you go overseas and mail back goods or foreign currency to relatives, they can import their goods of interest and consume them. It's possible (with a really really high real wage differential) that a job in a foreign country could benefit the home country more than the foreign one in terms of consumption. – RegressForward May 12 '15 at 14:49
• Thanks RegressForward though the topic of foreign remittances is actually just part of my post. My other topic is that of unemployment. I was thinking that if for example I work abroad instead of working in my home country which say is third world, I was thinking that whatever job I would have had would be taken by someone else (Alice) who would have otherwise been employed in a less-desirable job. In turn, such less-desirable job not taken by Alice is taken by Bob who say would have been otherwise unemployed. – BCLC May 12 '15 at 18:40
• Is it correct then to conclude that with a bunch of people from a third world country leaving their home country, there might be at least one job taken by someone in that third world country that would have otherwise been taken by a member of said bunch? – BCLC May 12 '15 at 18:42
• It is the same as reducing the population. Let us say I have a population of 10,000 equally qualified candidates for 5,000 jobs, Then, half of them are randomly removed from the labor pool by the plague. If there were the same number of jobs before and after the plague, then unemployment declines to zero. This is the same if they immigrated out or caught the plague. The key factor is that I have imagined the supply of jobs are constant, though there is likely some impact on the number of available jobs when reducing the population. – RegressForward May 13 '15 at 4:07

This is the brain drain vs brain gain discussion, there is a huge literature on this, e.g. "Brain Drain and Human Capital Formation in Developing Countries: Winners and Losers", Michel Beine, Fréderic Docquier and Hillel Rapoport, Economic Journal 2008. A further point that is brought up is increased incentives to build human capital because of potential higher payoffs abroad. Higher individual human capital, not only of those who remain at home but also of those who return (and have built networks), has spillover effects and benefits for society as a whole. It has been argued that this is helpful for countries with huge population such as India where not everyone with high skills can leave. For smaller countries the loss of the highly skilled, especially in the medical sector, is often a substantial problem. One country (I think it was the Philippines) even temporarily stopped teaching English to nurses because of a lack of them at home due to the constant outflow because of better earnings perspectives abroad. With the financial crisis it seems many however got stuck at home because of reduced chances elsewhere.