Brain Down the Drain or the Loss of Human Capital of Latvia
|Why does brain drain take place?|
|Economic effects of brain drain|
|Society’s aging and following consequences|
|Social budget of Latvia|
|The linkage with brain drain|
|Solution – the increase in the retirement age|
|The bright side or the positive impact of the brain drain|
|Brain drain and Brain gain combined, the Beneficial Brain Drain|
|Example of Ireland|
|What could Latvia Learn?|
The authors evaluated the effects of brain drain on the economy of Latvia, as well as provided some solutions, which can be practically implemented. Given the topic of our report, the research question that we proposed in the very beginning is as follows: “How does brain drain affect daily life of the remaining population of Latvia?” The conclusions to the issue are drawn in the further paragraphs.
According to the productivity function, there is need for a highly qualified workforce in order to increase productivity. This can be done by simplifying the process of immigration. Labour from the countries with relatively low wage would be interested in living and working in Latvia. Additionally, labour supply should be increased for graduates of universities. It is worth adding that in the ASAD model, AD curve should shift upwards in order to maintain the same level of GDP and prices. It can be implemented by using the expansionary fiscal policy.
Even though the phenomenon of the beneficial brain drain took empirical form, unfortunately, that cannot be applied in Latvia’s case. According to the beneficial brain drain model, the average probability of emigration in Latvia is relatively high; therefore, the country experiences the net brain loss. The phenomenon of brain gain would appear only in the case where the average probability of emigration is relatively low (lower than 50%).
The authors observed a critical situation in the social budget of the country, which was increasing rapidly. It is concluded that because of increasing emigration and depopulation, there is no other solution like the increase in the retirement age. Depicting the situation in the life-cycle model, the authors observed the rise in the consumption of consumer because of the increase in the retirement age. The only group of people, which does not change their preferences considering the amount of consumer goods, are pensioners.
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