Economic Analysis of Brain Drain

In this paper, we consider the possibility of signaling and individual's two-stage decision procedures within an asymmetric information framework to investigate the brain drain phenomena. The results indicate the relationship between an individual's ability and the signal he will choose at rational expectations equilibrium. Also, the persons who will remain abroad are identified. Where the ranking of the universities provides the signal to domestic employers, we can therefore interpret these results in such a way that there is an association between students of a particular quality and corresponding qualities of universities they will choose to attend to attain Ph. D.'s. Moreover, we can predict whether these graduating Ph.D.'s choose to return home or remain abroad.