| Most economists agree that a country's economic growth depends on human capital, physical capital, technology, and several other minor inputs. Human capital is the basic wealth of every country. Highly skilled workers are the most important component of human capital. Human capital can have a positive spillover effect on society. When talented young people leave their native country to work elsewhere, this brain drain inhibits the country's economic growth. Several factors contribute to brain drain. These can be classified roughly into three categories: economic, academic, and personal. Economic factors play the most important role.; From the early 1960s to the late 1980s, Taiwan suffered a brain drain when many people who had earned advanced degrees in western countries chose to leave Taiwan to work elsewhere. In this study's statistical analysis, I show that Taiwan's economy is based in past on an effective labor force, and explain why Taiwan's economy has grown over the past 30 years. With the improved economy in the 1990s, young people are increasingly choosing to return to or remain in Taiwan to work and live. As Taiwan's economy improves, its highly skilled labor market becomes more competitive.; This study's quantitative analysis includes a mathematical model based on a revised growth model, and statistics or econometric tests. In performing the quantitative analysis, I created a new measurable variable—the effective labor force—which combines human capital and the labor force. I show that this new variable has a significant effect on Taiwan's economic growth.; In the Ordinary Least Squares and simultaneous model specifications, I found that the mobility of highly skilled human capital does not undermine Taiwan's economic growth. The reason Taiwan continues to experienced economic growth after a brain drain is that the manufacturing industry plus international trade have helped Taiwan's economy in the past 30 years. The Granger causality test also offers strong evidence for the correlation between the accumulation of human capital and economic growth. In fact, the quality of Taiwan's labor force has improved greatly is in the past 30 years. In sum, in this study I found that the brain drain does not undermine economic growth in Taiwan. |
