Does Brain Drain Lead to Institutional Gain?

A country's endowment of human capital affects its institutions through various channels. This raises the possibility that skilled emigration can leave its mark on a country's institutional development. We explore the impact of emigrant human capital on home country's institutional quality. Using geographical and genetic distance-based instrumental variables for emigration and a dynamic panel estimation method, we find that human capital emigration helps the home country's political institutions, but hurts economic institutions. The conventional ‘brain drain’ argument, therefore, needs to incorporate the institutional changes due to skilled labour emigration.