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Cover of Working Paper 152
September 30, 2008

Human Capital Investment under Exit Options: Evidence from a Natural Quasi-Experiment - Working Paper 152

When countries select immigrants based on skill, what happens in the migrants' countries of origin? Departing skilled workers obviously tend to reduce stocks of skill there, but the prospect of skilled migration can induce more investment in skill. It is not clear which effect dominates. This paper studies one of the fastest and relatively largest exoduses of skilled workers on record, in the Pacific country of Fiji, which paradoxically produced a net increase in the stock of skill within Fiji. It offers evidence that skilled migration prospects caused that net increase, and evidence to rule out several competing explanations.