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Analytical Studies Branch Research Paper Series - Logo

Analytical Studies Branch Research Paper Series


Volume 2007
Number 289

International Mobility: A Longitudinal Analysis of the Effects on Individuals' Earnings

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International Mobility: A Longitudinal Analysis of the Effects on Individuals' Earnings

by Ross Finnie

Executive summary

The "brain drain", a much-discussed issue in the late 1990s, has largely faded from public and academic discussions, perhaps largely because recent evidence indicates that the overall number of Canadians leaving the country in any given year is relatively low (on the order of one tenth of 1% of the population in any given year) and is not necessarily as concentrated at the top of the occupation scale or in certain sectors as previously conjectured.

Using Statistics Canada's Longitudinal Administrative Database (LAD), constructed from individuals' tax records, this paper begins by reporting more up-to-date data on the rates of leaving, as well as of return. The main body of the paper then presents new evidence on one aspect of this dynamic that has not previously been studied: the effects on earnings of leaving the country and then returning. The analysis is restricted to men, largely because findings were much less conclusive for women. The first year of data in the LAD is 1982, and the file ran through 2003 when this work began, thus determining the period covered by the analysis.

The analysis finds that annual rates of departure from Canada from 1982 to 2003 have been generally low in historical terms (on the order of one tenth of one percent of the population in any given year), and tend to follow the economic cycle, but far from perfectly. Departures thus declined through most of the 1980s but then began to rise in 1988 and rose steadily through the first part of the 1990s, when the economy was stuck in a lingering recession. Rates then rose more slowly, to peak in 2000, after which they declined sharply through to the end of the data in 2003, falling 45% over this period.

Over the entire period, about 3.5% of those who left returned after one year, these rates then rising to 4.7% in the second year, and then declining thereafter, with about 16.2% of those who left having returned to Canada by five years later.

The analysis of the earnings effects exploits the LAD's capacity to allow the comparison of individuals' earnings before leaving versus after their return, and among individuals who left and returned against those who did not. That is, the study basically looks at the relative growth in earnings of those who left and came back as compared to those who never left. Such an analysis has not previously been possible with other databases.

Various models are estimated, but the preferred results indicate that, overall, those who left the country for two to five years did best in terms of their subsequent earnings levels: their post-return earnings were 12% higher in their first five years back as compared to their last five years before leaving. Those who left for only one year showed a more moderate 7% increase in their relative earnings on average, and this estimate is not (statistically) significantly different from zero, indicating that these changes varied significantly across experiences. Those who were away six years or more were found to actually have lower earnings after their returns than otherwise might have been expected, but these patterns varied significantly and might well be due to particular events related to the return (e.g., moving into retirement).

All measured effects take into account pre-move earnings levels and the normal growth in earnings that occurs with age, along with other factors that can affect earnings (e.g., marital status, province and area size of residence, the unemployment rate).

Concerns regarding emigration from Canada typically focus on workers at higher skill or occupation levels. As the LAD lacks these measures, individuals are classified into one of three categories according to their earnings in the last full year before leaving: earnings less than $60,000, from $60,000 to $100,000, and greater than $100,000. The data indicate, perhaps surprisingly, that it was those individuals at the lowest earnings levels who left the country that experienced the greatest (relative) growth in their earnings upon their returns, while those at higher earnings levels experienced more moderate gains.

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