Brain drain in Bhutan: its impacts and countermeasures

Abstract

This study examines the potential effects of skilled labor emigration on Bhutan’s economy using an extended computable general equilibrium (CGE) model. Numerical simulation analysis is undertaken to examine the impacts of an ongoing increase in skilled emigrants on the economy and welfare of Bhutan. The simulation results paint a somewhat pessimistic picture, showing that a rise in foreign wages would lead to a significant outflow of skilled labor, causing a substantial supply shortage in the domestic skilled labor market and a decline in all sectors - particularly in the manufacturing, services, and public sectors. Moreover, the increased inflow of remittances would exacerbate the negative impacts through the Dutch disease. The overall outcome is a decline in GDP by 0.2% from the base. To counter this adverse economic impact, this study proposes policy interventions by improving total factor productivity (TFP) or labor productivity in the domestic industries. Specifically, it is unveiled that reform initiatives that can enhance productivity gains beyond 0.3% in TFP or 0.4% in labor productivity across the sectors would contribute positively to GDP growth and curtail the brain drain from the country.