Marco Delogu, Université du Luxembourg

Abstract

Infrastructure and human capital are two widely recognized key ingredients to achieve development. Developing economies are characterized by large informal sector and substantial high skilled migration flows. This paper studies the interplay between infrastructure, informality and high skilled migration through a macroeconomic model which aims to depict a developing stylized country. Two

frameworks are considered: exogenous and endogenous brain drain. Theoretical results are derived along with dynamical properties of the model. Subsequently, the model is calibrated for 60 countries. Numerical experiments show that the informal sector slows down the infrastructure accumulation process while helping low skilled to escape from extreme poverty. A quantitative assessment of restrictive fiscal policies suggest that, in the long run, an increase increase in the

tax rate would be beneficial for high skilled individuals without worsening the welfare of low skilled individuals. The results are robust to the brain drain mechanism accounted.