The Macroeconomic Impact of Skilled Emigration from South Africa: A CGE Analysis

22 September 2012
Publication Type: Working Paper
JEL Code: C68, J61

South Africa faces the dual problem of large inflows of illegal immigrants and outflows of skilled emigrants. This situation potentially has serious implications for the domestic labour market and economy as a whole. In this paper we measure the impact of skilled emigration and the subsequent loss in primary factor productivity on the South African economy using a dynamic computable general equilibrium (CGE) model. Results indicate that skilled emigration in the abscence of any programmes to counter this flow of workers has a generally negative effect on the economy. Industries with the greatest exposure to the investment and export sectors as well as those with the highest concentration of skilled workers are shown to be most affected. We also use simple and intuitive back-of-the-envelope equations to enhance our understanding of the mechanisms driving the model’s macroeconomic results. These results justify the government’s current efforts to retain and attract skilled labour as part of the ASGISA framework.

Working Paper 166
1 February 2010