Work in progress

Is Recent Portuguese Emigration Tapping Into a Growing Pool of University Graduates or Draining it?

This report investigates whether recent Portuguese emigration is tapping into or draining the country’s growing pool of university graduates. We begin by analyzing aggregate data from the Observatório da Emigração to identify major destination countries and investigate recent trends in their Portuguese emigrant populations. Next, we assemble a comprehensive dataset covering Portugal and several major destination countries, integrating multiple census sources with information on university education attainment and detailed age groups. We use this to examine population and university education trends in Portugal and abroad, studying how the dynamics in the stocks of university graduates and non-graduates determine graduate rates among different birth and age groups over time. We find that graduate rates among Portuguese emigrants broadly align with those observed in Portugal for the United States, Spain, and Germany. Whereas for France, Canada, and Switzerland, we find evidence of negative educational selection. The United Kingdom stands out, showing positive educational selection and a rising relative size of its Portuguese graduate emigrant population among younger cohorts, compared to the population of graduates resident in Portugal. Overall, we find no evidence of a widespread brain drain, though some degree of brain drain is evident in the UK. However, while the UK case may raise concerns, the educational attainment of Portuguese emigrants appears more reflective of the country’s broader educational advancements than of a significant loss of talent.

Demand for skills and wage inequality

Differences in skill utilization across firms and labor markets have been associated with wage inequality, but how this relationship reflects differences in worker and firm heterogeneity is still unclear. Combining linked employer-employee data from Italy with detailed information on skill demand extracted from online job vacancies, we study the relationship between wages and the demand for cognitive and social skills across labor markets defined by province, sector, and occupation. We then estimate the worker- and firm-pay components of the wage process through an AKM model and investigate their relationship with skill demand at the labor market level. We find a strong and positive association between wages and the demand for cognitive and social skills, which is pronounced when both skills are required jointly for the same job position revealing their complementarity. Our decomposition suggests that higher wages in markets in which firms more frequently demand cognitive and social skills jointly are driven by worker effects, reflecting the higher market value of a hybrid skill set, rather than by firm pay policies. Conversely, markets in which firms demand more of either cognitive or social skills only are associated to higher firm effects, suggesting that more rents are shared to specialized workers, while the market value of these specialized skills for workers is lower. These results highlight the role of worker and firm heterogeneity as channels through which skill demand differences affect overall wage inequality.