Seminarium: Alexander Willén, Norwegian School of Economics

Abstract (eng)

"The Fatal Consequences of Brain Drain"

This paper examines the welfare effects of reallocating high-skilled workers across borders. A domestic labor demand shock in Norway sharply raised wages, drawing Swedish doctors into cross-border commuting. Using linked individual-level data and a dose-response difference-in-differences approach, we show that this outflow of physicians doubled commuting rates, significantly reducing Sweden’s domestic doctor supply. The result was a substantial rise in mortality in Sweden, with no corresponding health gains in Norway. These effects were unevenly distributed, disproportionately harming certain places and people. The underlying mechanism was a severe strain on Sweden’s healthcare system: physician shortages—particularly young, high-skilled generalists—increased hospitalizations, led to premature discharges, raised readmission rates, and worsened health outcomes. Rising operational costs further delayed critical care. Mortality effects were concentrated in circulatory, respiratory, and infectious diseases—conditions requiring urgent intervention—suggesting that physician shortages directly undermined life-saving treatment. Our findings highlight that reallocating skilled labor can generate significant welfare losses, particularly when sending countries face constrained public services.