The Fatal Consequences of Brain Drain

Abstract

We examine the welfare consequences of reallocating high-skilled labor across borders. A labor demand shock in Norway—driven by a surge in oil prices— substantially increased physician wages and sharply raised the incentive for Swedish doctors to commute across the border. Leveraging linked administrative data and a difference-in-differences design, we show that this shift doubled commuting rates and significantly reduced Sweden’s domestic physician supply. The result was a persistent rise in mortality, with no corresponding health gains in Norway. These effects were unevenly distributed, disproportionately harming certain places and populations. The underlying mechanism was a severe strain on Sweden’s healthcare system: shortages of high-skilled generalists led to more hospitalizations, premature discharges, and higher readmission rates. Mortality effects were larger in low-density physician regions and concentrated in older individuals and acute conditions.