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Figure II.1.2: The shape of H as a function of m<br />

H<br />

HN0<br />

0<br />

3. Emigration under Risk Aversion<br />

In case of risk aversion, a constant relative risk aversion (CRRA) function is used<br />

(Harrison & al, 2005) as or , ( ), where and r<br />

is <strong>the</strong> CRRA coefficient.<br />

Under <strong>the</strong> above assumptions, <strong>the</strong> objective function is formulated as:<br />

Given <strong>the</strong> concavity of , <strong>the</strong> necessary and sufficient condition for a maximum<br />

leads to <strong>the</strong> maximal level of education to be:<br />

The aggregate stock of skilled human capital in case of risk aversion under emigration is<br />

given by:<br />

A<br />

m*<br />

Net human capital gain<br />

! )(!<br />

or:<br />

B<br />

m **<br />

Net human capital loss<br />

1<br />

m<br />

(3)

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