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Equipping immigrants: migration flows and capital movements in small open economies

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  • Douglas Gollin

    ()

  • Fabian Lange

    ()

Abstract

This paper explores the extent to which migration-related capital flows can explain the variation in investment rates and current and capital account imbalances in OECD countries. We begin with a general equilibrium model of a small open economy in which migration is exogenous. Migrants must be equipped with capital, and the resulting demands for capital will generate cross-border flows of capital. Next, we move to an empirical exercise in which we allow both capital and labor flows to be endogenous. We test this model using data from a panel of OECD countries. We conclude that migration flows do in fact generate substantial matching capital flows. We calculate that increased migration may have accounted for as much as one-fifth of the increase in the US current account deficit since 1960. Copyright Kiel Institute 2013

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File URL: http://hdl.handle.net/10.1007/s10290-013-0161-6
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Bibliographic Info

Article provided by Springer in its journal Review of World Economics.

Volume (Year): 149 (2013)
Issue (Month): 4 (December)
Pages: 749-777

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Handle: RePEc:spr:weltar:v:149:y:2013:i:4:p:749-777

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Related research

Keywords: Migration; Current Account; Investment; F16; F21; F22;

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References

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  1. Cohen-Goldner, Sarit & Paserman, Daniele, 2004. "The Dynamic Impact of Immigration on Natives' Labor Market Outcomes: Evidence from Israel," IZA Discussion Papers 1315, Institute for the Study of Labor (IZA).
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  9. Raj Chetty, 2012. "Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply," Econometrica, Econometric Society, vol. 80(3), pages 969-1018, 05.
  10. Feroli, Michael, 2006. "Demography and the U.S. current account deficit," The North American Journal of Economics and Finance, Elsevier, vol. 17(1), pages 1-16, March.
  11. Francesc Ortega & Giovanni Peri, 2009. "The Causes and Effects of International Migrations: Evidence from OECD Countries 1980-2005," Working Papers 96, University of California, Davis, Department of Economics.
  12. Jeffrey Grogger & Gordon H. Hanson, 2008. "Income Maximization and the Selection and Sorting of International Migrants," NBER Working Papers 13821, National Bureau of Economic Research, Inc.
  13. Kelley, Allen C & Schmidt, Robert M, 1996. "Saving, Dependency and Development," Journal of Population Economics, Springer, vol. 9(4), pages 365-86, November.
  14. Stuart J. Wilson, 2003. "A Dynamic General Equilibrium Analysis of Migration and Capital Formation: The Case of Canada," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 455-481, April.
  15. Kogel, Tomas, 2005. "Youth dependency and total factor productivity," Journal of Development Economics, Elsevier, vol. 76(1), pages 147-173, February.
  16. Anders Isaksson, 2009. "The UNIDO World Productivity Database: An Overview," International Productivity Monitor, Centre for the Study of Living Standards, vol. 18, pages 38-50, Spring.
  17. Higgins, Matthew, 1998. "Demography, National Savings, and International Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 343-69, May.
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