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Equipping Immigrants: Migration Flows and Capital Movements

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  • Fabian Lange

    ()
    (Department of Economics, Yale University)

  • Douglas Gollin

    ()
    (Department of Economics, Williams College)

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 across OECD countries. Migrants must be equipped with machines, and the resulting demands for capital are likely, all else being equal, to generate cross-border flows of capital. We analyze and test the empirical predictions of a simple model with endogenous capital and labor flows. This model allows for exogenous variation in the supply of migrant labor as well as in local production conditions. Empirically, the observed correlations in investment rates, capital and labor flows can best be explained by an inelastic supply of migrant labor and large exogenous variation in local production conditions over time compared to the exogenous variation in the supply of migrant labor. We then examine how much the increase in net migration rates contributed to the increase in the US current account deficit since 1960. Between 1960 and 2000, the US current account declined by about 4% of annual GDP. The increase in migration contributed about 1% of GDP to this decline.

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Bibliographic Info

Paper provided by Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London in its series CReAM Discussion Paper Series with number 0914.

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Date of creation: May 2009
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Handle: RePEc:crm:wpaper:0914

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  1. 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.
  2. Taylor, A.M., 1991. "Capital Flows to the New World as an Intergenerational Transfer," Harvard Institute of Economic Research Working Papers 1579, Harvard - Institute of Economic Research.
  3. Matthew Higgins & Jeffrey G. Williamson, 1996. "Asian Demography and Foreign Capital Dependence," NBER Working Papers 5560, National Bureau of Economic Research, Inc.
  4. Mario Izquierdo & Juan F. Jimeno & Juan A. Rojas, 2007. "On the aggregate effects of immigration in Spain," Banco de Espa�a Working Papers 0714, Banco de Espa�a.
  5. Susan M. Collins, 1991. "Saving Behavior in Ten Developing Countries," NBER Chapters, in: National Saving and Economic Performance, pages 349-376 National Bureau of Economic Research, Inc.
  6. 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.
  7. Christian Dustmann & Tim Hatton & Ian Preston, 2005. "The Labour Market Effects of Immigration," Economic Journal, Royal Economic Society, vol. 115(507), pages F297-F299, November.
  8. Alan M. Taylor, 2004. "Commentary : demographic changes and international factor mobility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 421-435.
  9. Timothy J. Hatton & Jeffrey G. Williamson, 2008. "Global Migration and the World Economy: Two Centuries of Policy and Performance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582775, December.
  10. Martin Feldstein & Chair, 2004. "General discussion : demographic changes and international factor mobility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 437-446.
  11. 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.
  12. John F. Helliwell, 2004. "Demographic changes and international factor mobility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 369-420.
  13. B. Douglas Bernheim & John B. Shoven, 1991. "National Saving and Economic Performance," NBER Books, National Bureau of Economic Research, Inc, number bern91-2, July.
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Cited by:
  1. Francesc Ortega & Giovanni Peri, 2009. "The Causes and Effects of International Labor Mobility: Evidence from OECD Countries 1980-2005," Human Development Research Papers (2009 to present) HDRP-2009-06, Human Development Report Office (HDRO), United Nations Development Programme (UNDP), revised Apr 2009.

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