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Is there too little immigration? an analysis of temporary skilled migration

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Author Info
Subhayu Bandyopadhyay
Howard J. Wall

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Abstract

This paper presents a model of legal migration of temporary skilled workers from one source country to two host countries, both of which can control their levels of such immigration. Because of complementarities between capital and labor, the return on capital is positively related to the level of immigration. Consequently, when capital is immobile, host nations’ optimal levels of immigration are positively related to their capital endowments. Further, when capital is mobile between the host nations, the common return on capital is a function of the levels of immigration in both countries, meaning that immigration is a public good. As a result, when immigration imposes costs on host countries, the Nash equilibrium results in free riding and less immigration than would occur in the cooperative equilibrium. These results are qualitatively unaltered when capital mobility extends to the source nation.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2006-062.

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Date of creation: 2007
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Handle: RePEc:fip:fedlwp:2006-062

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Keywords: Emigration and immigration

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  1. Gianmarco I.P. Ottaviano & Giovanni Peri, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the U.S," NBER Working Papers 11672, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. George J. Borjas, 2001. "Does Immigration Grease the Wheels of the Labor Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2001-1), pages 69-134. [Downloadable!]
  3. Panagariya, Arvind & Schiff, Maurice, 1994. "Can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes?," Economics Letters, Elsevier, vol. 45(1), pages 79-84, May. [Downloadable!] (restricted)
  4. Scott M. Fuess, 2003. "Immigration Policy and Highly Skilled Workers: The Case of Japan," Contemporary Economic Policy, Oxford University Press, vol. 21(2), pages 243-257, April.
  5. Christian Dustmann & Arthur Van Soest, 2002. "Language and the earnings of immigrants," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(3), pages 473-492, April.
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  6. Bandyopadhyay, Subhayu, 1996. "Growth, welfare and optimal trade taxes: a fallacy of composition," Journal of Development Economics, Elsevier, vol. 50(2), pages 369-380, August. [Downloadable!] (restricted)
  7. Klaus Zimmermann, 2005. "European Labour Mobility: Challenges and Potentials," De Economist, Springer, vol. 153(4), pages 425-450, December. [Downloadable!] (restricted)
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  8. Bond, Eric W. & Chen, Tain-Jy, 1987. "The welfare effects of illegal immigration," Journal of International Economics, Elsevier, vol. 23(3-4), pages 315-328, November. [Downloadable!] (restricted)
  9. Richard B. Freeman, 2004. "Trade Wars: The Exaggerated Impact of Trade in Economic Debate," The World Economy, Blackwell Publishing, vol. 27(1), pages 1-23, 01. [Downloadable!] (restricted)
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  10. Xin Meng & Robert G. Gregory, 2005. "Intermarriage and the Economic Assimilation of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 135-176, January. [Downloadable!]
  11. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March. [Downloadable!] (restricted)
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