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Optimal quota for sector-specific immigration

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  • Karin Mayr

Abstract

Sectoral labor supply shortage is a cause of concern in many OECD countries and has raised support for immigration as a potential remedy. In this paper, we derive a general equilibrium model with overlapping generations, where natives require a compensating wage differential for working in one sector rather than in another. We identify price and wage effects of immigration on three different groups of natives: the young working in one of two sectors and the old. We determine the outcome of a majority vote on immigration into a given sector as well as the social optimum. The main findings are that i) the old determine the majority voting outcome of positive immigration into both sectors, if natives are not mobile across sectors, ii) the young determine the majority voting outcome of zero immigration into both sectors, if natives are mobile across sectors, iii) the social optimum is smaller than or equal to the majority voting outcome, and iv) sector-specific immigration is not always a substitute for native mobility across sectors.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp254.

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Date of creation: 20 Jun 2008
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Handle: RePEc:iis:dispap:iiisdp254

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  1. Giovanni Peri & Gianmarco I.P. Ottaviano, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the U.S," Working Papers 58, University of California, Davis, Department of Economics.
  2. David Card, 1996. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Working Papers 747, Princeton University, Department of Economics, Industrial Relations Section..
  3. Felbermayr, Gabriel & Kohler, Wilhelm K., 2007. "Immigration and native welfare," Munich Reprints in Economics 20608, University of Munich, Department of Economics.
  4. Haisken-DeNew, John P. & Schmidt, Christoph M., 1999. "Industry Wage Differentials Revisited: A Longitudinal Comparison of Germany and USA (1984-1996)," IZA Discussion Papers 98, Institute for the Study of Labor (IZA).
  5. Paul W. Miller, 1999. "Immigration Policy and Immigrant Quality: The Australian Points System," American Economic Review, American Economic Association, vol. 89(2), pages 192-197, May.
  6. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  7. Klein Paul & Ventura Gustavo J, 2007. "TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-38, May.
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