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Immigration and Outsourcing: A General Equilibrium Analysis

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  • Bandyopadhyay, Subhayu

    ()
    (Federal Reserve Bank of St. Louis)

  • Wall, Howard J.

    ()
    (Federal Reserve Bank of St. Louis)

Abstract

This paper analyzes the issues of immigration and outsourcing in a general-equilibrium model of international factor mobility. In our model, legal immigration is controlled through a quota, while outsourcing is determined both by the firms (in response to market conditions) and through policy-imposed barriers. A loosening of the immigration quota reduces outsourcing, enriches capitalists, leads to losses for native workers, and raises national income. If the nation targets an exogenously determined immigration level, the second-best outsourcing tax can be either positive or negative. If in addition to the immigration target there is a wage target (arising out of income distribution concerns), an outsourcing subsidy is required. The analysis is extended to consider illegal immigration and enforcement policy. A higher legal immigration quota will lead to more illegal immigration if skilled and unskilled labor are complements in production. If the two kinds of labor are complements (substitutes), national income increases (decreases) monotonically with the level of legal immigration.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1694.

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Length: 25 pages
Date of creation: Jul 2005
Date of revision:
Publication status: published in: Review of Development Economics, 2010, 14(3), 433-446
Handle: RePEc:iza:izadps:dp1694

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Keywords: outsourcing; immigration;

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  1. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 18(4), pages 93-114, Fall.
  2. Gordon H. Hanson & Antonio Spilimbergo, 1996. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," IDB Publications 6798, Inter-American Development Bank.
  3. Gaytan-Fregoso, Helena & Lahiri, Sajal, 2000. "Foreign aid and illegal immigration," Journal of Development Economics, Elsevier, Elsevier, vol. 63(2), pages 515-527, December.
  4. Djajic, Slobodan, 1997. "Illegal Immigration and Resource Allocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 97-117, February.
  5. Bandyopadhyay, Subhayu & Bandyopadhyay, Sudeshna Champati, 1998. "Illegal immigration: a supply side analysis," Journal of Development Economics, Elsevier, Elsevier, vol. 57(2), pages 343-360.
  6. Subhayu Bandyopadhyay, 2006. "Illegal Immigration and Second-best Import Tariffs," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 14(1), pages 93-103, 02.
  7. Djajic, Slobodan, 1987. "Illegal aliens, unemployment and immigration policy," Journal of Development Economics, Elsevier, Elsevier, vol. 25(1), pages 235-249, February.
  8. Bond, Eric W. & Chen, Tain-Jy, 1987. "The welfare effects of illegal immigration," Journal of International Economics, Elsevier, Elsevier, vol. 23(3-4), pages 315-328, November.
  9. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, American Economic Association, vol. 76(1), pages 56-71, March.
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Cited by:
  1. Barba Navaretti, Giorgio & Bertola, Giuseppe & Sembenelli, Alessandro, 2008. "Offshoring and Immigrant Employment: Firm-level Theory and Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6743, C.E.P.R. Discussion Papers.
  2. Simontini Das & Ajitava Raychaudhuri & Saikat Sinha Roy, 2012. "Immigration Versus Outsourcing: A Developing Country¡¯S View," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, Chung-Ang Unviersity, Department of Economics, vol. 37(2), pages 109-138, June.
  3. Cosimo Beverelli & Gianluca Orefice & Nadia Rocha, 2011. "Offshoring and Migration in a World with Policy Spillovers," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 11105, Institut d'Economie et Econométrie, Université de Genève.
  4. Michael Hübler, 2007. "A Simple Model of Outsourcing with Cournot Competition," Kiel Working Papers, Kiel Institute for the World Economy 1320, Kiel Institute for the World Economy.

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