This paper analyzes the welfare effect of illegal immigration on the host country within a dynamic general equilibrium framework and shows that it is positive for two reasons. First, immigrants are paid less than their marginal product and second, following an increase in immigration, domestic households find it optimal to increase their holdings of capital. It is also shown that dynamic inefficiency may arise, despite the fact that the model is of the Ramsey type. Nevertheless, the introduction of a minimum wage, which leads to job competition between domestic unskilled workers and immigrants reverses all of the above results.
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Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number
2007_01.
Find related papers by JEL classification: F2 - International Economics - - International Factor Movements and International Business O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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