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Illegal Immigration, Factor Substitution and Economic Growth

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Abstract

This paper develops a growth model with illegal immigration in which there exist two types of domestic labor, skilled and unskilled. These two types enter the production via a CES aggregator. In a similar manner, the paper also allows for the possibility of imperfect substitution between native and immigrant labor. Within such a framework it analyzes the e ects of an increase in immigration on the average capital stock, individual wages, asset holdings and the distribution of wealth. Contrary to previous results in the literature, the paper shows that illegal immigration may not necessarily make the distribution of wealth more unequal and unskilled labor worse o . This is so because the end results depend on the elasticities of substitution between di erent types of labor. Thus, assuming erroneously that immigrants and natives are perfect substitutes could lead to results that are not only over-estimated but also of the wrong sign.

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Bibliographic Info

Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number 2011_10.

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Date of creation: Jun 2011
Date of revision: Jun 2011
Handle: RePEc:mcd:mcddps:2011_10

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Web page: http://www.uom.gr/index.php?tmima=3

Related research

Keywords: Illegal Immigration; Economic Growth; Income Distribution; Factor Sub- stitution.;

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