This paper investigates the effects caused by immigration on a host country. Using 2- factor and 2-good model where one of the good is non-traded, we show that if the non- traded good is labour (capital) intensive, then: (a)the inflow of foreign workers lowers (raises) the relative price of the non-traded good, lowers (lowers) wage rate and raises (raises) the rental price of capital, and (b)those effects caused by the inflow of permanent migrants are smaller (larger) than those caused by the inflow of cross-border workers. We also demonstrate that the inflow of foreign workers gives rise to an increase in the welfare of the native inhabitants in the host country, and if the non-traded good is capital intensive, the inflow of permanent migrants are more gainful to the native inhabitants than that of cross-border workers.
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Paper provided by McGill University, Department of Economics in its series Departmental Working Papers with number
1997-01.