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A New Look at the Impact of Migration on the Wage Differential

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  • Hsiao-Chuan Chang
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    Abstract

    The impact of migrants on the host country's wages has been an important issue for policy makers and has attracted much research attention. Since no consistent conclusion has been reached regarding this impact, the debate over immigration policy continues in many countries. This paper constructs a theoretical dynamic general equilibrium model by which the transitional and long-run effects of a migration shock on endogenous variables, including the wage differential, can be illuminated. Consistent results from different scenarios are obtained: first, the wage differential is boosted by permanent migrants in both the short and long run; second, if migrants stay temporarily, the wage differential increases in the short run and the effect dies out in the long run; third, unskilled migrants have a smaller effect on the wage differential while engaging in unskilled-labour intensive production than in skilled-labour intensive production; fourth permanent migrants impel domestic workers to upgrade skills by demanding an increased amount of education.

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    Bibliographic Info

    Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 827.

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    Length: 28 pages
    Date of creation: 2001
    Date of revision:
    Handle: RePEc:mlb:wpaper:827

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