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Immigration, Human Capital and the Welfare of Natives

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  • Eberhard, Juan

Abstract

I analyze the effect of an unexpected influx of immigrants on the price of skill and hence on the earnings, human capital accumulation and educational attainment of native workers. In order to study these effects, I develop a general equilibrium model with heterogeneous workers who differ in their level of skill and in their ability to learn new skills. These workers accumulate human capital optimally using information about the current and future market price of skill to guide their decisions. To assess the impact of immigration, I compare simulated earnings in the presence of immigration with a series of counterfactual experiments. My findings suggest that immigration has a small negative direct effect on earnings, but a positive and relatively large impact indirectly through human capital accumulation and educational attainment. This latter mechanism explains 60% of the variations in earnings caused by immigration.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37844.

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Date of creation: Mar 2012
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Handle: RePEc:pra:mprapa:37844

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Keywords: Human Capital; Immigration; Heterogeneous Agents;

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References

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  1. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," NBER Working Papers 9055, National Bureau of Economic Research, Inc.
  2. Storesletten, Kjetil, 2001. "Fiscal Implications of Immigration - A Net Present Value Calculation -," Seminar Papers 701, Stockholm University, Institute for International Economic Studies.
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  16. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
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  21. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-75, April.
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Cited by:
  1. Jennifer Hunt, 2012. "The Impact of Immigration on the Educational Attainment of Natives," NBER Working Papers 18047, National Bureau of Economic Research, Inc.
  2. Dai, Tiantian & Liu, Xiangbo & Xie, Biancen, 2013. "The impact of immigrants on host country crime," Economics Letters, Elsevier, vol. 119(2), pages 157-161.

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