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Immigration and Outsourcing: A General Equilibrium Analysis

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Author Info
Subhayu Bandyopadhyay (Department of Economics, West Virginia University, and IZA, Bonn)
Howard J. Wall (Federal Reserve Bank of St . Louis)

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Abstract

This paper analyzes the issues of immigration and oursourcing in a general-equilibrium model of international factor mobility. In our model, legal immigration is controlled through a quota, while outsourcing is determined by the firms (in response to market conditions) and through policy-imposed barriers. A loosening of the immigration quota reduces outsourcing, enriches capitalists, leads to losses for native workers, and raises national income. If the nation targets an exogenously determined immigration level, the second-best outsourcing tax can be either positive or negative. If in addition to the immigration target there is a wage target (arising out of income distribution concerns), an outsourcing subsidy is required. The analysis is extended to consider illigal immigration if skilled and unskilled labor are complements in production. If the two kinds of labor are complements (subsitutes), national income increases (decreases) monotonically with the level of legal immigration.

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File URL: http://www.be.wvu.edu/div/econ//work/pdf_files/06-15.pdf
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Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 06-15.

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Length: 23 pages
Date of creation: 2006
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Handle: RePEc:wvu:wpaper:06-15

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  1. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall. [Downloadable!] (restricted)
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  2. Djajic, Slobodan, 1997. "Illegal Immigration and Resource Allocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 97-117, February.
  3. Gaytan-Fregoso, Helena & Lahiri, Sajal, 2000. "Foreign aid and illegal immigration," Journal of Development Economics, Elsevier, vol. 63(2), pages 515-527, December. [Downloadable!] (restricted)
  4. Bandyopadhyay, Subhayu & Bandyopadhyay, Sudeshna Champati, 1998. "Illegal immigration: a supply side analysis," Journal of Development Economics, Elsevier, vol. 57(2), pages 343-360. [Downloadable!] (restricted)
  5. Gordon H. Hanson & Antonio Spilimbergo, 1999. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," American Economic Review, American Economic Association, vol. 89(5), pages 1337-1357, December. [Downloadable!] (restricted)
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  6. Subhayu Bandyopadhyay, 2006. "Illegal Immigration and Second-best Import Tariffs," Review of International Economics, Blackwell Publishing, vol. 14(1), pages 93-103, 02. [Downloadable!] (restricted)
  7. Bond, Eric W. & Chen, Tain-Jy, 1987. "The welfare effects of illegal immigration," Journal of International Economics, Elsevier, vol. 23(3-4), pages 315-328, November. [Downloadable!] (restricted)
  8. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March. [Downloadable!] (restricted)
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  1. Barba Navaretti, Giorgio & Bertola, Giuseppe & Sembenelli, Alessandro, 2008. "Offshoring and Immigrant Employment: Firm-level Theory and Evidence," CEPR Discussion Papers 6743, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Michael Hübler, 2007. "A Simple Model of Outsourcing with Cournot Competition," Kiel Working Papers 1320, Kiel Institute for the World Economy. [Downloadable!]
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