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Differential Migration Prospects, Skill Formation, and Welfare

  • Oded Stark
  • Roman Zakharenko

This paper develops a one sector, two-input model with endogenous human capital formation. The two inputs are two types of skilled labor: “engineering,” which exerts a positive externality on total factor productivity, and “law,” which does not. The paper shows that a marginal prospect of migration by engineers increases human capital accumulation of both types of workers (engineers and lawyers), and also the number of engineers who remain in the country. These two effects are socially desirable, since they move the economy from the (inefficient) free-market equilibrium towards the social optimum. The paper also shows that if the externality effect of engineering is sufficiently powerful, everyone will be better off as a consequence of the said prospect of migration, including the engineers who lose the migration “lottery,” and even the individuals who practice law.

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File URL: http://hdl.handle.net/10.1111/j.1467-9396.2012.01045.x
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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 20 (2012)
Issue (Month): 4 (09)
Pages: 657-673

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Handle: RePEc:bla:reviec:v:20:y:2012:i:4:p:657-673
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  1. Giordani, Paolo & Ruta, Michele, 2009. "The Immigration Policy Puzzle," MPRA Paper 23584, University Library of Munich, Germany.
  2. Paul A. David, 2005. "Reforming the Taxation of Human Capital: A Modest Proposal for Promoting Economic Growth," HEW 0502002, EconWPA.
  3. Iyigun, Murat F & Owen, Ann L, 1999. " Entrepreneurs, Professionals, and Growth," Journal of Economic Growth, Springer, vol. 4(2), pages 213-32, June.
  4. Murat F. Iyigun & Ann L. Owen, 1997. "Risk, entrepreneurship and human capital accumulation," Finance and Economics Discussion Series 1997-37, Board of Governors of the Federal Reserve System (U.S.).
  5. David N. Weil, 2005. "Accounting for the Effect of Health on Economic Growth," NBER Working Papers 11455, National Bureau of Economic Research, Inc.
  6. Paul A. David, 2005. "Two Centuries of American Macroeconomic Growth From Exploitation of Resource Abundance to Knowledge-Driven Development," Macroeconomics 0502021, EconWPA.
  7. Stark, Oded & Casarico, Alessandra & Devillanova, Carlo & Uebelmesser, Silke, 2012. "On the formation of international migration policies when no country has an exclusive policy-setting say," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 420-429.
  8. Paul A. David, 2005. "THE TALE OF TWO TRAVERSES Innovation and Accumulation in the First Two Centuries of U.S. Economic Growth," Macroeconomics 0502019, EconWPA.
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