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Migration and Diversity: Human versus Social Capital

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  • Vlad Manole
  • Maurice Schiff

Abstract

This paper examines the welfare implications associated with different degrees of diversity or similarity between migrants and natives under both migration and trade. We use a general equilibrium model of migration, human capital and social capital and find that there are three equilibrium solutions: an internal one with half the population of each country migrating to the other country, and two corner solutions where everyone ends up in one of the two countries. The internal solution is unstable and is unlikely to be reached under different levels of human capital across the two countries. The corner solutions are stable and will be reached under most circumstances. If there are human capital differences across the two populations, everyone ends up in the country with the highest initial level of human capital. Welfare under any of the equilibrium solutions rises with the diversity in human capital and decreases with the diversity in social capital between migrants and natives. Trade and both migration solutions reduce inequality between the populations of the two countries by the same amount. In addition, trade and migration are not equivalent if social capital is present: the highest welfare is obtained with migration under the corner solution, the second highest welfare is obtained with trade, and the lowest welfare is obtained with migration under the internal solution. The first two solutions (third solution) raise (may raise or reduce) welfare relative to the no-migration case.
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Suggested Citation

  • Vlad Manole & Maurice Schiff, 2013. "Migration and Diversity: Human versus Social Capital," Review of International Economics, Wiley Blackwell, vol. 21(2), pages 281-294, May.
  • Handle: RePEc:bla:reviec:v:21:y:2013:i:2:p:281-294
    DOI: 10.1111/roie.2013.21.issue-2
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    References listed on IDEAS

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    1. Thomas K. Bauer & Astrid Kunze, 2004. "The demand for high-skilled workers and immigration policy," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 47(1), pages 77-88.
    2. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 811-846.
      • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    3. Edward P. Lazear, 1999. "Culture and Language," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 95-126, December.
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    Cited by:

    1. Schiff, Maurice, 2004. "When Migrants Overstay Their Legal Welcome: A Proposed Solution to the Guest-Worker Program," IZA Discussion Papers 1401, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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