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Could immigration explain wage inequality in a skill-biased technological model?

Author

Listed:
  • Oscar Afonso

    () (Universidade do Porto)

  • Susana Gabriel

    () (Universidade do Porto
    Universidade Portucalense Infante D. Henrique)

  • Pedro Mazeda Gil

    () (Universidade do Porto)

Abstract

Abstract The aim of this paper is to evaluate how immigration of high-skilled workers affects the technological-knowledge bias and, in turn, the skill premium in the host countries, in particular bearing in mind the recent experience in a number of European countries. We study a skill-biased dynamic general equilibrium R&D growth model in which the standard R&D technology is modified so wage inequality results from the direction of the technological knowledge, which in turn is induced by the price channel. By solving the transitional dynamics numerically, we show that the rise of the skill premium arises from the price-channel effect, complemented with a mechanism that reflects the impact of immigration on R&D. According to our quantitative results, our model is able to account for a significant proportion of the dynamics of the skill premium in the data for a number of European countries, thus, suggesting that differences in labour skills between immigrants and natives are, in practice, an important source of skill premium variation over time.

Suggested Citation

  • Oscar Afonso & Susana Gabriel & Pedro Mazeda Gil, 2016. "Could immigration explain wage inequality in a skill-biased technological model?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(3), pages 559-577, August.
  • Handle: RePEc:kap:empiri:v:43:y:2016:i:3:d:10.1007_s10663-015-9305-3
    DOI: 10.1007/s10663-015-9305-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Immigration; Technological-knowledge bias; Wage inequality; Scale effects; Numerical simulation;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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