Immigration of Medical Workers and Variable Labour Supply

This paper studies the effects of immigration policy on the immigration of foreign medical workers on the welfare and income distribution of home medical workers and labourers. We set up a simple small open economy with two traded goods and non-traded medical care services. In the economy, there exists a constant rate of labourers who get ill health and must leave their jobs and thereby lose part of their income. But they can reduce the loss of working time and income by consuming medical services. There are two channels that consumption of the medical service affects the welfare of consumers: (i) consumption of medical service raises the state of health and increases utility, and (ii) consumption of medical service reduces the leave period of labourers and raises their wage income (labour supply-enhancing effect). We see that the above second effect makes the effective price of the medical service for the consumer lower than its market price and causes consumption bias towards the consumption of medical services. To introduce the above properties of consumption of medical service, we define the effective expenditure function of the labourers and examine its properties and conduct comparative static analyses. JEL codes: F13, F22