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Immigration, investment, and real wages

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  • Elise Brezis

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  • Paul Krugman

Abstract

When a country is the recipient of large-scale, politically motivated immigration -- as has been the case for Israel in recent years -- the initial impact is to reduce real wages. Over the longer term, however, the endogenous response of investment, together with increasing returns, may well actually increase real earnings. If immigration itself is not wholly exogenous, but responds to real wages, there may be multiple equilibria. That is, optimism or pessimism about the success of the economy at absorbing immigrants may constitute a self-fulfilling prophecy.
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Suggested Citation

  • Elise Brezis & Paul Krugman, 1996. "Immigration, investment, and real wages," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(1), pages 83-93, February.
  • Handle: RePEc:spr:jopoec:v:9:y:1996:i:1:p:83-93
    DOI: 10.1007/PL00003829
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    References listed on IDEAS

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    1. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    2. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
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    1. repec:bdi:workqs:qse_08 is not listed on IDEAS
    2. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
    3. BEHRENS, Kristian & SATO, Yasuhiro, 2006. "Labor market integration and migration: impacts on skill formation and the wage structure," CORE Discussion Papers 2006001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Katarzyna Budnik, 2011. "Temporary migration in theories of international mobility of labour," Bank i Kredyt, Narodowy Bank Polski, vol. 42(6), pages 7-48.
    5. Bénassy, Jean-Pascal & Brezis, Elise S., 2013. "Brain drain and development traps," Journal of Development Economics, Elsevier, vol. 102(C), pages 15-22.
    6. Tremblay, Rodrigue, 1998. "Mobilité internationale des facteurs de production en situation de chômage et de libre-échange," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(2), pages 245-271, juin.
    7. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    8. Huber, Peter & Oberdabernig, Doris A., 2016. "The impact of welfare benefits on natives' and immigrants' attitudes toward immigration," European Journal of Political Economy, Elsevier, vol. 44(C), pages 53-78.
    9. Hainmueller, Jens & Hiscox, Michael J., 2007. "Educated Preferences: Explaining Attitudes Toward Immigration in Europe," International Organization, Cambridge University Press, vol. 61(02), pages 399-442, April.
    10. Michael Beenstock & Jeffrey Fisher, 1997. "The macroeconomic effects of immigration: Israel in the 1990s," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(2), pages 330-358, June.
    11. Sarit Cohen & Chang-Tai Hsieh, 2001. "Macroeconomic and Labor Market Impact of Russian Immigration in Israel," Working Papers 2001-11, Bar-Ilan University, Department of Economics.
    12. Elise Brezis & Ariel Soueri, 2011. "Why do Students Migrate? Where do they Migrate to?," Working Papers 25, AlmaLaurea Inter-University Consortium.
    13. Davide Gandolfi & Timothy Halliday & Raymond Robertson, 2017. "Trade, FDI, migration, and the place premium: Mexico and the United States," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 1-37, February.
    14. Hainmueller, Jens & Hiscox, Michael J. & Margalit, Yotam, 2015. "Do concerns about labor market competition shape attitudes toward immigration? New evidence," Journal of International Economics, Elsevier, vol. 97(1), pages 193-207.
    15. Lucas Bretschger, 2001. "Labor Supply, Migration, and Long-Term Development," Open Economies Review, Springer, vol. 12(1), pages 5-27, January.
    16. Epstein, Gil S, 2002. "Informational Cascades and Decision to Migrate," CEPR Discussion Papers 3287, C.E.P.R. Discussion Papers.
    17. Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
    18. Yaya, Mehmet-Erdem, 2005. "Immigration, Trade and Wages in Germany," MPRA Paper 505, University Library of Munich, Germany, revised Jun 2006.
    19. Dennis Coates & T. H. Gindling, 2013. "Is Hispanic Population Dispersion Into Rural Counties Contributing To Local Economic Growth?," Contemporary Economic Policy, Western Economic Association International, vol. 31(4), pages 649-668, October.
    20. Elise S. Brezis & Ariel Soueri, 2012. "Globalization and Migration: A “Unified Brain Drain” Model," Working Papers 2012-15, Bar-Ilan University, Department of Economics.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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