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Equipping immigrants: migration flows and capital movements in small open economies

  • Douglas Gollin

    ()

  • Fabian Lange

    ()

This paper explores the extent to which migration-related capital flows can explain the variation in investment rates and current and capital account imbalances in OECD countries. We begin with a general equilibrium model of a small open economy in which migration is exogenous. Migrants must be equipped with capital, and the resulting demands for capital will generate cross-border flows of capital. Next, we move to an empirical exercise in which we allow both capital and labor flows to be endogenous. We test this model using data from a panel of OECD countries. We conclude that migration flows do in fact generate substantial matching capital flows. We calculate that increased migration may have accounted for as much as one-fifth of the increase in the US current account deficit since 1960. Copyright Kiel Institute 2013

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File URL: http://hdl.handle.net/10.1007/s10290-013-0161-6
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Article provided by Springer in its journal Review of World Economics.

Volume (Year): 149 (2013)
Issue (Month): 4 (December)
Pages: 749-777

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Handle: RePEc:spr:weltar:v:149:y:2013:i:4:p:749-777
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