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Guest worker programs: A theoretical analysis of welfare of the host and source countries


  • Slobodan Djajić
  • Michael S. Michael


This article examines the interaction between migration policies of the host and source countries in the context of a model of guest-worker migration. For the host, the objective is to provide low-cost labor for its employers while avoiding illegal immigration. It optimizes over these objectives by setting the time limit of a guest-worker permit. The source country seeks remittance flows and return migration by offering fiscal benefits to returnees. Within this framework, we solve for the Nash equilibrium values of the migration policy instruments and compare them, to the extent possible, with the ones that emerge in a cooperative setting.

Suggested Citation

  • Slobodan Djajić & Michael S. Michael, 2013. "Guest worker programs: A theoretical analysis of welfare of the host and source countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(3), pages 454-475, April.
  • Handle: RePEc:taf:jitecd:v:22:y:2013:i:3:p:454-475 DOI: 10.1080/09638199.2011.566932

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    References listed on IDEAS

    1. Catalina Amuedo-Dorantes, 2006. "Remittances and their microeconomic impacts: evidence from Latin America," Proceedings, Federal Reserve Bank of Dallas, pages 187-197.
    2. Alan de Brauw & Scott Rozelle, 2003. "Household Investment through migration in Rural China," Department of Economics Working Papers 2003-01, Department of Economics, Williams College.
    3. James F. Hollifield & Pia M. Orrenius & Thomas Osang, 2006. "Migration, trade, and development: an overview," Proceedings, Federal Reserve Bank of Dallas, pages 3-8.
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    Cited by:

    1. Djajic, Slobodan & Mesnard, Alice, 2014. "Guest Workers in the Underground Economy," CEPR Discussion Papers 10074, C.E.P.R. Discussion Papers.
    2. Slobodan Djajic, 2014. "Guest-Worker Programs," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(2), pages 16-19, 07.
    3. Slobodan Djajic & Alice Mesnard, 2013. "Guest Workers in the Underground Economy," CReAM Discussion Paper Series 1324, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    4. repec:ces:ifodic:v:12:y:2014:i:2:p:19116207 is not listed on IDEAS
    5. Djajic, S. & Mesnard, A., 2013. "Guest Workers in the Underground Economy," Working Papers 13/05, Department of Economics, City University London.
    6. Djajić, Slobodan & Mesnard, Alice, 2015. "Guest workers in the underground economy," Labour Economics, Elsevier, vol. 35(C), pages 53-62.
    7. Slobodan Djajić & Alice Mesnard, 2013. "Guest Workers in the Underground Economy," IHEID Working Papers 15-2013, Economics Section, The Graduate Institute of International Studies.

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