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Welfare Effects of Labor Migration

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  • Vikhrov Dmytro

Abstract

The developed theoretical model analyzes the welfare effects of labor migration. I find that for the receiving country immigration enhances welfare as long as the marginal benefits to the natives' income exceed the social costs of immigration. Over-emigration of workers generated by free mobility is welfare detrimental to the source country because of the diaspora effect - migrants negatively affect their own income. The source country prefers to coordinate the immigration quota with the destination country, because the coordinated solution internalizes the negative diaspora effect. Contrary to popular opinion, under certain conditions unilateral enforcement of the immigration quota benefits the source country also, because it reduces the extent of the migrants' income decline.

Suggested Citation

  • Vikhrov Dmytro, 2013. "Welfare Effects of Labor Migration," CERGE-EI Working Papers wp491, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp491
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    References listed on IDEAS

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    More about this item

    Keywords

    migration costs; wage effect; immigration policy; coordination;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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