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A New Look at the Impact of Migration on the Wage Differential

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  • Hsiao-Chuan Chang

Abstract

The impact of migrants on the host country's wages has been an important issue for policy makers and has attracted much research attention. Since no consistent conclusion has been reached regarding this impact, the debate over immigration policy continues in many countries. This paper constructs a theoretical dynamic general equilibrium model by which the transitional and long-run effects of a migration shock on endogenous variables, including the wage differential, can be illuminated. Consistent results from different scenarios are obtained: first, the wage differential is boosted by permanent migrants in both the short and long run; second, if migrants stay temporarily, the wage differential increases in the short run and the effect dies out in the long run; third, unskilled migrants have a smaller effect on the wage differential while engaging in unskilled-labour intensive production than in skilled-labour intensive production; fourth permanent migrants impel domestic workers to upgrade skills by demanding an increased amount of education.

Suggested Citation

  • Hsiao-Chuan Chang, 2001. "A New Look at the Impact of Migration on the Wage Differential," Department of Economics - Working Papers Series 827, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:827
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    File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-00-01/827.pdf
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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D10 - Microeconomics - - Household Behavior - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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