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Immigration, Investment and Real Wages

  • Elise S. Brezis
  • Paul Krugman

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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4563.

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Date of creation: Dec 1993
Date of revision:
Publication status: published as Journal of Population Economics, Vol. 9, no. 1 (1996): 83-93.
Handle: RePEc:nbr:nberwo:4563
Note: ITI
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  1. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  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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