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The Dynamic Effects of Changes to Japanese Immigration Policy

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  • Phillips, Kerk L.

Abstract

This paper constructs a multi-sector dynamic general equilibrium model for a trading economy. We incorporate three major factors of production: capital, skilled labor & unskilled labor. We solve and calibrate the model using data from Japan. We then consider changes to immigration policy. We are able to examine the effects on output, consumption, wages, and utility. We do this for both the new steady state and for the time-path leading to that steady state. In addition, we are able, if we so wish, to impose a series of unrelated macroeconomic shock to the model. This has the advantage of allowing us to calculate confidence bands around our policy impulse response functions. We find that allowing skilled labor to immigrate leads to greater welfare gains in the steady state. However, even with exclusively unskilled immigration, existing workers are made slightly better off on average when immigration restrictions are relaxed. We also show that there is a great deal of uncertainty surrounding the exact time path to a new steady state in the presence of the typical fluctuations associated with business cycles. We find a great deal of inertia in the transition to a new steady state.

Suggested Citation

  • Phillips, Kerk L., 2010. "The Dynamic Effects of Changes to Japanese Immigration Policy," MPRA Paper 23673, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:23673
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    References listed on IDEAS

    as
    1. Phillips, Kerk L., 2010. "A Dynamic General Equilibrium Analysis of Japanese & Korean Immigration," MPRA Paper 23501, University Library of Munich, Germany.
    2. Samuel de Abreu Pessoa & Silvia Matos Pessoa & Rafael Rob, 2005. "Elasticity of Substitution between Capital and Labor and its applications to growth and development," PIER Working Paper Archive 05-012, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Marimon, Ramon & Scott, Andrew (ed.), 1999. "Computational Methods for the Study of Dynamic Economies," OUP Catalogue, Oxford University Press, number 9780198294979.
    4. Christiano, Lawrence J, 2002. "Solving Dynamic Equilibrium Models by a Method of Undetermined Coefficients," Computational Economics, Springer;Society for Computational Economics, vol. 20(1-2), pages 21-55, October.
    5. Scott M. Fuess, 2003. "Immigration Policy and Highly Skilled Workers: The Case of Japan," Contemporary Economic Policy, Western Economic Association International, vol. 21(2), pages 243-257, April.
    6. Goto, Junichi, 1998. "The impact of migrant workers on the Japanese economy: Trickle vs. flood," Japan and the World Economy, Elsevier, vol. 10(1), pages 63-83, January.
    7. Yong-Yil Choi, 2004. "The macroeconomic impact of foreign labour influx into the industrialized nation state and the complementary policies," Applied Economics, Taylor & Francis Journals, vol. 36(10), pages 1057-1063.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    labor migration; factor mobility; dynamic general equilibrium; Japan;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F15 - International Economics - - Trade - - - Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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