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Immigration, Human Capital and the Welfare of Natives

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  • Eberhard, Juan

Abstract

I analyze the effect of an unexpected influx of immigrants on the price of skill and hence on the earnings, human capital accumulation and educational attainment of native workers. In order to study these effects, I develop a general equilibrium model with heterogeneous workers who differ in their level of skill and in their ability to learn new skills. These workers accumulate human capital optimally using information about the current and future market price of skill to guide their decisions. To assess the impact of immigration, I compare simulated earnings in the presence of immigration with a series of counterfactual experiments. My findings suggest that immigration has a small negative direct effect on earnings, but a positive and relatively large impact indirectly through human capital accumulation and educational attainment. This latter mechanism explains 60% of the variations in earnings caused by immigration.

Suggested Citation

  • Eberhard, Juan, 2012. "Immigration, Human Capital and the Welfare of Natives," MPRA Paper 37844, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37844
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    References listed on IDEAS

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    Cited by:

    1. Boldrin, Michele & Montes, Ana, 2015. "Modeling an immigration shock," European Economic Review, Elsevier, vol. 74(C), pages 190-206.
    2. Hunt, Jennifer, 2012. "The Impact of Immigration on the Educational Attainment of Natives," IZA Discussion Papers 6904, Institute for the Study of Labor (IZA).
    3. Dai, Tiantian & Liu, Xiangbo & Xie, Biancen, 2013. "The impact of immigrants on host country crime," Economics Letters, Elsevier, vol. 119(2), pages 157-161.
    4. Jackson, Osborne, 2015. "Does immigration crowd natives into or out of higher education?," Working Papers 15-18, Federal Reserve Bank of Boston.
    5. Luca Marchiori & Patrice Pieretti & Benteng Zou, 2014. "Immigration, occupational choice and public employment," CREA Discussion Paper Series 14-15, Center for Research in Economic Analysis, University of Luxembourg.
    6. Peter McHenry, 2015. "Immigration and the Human Capital of Natives," Journal of Human Resources, University of Wisconsin Press, vol. 50(1), pages 34-71.
    7. Ortega, Javier & Verdugo, Gregory, 2014. "The impact of immigration on the French labor market: Why so different?," Labour Economics, Elsevier, vol. 29(C), pages 14-27.
    8. Brunello, Giorgio & Lodigiani, Elisabetta & Rocco, Lorenzo, 2017. "Does Low Skilled Immigration Cause Human Capital Polarization? Evidence from Italian Provinces," IZA Discussion Papers 11062, Institute for the Study of Labor (IZA).
    9. Akin Serife Nuray, 2012. "Immigration, Fiscal Policy, and Welfare in an Aging Population," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-45, July.

    More about this item

    Keywords

    Human Capital; Immigration; Heterogeneous Agents;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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