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Indeterminacy in a Dynamic Small Open Economy with International Migration

  • Carmelo Pierpaolo Parello

In this paper we present a dynamic small open economy version of the standard neoclassical model of exogenous growth where we allow for international migration. We consider both the case of perfect world capital markets and the case of imperfect capital markets and show that local indeterminacy always arises independently of the capital market regime. Also, we show that the competitive equilibrium fails to reach the social optimum and that the only policy capable of establishing the …rst best is tax capital earnings. Our analysis thus supports the view that all the policy actions that aim at restricting migration ‡ows are always ine¤ective to achieve the …rst best.

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Paper provided by University of Rome La Sapienza, Department of Public Economics in its series Working Papers with number 159.

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Length: 33
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:sap:wpaper:wp159
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  1. Kemnitz, Alexander & Wigger, Berthold U., 2000. "Growth and social security: the role of human capital," European Journal of Political Economy, Elsevier, vol. 16(4), pages 673-683, November.
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  3. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
  4. Weder, Mark, 2000. "Indeterminacy in a Small Open Economy Ramsey Growth Model," CEPR Discussion Papers 2585, C.E.P.R. Discussion Papers.
  5. David Card, 2009. "Immigration and Inequality," NBER Working Papers 14683, National Bureau of Economic Research, Inc.
  6. Theodore Palivos & Chong Yip, 2010. "Illegal immigration in a heterogeneous labor market," Journal of Economics, Springer, vol. 101(1), pages 21-47, September.
  7. Chassamboulli, Andri & Palivos, Theodore, 2010. ""Give me your Tired, your Poor," so I can Prosper: Immigration in Search Equilibrium," MPRA Paper 32379, University Library of Munich, Germany.
  8. Liu, Xiangbo, 2010. "On the macroeconomic and welfare effects of illegal immigration," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2547-2567, December.
  9. Theodore Palivos, 2007. "Welfare effects of illegal immigration," Discussion Paper Series 2007_01, Department of Economics, University of Macedonia, revised Dec 2007.
  10. Hazari, Bharat R. & Sgro, Pasquale M., 2003. "The simple analytics of optimal growth with illegal migrants," Journal of Economic Dynamics and Control, Elsevier, vol. 28(1), pages 141-151, October.
  11. Willem H. Buiter, 1983. "Predetermined and Non-Predetermined Variables in Rational Expectations Models," NBER Technical Working Papers 0021, National Bureau of Economic Research, Inc.
  12. Borjas, George J, 1983. "The Substitutability of Black, Hispanic, and White Labor," Economic Inquiry, Western Economic Association International, vol. 21(1), pages 93-106, January.
  13. Moy, Hon Man & Yip, Chong K., 2006. "The simple analytics of optimal growth with illegal migrants: A clarification," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2469-2475, December.
  14. Rodriguez, Carlos Alfredo, 1975. "On the Welfare Aspects of International Migration," Journal of Political Economy, University of Chicago Press, vol. 83(5), pages 1065-72, October.
  15. Ather H. Akbari & Don J. Devoretz, 1992. "The Substitutability of Foreign-Born Labour in Canadian-Production: Circa 1980," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 604-14, August.
  16. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  17. Asadul, Islam, 2008. "The Substitutability of Labor between Immigrants and Natives in the Canadian Labor Market: Circa 1995," MPRA Paper 7164, University Library of Munich, Germany.
  18. Eicher, Theo S & Turnovsky, Stephen J, 1999. "Non-scale Models of Economic Growth," Economic Journal, Royal Economic Society, vol. 109(457), pages 394-415, July.
  19. Theodore Palivos & Jianpo Xue & Chong K. Yip, 2011. "Illegal Immigration, Factor Substitution and Economic Growth," Discussion Paper Series 2011_10, Department of Economics, University of Macedonia, revised Jun 2011.
  20. George J. Borjas, 1985. "The Sensitivity of Labor Demand Functions to Choice of Dependent Variable," NBER Working Papers 1624, National Bureau of Economic Research, Inc.
  21. William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers 244, Cowles Foundation for Research in Economics, Yale University.
  22. Galor, Oded, 1986. "Time preference and international labor migration," Journal of Economic Theory, Elsevier, vol. 38(1), pages 1-20, February.
  23. Ortigueira, Salvador & Santos, Manuel S, 1997. "On the Speed of Convergence in Endogenous Growth Models," American Economic Review, American Economic Association, vol. 87(3), pages 383-99, June.
  24. Theodore Palivos & Chong K. Yip, 2007. "Illegal Immigration in a Heterogeneous Society," Departmental Working Papers _188, Chinese University of Hong Kong, Department of Economics.
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