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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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  5. 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.
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  10. Hazari, Bharat R. & Sgro, Pasquale M., 2003. "The simple analytics of optimal growth with illegal migrants," CEPREMAP Working Papers (Couverture Orange) 0301, CEPREMAP.
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  16. 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.
  17. 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.
  18. Asadul Islam, 2009. "The substitutability of labor between immigrants and natives in the Canadian labor market: circa 1995," Journal of Population Economics, Springer, vol. 22(1), pages 199-217, January.
  19. Theodore Palivos & Chong K. Yip, 2007. "Illegal Immigration in a Heterogeneous Society," Discussion Paper Series 2007_02, Department of Economics, University of Macedonia, revised Dec 2007.
  20. 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.
  21. Theodore Palivos & Chong Yip, 2010. "Illegal immigration in a heterogeneous labor market," Journal of Economics, Springer, vol. 101(1), pages 21-47, September.
  22. Weder, Mark, 2001. "Indeterminacy in a Small Open Economy Ramsey Growth Model," Journal of Economic Theory, Elsevier, vol. 98(2), pages 339-356, June.
  23. 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.
  24. 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.
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