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The Dynamic Effects of Skilled Labour Targeting in Immigration Programs

  • Richard G. Harris

    ()

    (Department of Economics, Simon Fraser University)

  • Peter E. Robertson

    ()

    (School of Economics, The University of New South Wales)

We consider the impact of the recent trend in immigration policies towards selecting migrants on the basis of skills. The analysis uses an inter-temporal general equilibrium model with endogenous skill formation. The model is calibrated to a steady state benchmark that represents Australia in 2000-2001. We then consider the impact of the increase in skilled migrants of approximately 20 thousand per year, which corresponds to the increase in flows of migrant Professionals in Australia since 2000. We find that this generates substantial crowding out of the higher Education sector in Australia. Moreover we show that, when this shock is anticipated as a permanent policy change, there is very little net increase in the stock of skilled labour due to falling student enrollments of 12%. Paradoxically, in this case, the decline in students increases the number of unskilled workers in the economy such that the ratio skilled to unskilled workers in the economy actually falls and the skill premium increases.

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File URL: http://wwwdocs.fce.unsw.edu.au/economics/Research/WorkingPapers/2007_21.pdf
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Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2007-21.

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Length: 32 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:swe:wpaper:2007-21
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  1. Hatton, Timothy J. & Williamson, Jeffrey G, 2006. "What Determines Immigrations' Impact? Comparing Two Global Centuries," CEPR Discussion Papers 5885, C.E.P.R. Discussion Papers.
  2. Bruce Chapman & Glenn Withers, 2002. "Human Capital Accumulation: Education and Immigration," CEPR Discussion Papers 452, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  3. Cobb-Clark, Deborah A., 2004. "Selection Policy and the Labour Market Outcomes of New Immigrants," IZA Discussion Papers 1380, Institute for the Study of Labor (IZA).
  4. McCulloch, Rachel & Yellen, Janet L., 1975. "Consequences of a tax on the brain drain for unemployment and income inequality in less developed countries," Journal of Development Economics, Elsevier, vol. 2(3), pages 249-264, September.
  5. Bhagwati, Jagdish & Hamada, Koichi, 1974. "The brain drain, international integration of markets for professionals and unemployment : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 1(1), pages 19-42, April.
  6. Stark, Oded & Wang, Yong, 2001. "Inducing Human Capital Formation: Migration as a Substitute for Subsidies," Economics Series 100, Institute for Advanced Studies.
  7. Paul W. Miller, 1999. "Immigration Policy and Immigrant Quality: The Australian Points System," American Economic Review, American Economic Association, vol. 89(2), pages 192-197, May.
  8. Heather Antecol & Deborah A. Cobb-Clark & Stephen J. Trejo, 2004. "Selective immigration policy in Australia, Canada, and the United States," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 47(1), pages 57-76.
  9. George J. Borjas, 2004. "Do Foreign Students Crowd Out Native Students from Graduate Programs?," NBER Working Papers 10349, National Bureau of Economic Research, Inc.
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