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Two-way migration between similar countries

  • Kreickemeier, Udo
  • Wrona, Jens

We develop a model to explain two-way migration of high-skilled individuals between countries that are similar in their economic characteristics. High-skilled migration is explained by a combination of two features: In both countries there is a continuum of workers with differing abilities, which are private knowledge, and the production technology gives incentives to firms for hiring workers of similar ability. In the presence on migration cost, high-skilled workers self-select into the group of migrants, thereby ensuring they are hired together with other high-skilled migrants. The laissez-faire equilibrium features too much migration, explained by a negative migration externality, and as a result all individuals are worse of than in autarky. We also show that for suffciently low levels of migration cost the optimal level of migration is strictly positive. In extensions to our basic model, we consider the presence of an internationally immobile factor and find that in this case the possibility of aggregate gains from migration in the laissez-faire equilibrium emerges. We also show that our basic results are robust with respect to small differences in countries' technologies.

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Paper provided by University of Tuebingen, Faculty of Economics and Social Sciences in its series University of Tuebingen Working Papers in Economics and Finance with number 1.

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Date of creation: 2011
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Handle: RePEc:zbw:tuewef:1
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  1. Fredrik Andersson & Mónica García-Pérez & John Haltiwanger & Kristin McCue & Seth Sanders, 2014. "Workplace Concentration of Immigrants," Demography, Springer, vol. 51(6), pages 2281-2306, December.
  2. Hendricks, Lutz, 2001. "The Economic Performance of Immigrants: A Theory of Assortative Matching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 417-49, May.
  3. Giannetti, Mariassunta, 2003. "On the mechanics of migration decisions: skill complementarities and endogenous price differentials," Journal of Development Economics, Elsevier, vol. 71(2), pages 329-349, August.
  4. Docquier, Frederic & Marfouk, Abdeslam, 2004. "Measuring the international mobility of skilled workers (1990-2000) : release 1.0," Policy Research Working Paper Series 3381, The World Bank.
  5. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
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