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Two-way migration between similar countries

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  • Kreickemeier, Udo
  • Wrona, Jens

Abstract

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.

Suggested Citation

  • Kreickemeier, Udo & Wrona, Jens, 2011. "Two-way migration between similar countries," University of Tübingen Working Papers in Business and Economics 1, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
  • Handle: RePEc:zbw:tuewef:1
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    Cited by:

    1. Dequiedt, Vianney & Zenou, Yves, 2013. "International migration, imperfect information, and brain drain," Journal of Development Economics, Elsevier, vol. 102(C), pages 62-78.
    2. Inga Heiland, 2017. "Five Essays on International Trade, Factor Flows and the Gains from Globalization," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 74, December.
    3. Inga Heiland & Wilhelm Kohler, 2013. "Heterogeneous Workers, Trade, and Migration," CESifo Working Paper Series 4387, CESifo.
    4. Nikolaj Malchow‐Møller & Jakob Roland Munch & Jan Rose Skaksen, 2019. "Do Foreign Experts Increase the Productivity of Domestic Firms?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 517-546, April.
    5. Céline Bonnet & Jan Philip Schain, 2020. "An Empirical Analysis of Mergers: Efficiency Gains and Impact on Consumer Prices," Post-Print hal-02952921, HAL.
    6. Bonnet, Céline & Schain, Jan Philip, 2017. "An empirical analysis of mergers: Efficiency gains and impact on consumer prices," DICE Discussion Papers 244, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    7. Florian Knauth & Jens Wrona, 2018. "There and Back Again: A Simple Theory of Planned Return Migration," CESifo Working Paper Series 7388, CESifo.
    8. Knauth, Florian & Wrona, Jens, 2018. "There and back again: A simple theory of planned return migration," DICE Discussion Papers 290, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    Keywords

    Migration; Skilled Workers; Positive Assortative Matching; Externalities;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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