Is there too little immigration? An analysis of temporary skilled migration

This paper presents a model of legal migration of temporary skilled workers from one source country to two host countries, both of which can control their levels of such immigration. Because of complementarities between capital and labor, the return on capital is positively related to the level of i...

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Bibliographic Details
Published in:The journal of international trade & economic development 2008-06, Vol.17 (2), p.197-211
Main Authors: Bandyopadhyay, Subhayu, Wall, Howard J.
Format: Article
Language:English
Subjects:
assimilation costs
Capital mobility
Capital movement
Economic models
Externalities
Game theory
Immigration
Labour migration
Migrant workers
Nash equilibrium
optimal immigration
Public goods
skilled immigration
Skilled workers
Studies
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Summary:This paper presents a model of legal migration of temporary skilled workers from one source country to two host countries, both of which can control their levels of such immigration. Because of complementarities between capital and labor, the return on capital is positively related to the level of immigration. Consequently, when capital is immobile, host nations' optimal levels of immigration are positively related to their capital endowments. Further, when capital is mobile between the host nations, the common return on capital is a function of the levels of immigration in both countries, meaning that immigration is a public good. As a result, when immigration imposes costs on host countries, the Nash equilibrium results in free riding and less immigration than would occur in the cooperative equilibrium. These results are qualitatively unaltered when capital mobility extends to the source nation.
ISSN:0963-8199
1469-9559
DOI:10.1080/09638190701872616