Wage Effects of Labor Migration with International Capital Mobility

Wage effects of immigration are investigated in a setting with international capital mobility, which eliminates two-thirds of the native wage-effects of immigration. Without international capital mobility, overall gains from migration in the immigration region are only a small fraction of total losses to native workers, but with perfect international capital adjustment, overall gains are larger than total losses to native workers. Two alternative tax policies to eliminate the negative wage-effects of immigration on low skilled native workers are evaluated.

Introduction: Many important economic decisions are made by households, implying joint rather than individual decisions. For example, decisions regarding labor supply, savings, and investments are often made jointly within the household. This implies that such decisions will be a function of the preferences of household members and the relative influence of each household member on the joint decisions. However, it is not straightforward to measure the relative influence of spouses on joint decisions. One often used approach has been to look at who is in control of the household income and correlate this with household behavior and outcomes.

Author: Joakim Ruist, Arne Bigsten

Source: Göteborg University

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