Welfare Effects of Immigration Policies in the Presence of Skilled,Unskilled Labor and Capital Mobility

This paper investigates the welfare consequences of immigration policies in a model with two types of labor, skilled and unskilled, and international capital mobility. The paper examines the effect of government policies, which change the immigration cost and cause immigration of one type of labor, on the welfare of natives, when the other types of labor and/or capital are also mobile. It is shown, for example, in the absence of capital mobility, if skilled and unskilled labor are highly complementary in production, then a decrease in the immigration cost of the net fiscal contributor skilled labor that causes its immigration, decreases the welfare of natives.     

Public consumer goods, output-generated variable returns, and labor supply

This paper develops a simple general-equilibrium model of a closed economy. The economy under consideration produces two final goods, one private and one public, which are both produced with labor and an intermediate good under constant returns to scale. The intermediate good is produced by labor alone, and its production is subject to output-generated variable returns to scale. The public good can be interpreted as government spending on environmental quality, police protection, cultural activities, and publicly funded health care. The model is used to examine the impact of an exogenous change in labor supply on the size of the government, relative prices, and welfare. Within the context of the present study, an increase in labor supply can be attributed to either exogenous immigration or population growth. The model is also used to examine the relationship between the size of the country and the pattern of trade.     

影响非正规就业安全性的因素分析

非正规就业作为多种就业形式之一在促进中国经济增长、缓解日益严重的就业压力方面起着越来越重要的作用。但同时在当下劳动力市场中非正规就业的安全性却受到了严峻的挑战。影响非正规就业安全性的主要因素表现为非正规就业者贫乏的社会资本以及本身偏低的人力资本存量、强资本弱劳工的社会格局;歧视性的政策惯性;不完善的劳动力市场以及缺位的社会服务体系。     

Capital–skill complementarity and the immigration surplus

We build a neoclassical growth model with overlapping dynasties and capital–skill complementarities to evaluate changes in immigration policy. Calibrating the model using US data, we quantify the differential effects of skilled and unskilled immigration on factor returns and on the welfare of different sectors of the population. An influx of high-skilled immigrants lowers the wages of skilled workers, raises the wages of unskilled workers, and because of the relative complementarity between capital and skilled labor, substantially raises the rate of return to native-owned capital. By contrast, an influx of unskilled immigrants produces an opposite effect on wages, and has only a negligible effect on the return to capital. Because of capital–skill complementarity, an increase in the number of skilled immigrants generates an immigration surplus—the overall welfare benefit accruing to the native population—that is approximately ten times larger than the immigration surplus generated by an identical increase in the number of unskilled immigrants. This differential welfare effect is far higher than can be accounted for by the disparity between the productivities of each type of worker.     

Changes in income distribution and welfare from greater immigration of unskilled workers

This paper considers the consequences of greater immigration of unskilled labor on income distribution and welfare in the receiving country. To address these issues, both the sending and receiving countries are represented in a static general equilibrium model which distinguishes between skilled and unskilled labor and which allows prices to be determined endogenously. In this framework an inflow of unskilled labor is likely to reduce wages of unskilled labor, but whether capital or skilled labor benefits depends upon demand elasticities, elasticities of substitution in production, and differences across countries in the productivity of unskilled labor. National welfare in the receiving country is likely to rise, to the extent that the relative price of importable goods falls, non-residents already in the country receive lower wages, immigrants receive lower wages than those paid to domestic workers, and immigrants cause little increased demand for public services and transfer programs.     

Sectoral labor adjustment and monetary policy in a small open economy

This paper studies the welfare implications of sectoral labor adjustment cost in a two-sector small open economy model with sticky prices. We find that, when the economy faces external shocks, if monetary policy can stabilize the real economy, then sectoral labor market adjustment cost will lead to welfare loss. However, if monetary policy such as fixed exchange rates cannot stabilize real variables, then some degree of labor market friction will improve welfare instead and the gain will be significant. As a result, the welfare gap between flexible exchange rates and fixed exchange rates decreases with sectoral labor market friction. This is because the friction can offset some of the nominal rigidity and become a substitute for monetary policy to stabilize the real economy.     

Countries, regions and trade: On the welfare impacts of economic integration

We study the impact of falling international trade costs and falling national transport costs on the economic geography of countries involved in an integration process. Each country is formed by two regions between which labor is mobile, whereas there is no international mobility. Goods can be traded both nationally and internationally at positive, but different, costs. A decrease in trade costs and/or in transport costs has a direct impact on prices and wages, which allows us to account for the impact of changes in these parameters on the economic geography and welfare of each country. We show that, as trade barriers fall, the benefits of integration come after its costs. We also show that national transport policies are of the beggar-thy-neighbor type. On both counts, policy coordination is required in the process of economic integration.     

Illegal immigration in the presence of labor unions

"This paper develops a general equilibrium framework of a two-sector economy which incorporates illegal immigration in the presence of labor unions. It demonstrates that stricter enforcement of immigration laws, by reducing the demand for or supply of illegal aliens, benefits all legal workers in the economy. The model is used to evaluate the impact of these policy changes on national income. Results indicate that national income does not necessarily fall when immigration controls are tightened. The existence of a union mitigates the negative welfare impact of a reduction in the number of illegal immigrants."     

IMMIGRATION AND NATIVE WELFARE*

This article unifies two approaches for identifying the welfare and wage effects of immigration, one emphasizing the immigration surplus, the other stressing a potential welfare loss due to a terms‐of‐trade effect. We decompose the native welfare effect into a standard complementarity effect, augmented by a Stolper–Samuelson effect, and a terms‐of‐trade effect. We illustrate the welfare and wage effects of endogenous goods prices in a stylized‐specific factors model. Finally, we calibrate this model to a generic OECD economy and provide simulation results. The key insight is that endogenous goods prices play a quantitatively important role, sometimes even overturning received results.     

General Equilibrium Impacts of Monetary and Fiscal Policies on Welfare of Households in South Asia

Impacts of fiscal and monetary policies are assessed in an open economy two sector multi‐household general equilibrium tax model with money for South Asia. Despite impressive growth rates there is evidence for alarming gaps in the distribution of income among households that require very careful design of economic policies. Generally the impacts of fiscal expansions are positive for all categories of households under the flexible price system but the gains are much higher for households in the upper income group than for those in the bottom. In theory the equilibrium relative prices guarantee the optimal allocation of resources in such economy. Simulation results show that demand, output and employment are sensitive to the preferences of consumers, confidence of producers and sector specific production technologies. Monetary policy is super‐neutral under flexible price regime but can complement fiscal policy well when aggregate prices are made sticky. Combination of monetary and fiscal policies in this manner can have extensive impacts in efficiency and redistribution. Higher taxes distort incentives to work and investment from richer households slowing down the economy. This reduces the welfare level of both rich and poor. Flexibility in prices enhances the market mechanism and makes the fiscal policy more effective and efficient.     

Immigration and remittances in a two-country model of growth with labor market frictions

We present a North-South model with labor market frictions and labor migration to study the dynamic implications of workers mobility on employment, capital accumulation and welfare. In the baseline model, the Northern country is able to control immigration flows by setting a cap on the number of foreign workers. We find that, despite an increase in migration displaces native employment in the short-run, a permanent raise of the migration cap stimulates capital accumulation, improves labor market conditions and increases social welfare in the long run. In an extension of the model, we also test the long-run effects of a pro-employment protectionist policy consisting in imposing a distortionary tax on immigrant employment. We find that the protectionist policy in North, while increasing national welfare, damages the macroeconomic performance of the domestic economy and is not effective in improving native employment.     

A general equilibrium analysis of parental leave policies

Despite mandatory parental leave policies being a prevalent feature of labor markets in developed countries, their aggregate effects in the economy are not well understood. To assess their quantitative impact, we develop a general equilibrium model of fertility and labor market decisions that builds on the labor matching framework of Mortensen and Pissarides (1994). We find that females gain substantially with generous policies but this benefit occurs at the expense of a reduction in the welfare of males. Leave policies have important effects on fertility, leave taking decisions, and employment. These effects are mainly driven by how the policy affects bargaining – young females anticipate future states with higher threat points induced by the policy. Because the realization of these states depends on the decisions of females to give birth and take a leave, leave policies effectively subsidize fertility and leave taking. We also find that generous paid parental leaves can be an effective tool to encourage mothers to spend time with their children after giving birth.     

Can Understanding Spatial Equilibria Enhance Benefit Transfers for Environmental Policy Evaluation?

A conceptual model of consumer sorting in markets for housing, labor and health care is outlined and used to make three points about how benefit transfers are used for environmental policy evaluation. First, the standard approach to assessing benefits of air quality improvements by transferring the value of a statistical life from labor market studies embeds several untested (but testable) assumptions. Second, if the cost of an environmental policy exceeds its capitalized effect on housing prices, then the capitalization effect is an insufficient statistic for determining whether benefits exceed costs. Third, there are several ways in which equilibrium sorting models may be usefully extended to assess distributional welfare effects of environmental policies.     

Quantifying the impact of services liberalization in a developing country

We compare goods versus services liberalization in terms of welfare, outputs, and factor prices in Tunisia using a CGE model with multiple products, services and trading partners. Restraints on services trade involve both cross-border supply (tariff-equivalent price wedges) and on foreign ownership (monopoly-rent distortions and inefficiency costs). Goods-trade liberalization yields a modest gain in aggregate welfare. Reducing service barriers generate relatively large welfare gains and low adjustment costs. Services liberalization increases economic activity in all sectors and raise the real returns to both capital and labor. The results point to the potential importance of deregulating services provision for economic development.     

A welfare economic analysis of labor market policies in the Harris–Todaro model

This paper presents a welfare economic analysis of the benefits of various labor market policies in the Harris–Todaro labor market model. The policies considered are a policy of modern sector job creation, which I call modern sector enlargement (MSENL); a policy of rural development, which I call traditional sector enrichment (TSENR); and a policy of wage limitation in the urban economy, which I call modern sector wage restraint (MSWR). First, I analyze the inequality effects of these policies. I then perform two welfare economic analyses, the first based on summary measures of labor market conditions (total labor earnings, unemployment, inequality of labor incomes, and poverty rates) and the second based on dominance analysis in the labor market, in both cases assuming that the costs are borne elsewhere. The results of the welfare analyses are compared, and it is shown that TSENR unambiguously increases welfare in the labor market using both approaches, the other policies yield ambiguous results, and no policy is unambiguously welfare-decreasing.     

Labor market integration policies and the convergence of regions: the role of skills and technology diffusion

We study the role of different labor market integration policies on economic performance and convergence of two distinct regions in an agent-based model. Production is characterized by a complementarity between the quality of the capital stock and the specific skills of workers using the capital stock. Hence, productivity changes in a region are influenced both by the investment of local firms in high quality capital goods and by the evolution of the specific skill distribution of workers employed in the region. We show that various labor market integration policies yield, via differing regional worker flows, to distinct regional distributions of specific skills. Through this mechanism, relative regional prices are affected, determining the shares that the regions can capture from overall consumption good demand. There occurs a trade-off between aggregate output and convergence of regions with closed labor markets resulting in relatively high convergence but low output, and more integrated labor markets yielding higher output but lower convergence. Furthermore, results differ substantially in several respects as distinct labor market opening policies are applied.     

Policy commitment and the welfare gains from capital market liberalization

This paper evaluates the quantitative impact of capital liberalization on the taxation structure and welfare of the liberalizing countries when governments conduct fiscal policy optimally but without commitment (time-consistent policies). The transition from a regime of capital autarky to a regime of free mobility leads to a decrease in the long-term tax rate on capital of 13 percent and an increase in the tax rate on labor of 2 percent. As a consequence of this taxation shift, welfare increases by about 1 percent. The reduction in capital taxation induced by capital market liberalization is welfare improving because, in the absence of capital mobility, the time-consistent policies over-tax capital.     

Aging,Factor Returns,and Immigration Policy

Immigration has various economic and non‐economic effects on the destination country's inhabitants. In this paper, we focus on the impact of immigration on factor returns and analyze how aging affects immigration policy, employing a dynamic political‐economy model of representative democracy. Aging, that is, a decline in the growth rate of the native population, has an expansionary effect on immigration in this framework. This immigration effect may even overcompensate the initial contraction of the labor force. We show that the immigration rate in the representative democracy equilibrium exceeds the immigration rate that would maximize welfare of current and future generations, and we also discuss the influence of social security on immigration policy.     

Welfare and equity impacts of cross-border factor mobility in Bangladesh: A general equilibrium analysis

We develop a dynamic computable general equilibrium model with cross-border factor mobility to assess the impacts of a foreign wage shock and the effects of counteractive policy measures in Bangladesh. The model features migration of workers and foreign direct investment (FDI) in the ready-made garments (RMG) sector. Our simulation results show that returning migrants induced by a foreign wage fall would reduce household welfare by lowering wages and increasing unemployment, particularly for unskilled workers in the domestic labor market. To counteract this negative shock, FDI promotion in the RMG sector and a human-capital development program are considered. The former policy minimizes the negative impacts of the foreign labor market shock, while a combination of both policies is more equitable.     

Insourcing,Outsourcing, and Unemployment in the Spanish Auto Industry

This paper examines the role of outsourced intermediate goods, together with capital, labor, and insourced intermediate products, as inputs in Spain's motor vehicle production. Its findings are consistent with statistically significant economies of scale. Capital and labor are found to be substitutes, as are most of the other input pairs. However, capital and outsourced intermediate goods and labor and insourced intermediate goods appear to have complementary relationships, and the latter relationship has become stronger over the period of study. Any actions that decrease the price of one of the inputs in a complementary pair will increase the demand for the other input. Since labor and outsourced intermediate goods appear to be substitutes, a decrease in import prices as a result of further European integration will decrease the demand for domestic labor and exacerbate Spain's unemployment problem. A similar result holds for insourced and outsourced intermediate goods.