Immigration and Wages: An Open Economy Model
Wang-Sheng Lee
Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne
Abstract:
This paper shows how some simple modifications to the classical Heckscher-Ohlin model in international trade can be made so that it can be used to analyse the impact of immigration on wages. In particular, this is accomplished by constructing a model in which countries have very different endowments of factors, reside in different diversification cones and specialise in production. In such a model, it is not necessary that factor prices are equalised across countries. Based on simulation results of this modified Heckscher-Ohlin model, it is found that the actual immigrant flow in the U.S. from 1979 to 1995 is unlikely to be a major contributor to the observed high-skill/low-skill wage gap increase over the period. This paper shows how some simple modifications to the classical Heckscher-Ohlin model in international trade can be made so that it can be used to analyse the impact of immigration on wages. In particular, this is accomplished by constructing a model in which countries have very different endowments of factors, reside in different diversification cones and specialise in production. In such a model, it is not necessary that factor prices are equalised across countries. Based on simulation results of this modified Heckscher-Ohlin model, it is found that the actual immigrant flow in the U.S. from 1979 to 1995 is unlikely to be a major contributor to the observed high-skill/low-skill wage gap increase over the period.
Keywords: Immigration; Heckscher-Ohlin; multi-cone; general equilibrium. (search for similar items in EconPapers)
Pages: 20 pages
Date: 2007-03
New Economics Papers: this item is included in nep-cmp, nep-lab and nep-mig
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Citations: View citations in EconPapers (5)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2007n07
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