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

Bright Isaac Ikhenaode and Carmelo Parello

Economic Modelling, 2020, vol. 93, issue C, 675-692

Abstract: 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.

Keywords: North-South migration; Ramsey-like growth; International labor mobility; Frictional unemployment; Migration policy (search for similar items in EconPapers)
JEL-codes: F24 F41 J61 O15 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:93:y:2020:i:c:p:675-692

DOI: 10.1016/j.econmod.2020.01.017

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