 Emigration, Tax on Remittances and Export QualityShrimoyee Ganguly and Rajat Acharyya South Asian Journal of Macroeconomics and Public Finance, 2021, vol. 10, issue 1, 40-71 Abstract: We examine the implications of the emigration of unskilled workers for the quality of a skill-based good exported by a small open economy. This issue is relevant in the context of quality constraints faced by the developing countries like China and India in promoting their exports, on the one hand, and the significantly large emigrations of workers, particularly unskilled workers, which lower their productive capacities, on the other hand. We show that even though unskilled workers are not directly used in the production of quality-differentiated export goods, their emigration would lower export quality when quality upgradation requires more intensive use of skilled workers relative to capital. This result follows from the complementarity between skilled and unskilled wages in a competitive general equilibrium model. A quality-content production subsidy in such a case can mitigate the adverse effects of emigration. The significantly large remittances received from unskilled emigrants create scope for taxing such remittances to finance the subsidy. JEL Classification: F16, F20, F22, F24 Keywords: Labour emigration; remittances; export quality; production subsidy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sae:smppub:v:10:y:2021:i:1:p:40-71 Access Statistics for this article More articles in South Asian Journal of Macroeconomics and Public Finance |
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