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Equipping immigrants: migration flows and capital movements in small open economies

Douglas Gollin () and Fabian Lange ()

Review of World Economics (Weltwirtschaftliches Archiv), 2013, vol. 149, issue 4, 749-777

Abstract: This paper explores the extent to which migration-related capital flows can explain the variation in investment rates and current and capital account imbalances in OECD countries. We begin with a general equilibrium model of a small open economy in which migration is exogenous. Migrants must be equipped with capital, and the resulting demands for capital will generate cross-border flows of capital. Next, we move to an empirical exercise in which we allow both capital and labor flows to be endogenous. We test this model using data from a panel of OECD countries. We conclude that migration flows do in fact generate substantial matching capital flows. We calculate that increased migration may have accounted for as much as one-fifth of the increase in the US current account deficit since 1960. Copyright Kiel Institute 2013

Keywords: Migration; Current Account; Investment; F16; F21; F22 (search for similar items in EconPapers)
Date: 2013
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Review of World Economics (Weltwirtschaftliches Archiv) is currently edited by Paul Bergin, Holger Görg, Cédric Tille and Gerald Willmann

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Handle: RePEc:spr:weltar:v:149:y:2013:i:4:p:749-777