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Crossing the Rio Grande: Migrations, business cycles and the welfare state

Morten Ravn () and Fabio Canova ()

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In this paper we study the macroeconomic effects of an inflow of low-skilled workers into an economy where there is capital accumulation and two types of agents. We find that there are substantial dynamic effects following unexpected migrations with adjustments that resemble those triggered by a sudden disruption of the capital stock. We look at the interrelations between these dynamic effects and three different fiscal systems for the redistribution of income and find that these schemes can change the dynamics and lead to prolonged periods of adjustments. The aggregate welfare implications are sensitive to the welfare system: while there are welfare gains without redistribution, these gains may be turned into costs when the state engages in redistribution.

Keywords: Migration; business cycles; heterogeneous agents; the welfare state (search for similar items in EconPapers)
JEL-codes: E32 E62 F20 H23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
Date: 1997-07, Revised 1997-12
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Working Paper: Crossing the Rio Grande: Migrations, Business Cycles and the Welfare State (1998) Downloads
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