Working Paper: CEPR ID: DP1500
Authors: Konstantine Gatsios; Panos Hatzipanayotou; Michael S. Michael
Abstract: The objective of this paper is to highlight the importance of the ?public finance? impact of international migration on wages and welfare. To this end, we construct a general equilibrium model of a labour-exporting (source) and a labour-importing (host) country with identical consumers, producing many private traded goods and one public consumption good. Within this framework, it is shown that, contrary to existing literature, international migration may have adverse effects on wages and welfare in both countries, even if commodity prices are constant. The analysis describes and explains the conditions under which these adverse effects may occur. Furthermore, under certain conditions a conflict of interests arises among the migrating workers, the non-migrating workers, and the government seeking to maximize social welfare.
Keywords: international migration; public goods; wages; welfare
JEL Codes: F22; H14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| international migration (F22) | wages (J31) |
| international migration (F22) | public good provision (H42) |
| decrease in domestic labor supply due to migration (J61) | tax revenue (H27) |
| tax revenue (H27) | public good provision (H42) |
| international migration (F22) | welfare (I38) |