Working Paper: NBER ID: w4563
Authors: Elise S. Brezis; Paul Krugman
Abstract: When a country is the recipient of large-scale, politically motivated immigration -- as has been the case for Israel in recent years -- the initial impact is to reduce real wages. Over the longer term, however, the endogenous response of investment, together with increasing returns, may well actually increase real earnings. If immigration itself is not wholly exogenous, but responds to real wages, there may be multiple equilibria. That is, optimism or pessimism about the success of the economy at absorbing immigrants may constitute a self-fulfilling prophecy.
Keywords: immigration; investment; real wages; economics
JEL Codes: F22; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Immigration (F22) | Real Wages (J31) |
| Investment (G31) | Real Wages (J31) |
| Immigration (F22) | Investment (G31) |