A Dynamic General Equilibrium Analysis of Korean Immigration Policy

Kerk Phillips

Brigham Young University - Department of Economics

September 2011

Korea and the World Economy, Forthcoming

This paper constructs a multi-sector dynamic general equilibrium model for a trading economy. We incorporate three major factors of production: capital, skilled labor & unskilled labor. We solve and calibrate the model using data from Korea. We then consider changes to immigration policy. We are able to examine the effects on output, consumption, wages, and utility. We do this for both the new steady state and for the time-path leading to that steady state. In addition, we are able, if we so wish, to impose a series of unrelated macroeconomic shock to the model. This has the advantage of allowing us to calculate confidence bands around our policy impulse response functions.

We find that allowing skilled labor to immigrate leads to greater welfare gains in the steady state. We also show that there is a great deal of uncertainty surrounding the exact time path to a new steady state in the presence of the typical fluctuations associated with business cycles. We find a great deal of inertia in the transition to a new steady state.

Keywords: labor migration, factor mobility, dynamic general equilibrium, Korea

JEL Classification: F15, F22, F42

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Date posted: February 18, 2012 ; Last revised: August 23, 2012

Suggested Citation

Phillips, Kerk, A Dynamic General Equilibrium Analysis of Korean Immigration Policy (September 2011). Korea and the World Economy, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2006535 or http://dx.doi.org/10.2139/ssrn.2006535

Contact Information

Kerk L Phillips (Contact Author)
Brigham Young University - Department of Economics ( email )
166 Faculty Office Bldg.
Provo, UT 84602-2363
United States
801-422-5928 (Phone)
HOME PAGE: http://sites.google.com/site/kerkphillips
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