Migration, Skill Formation, and the Wage Structure

26 Pages Posted: 8 Feb 2011

See all articles by Kristian Behrens

Kristian Behrens

University of Quebec at Montreal (UQAM) - Department of Economics

Yasuhiro Sato

Osaka University - Graduate School of Economics

Date Written: February 7, 2011

Abstract

We analyze the impacts of migration and of labor market integration on the distribution of skills and the wage structure in both the short and the long run. To do so, we develop a framework where workers have heterogeneous skills and where in-migration expands the range of available skills in the economy. In the short run, this expansion leads to productivity gains, which may more than offset the negative endowment effects of a larger labor supply so that all workers may be better off. In the long run, in-migration impacts wages further by altering the workers' incentives to acquire skills, thereby affecting the wage structure indirectly by changing the economy's skill composition. Since the short and the long-run effects of in-migration on wages may differ, compositional changes may be an important element to take into consideration. A numerical illustration calibrated on U.S. data suggests that the immigration of skilled workers negatively affects the incentives for domestic skill formation, thereby suggesting that endowment effects dominate externalities. We finally extend the model to cope with the simultaneous impacts that migration and skill formation have on the host and the source region, and we show that more migration increases wage disparities and the skill gap across regions.

Suggested Citation

Behrens, Kristian and Sato, Yasuhiro, Migration, Skill Formation, and the Wage Structure (February 7, 2011). Journal of Regional Science, Vol. 51, No. 1, pp. 5-30, 2011, Available at SSRN: https://ssrn.com/abstract=1757642 or http://dx.doi.org/10.1111/j.1467-9787.2010.00682.x

Kristian Behrens (Contact Author)

University of Quebec at Montreal (UQAM) - Department of Economics ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada

Yasuhiro Sato

Osaka University - Graduate School of Economics ( email )

1-7 Machikaneyama
Toyonaka, Osaka, 560-0043
Japan

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