The Simple Analytics of Neoclassical Growth with Migration

Abstract

This paper investigates the economic consequences of migration in the Ramsey-type dynamic optimizing context. In contrast to Hazari and Sgro (2003) conclusions, we show that with a Cobb-Douglas production function migration unambiguously reduces per-capita domestic consumption growth, whereas necessarily raises the long-run per-capita consumption of domestic residents when production is 'sufficiently' capital intensive. Our findings are supported by several empirical studies and confirmed by simulation analyses in an international context, suggesting that changes in technological adjustment in response to migrants inflows may take some years to translate into productivity, generating some crowding out effects. The gains for natives materialize in the long run when the specialization of natives adjusts, firms invest in capital and adopt appropriate technologies.

Keywords: migration, domestic consumption, growth

JEL Classification: F2, 04