Welfare Effects of Labor Migration

CERGE-EI Working Paper Series No. 491

38 Pages Posted: 12 Oct 2013 Last revised: 14 Oct 2013

See all articles by Dmytro Vikhrov

Dmytro Vikhrov

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Date Written: October 1, 2013

Abstract

The developed theoretical model analyzes the welfare effects of labor migration. I find that for the receiving country immigration enhances welfare as long as the marginal benefits to the natives’ income exceed the social costs of immigration. Over-emigration of workers generated by free mobility is welfare detrimental to the source country because of the diaspora effect – migrants negatively affect their own income. The source country prefers to coordinate the immigration quota with the destination country, because the coordinated solution internalizes the negative diaspora effect. Contrary to popular opinion, under certain conditions unilateral enforcement of the immigration quota benefits the source country also, because it reduces the extent of the migrants’ income decline.

Keywords: migration costs, wage effect, immigration policy, coordination

JEL Classification: F22, J15, D61, E61

Suggested Citation

Vikhrov, Dmytro, Welfare Effects of Labor Migration (October 1, 2013). CERGE-EI Working Paper Series No. 491, Available at SSRN: https://ssrn.com/abstract=2339125 or http://dx.doi.org/10.2139/ssrn.2339125

Dmytro Vikhrov (Contact Author)

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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