Globalizing Labor and the World Economy: The Role of Human Capital

Luxembourg Institute of Socio-Economic Research (LISER) Working Paper n°2017-16

64 Pages Posted: 15 Nov 2017

See all articles by Marco Delogu

Marco Delogu

Universite du Luxembourg

Frédéric Docquier

Université catholique de Louvain; CREAM, Centre for Research on Environmental Appraisal & Management, UK; IZA Institute of Labor Economics

Joel Machado

Luxembourg Institute of Socio-Economic Research (LISER); Universite du Luxembourg - Faculty of Law, Economics and Finance

Date Written: November 13, 2017

Abstract

We develop a dynamic model of the world economy that jointly endogenizes individual decisions about fertility, education and migration. We then use it to compare the shortand long-term effects of immigration restrictions on the world distribution of income. Our calibration strategy replicates the economic and demographic characteristics of the world, and allows us to proxy bilateral migration costs and visa costs for two classes of workers and for each pair of countries. In our benchmark simulations, the world average level of income per worker increases by 12% in the short term and by approximately 52% after one century. These results are highly robust to our identifying strategy and technological assumptions. Sizable differences are obtained when our baseline (pre-liberalization) trajectory involves a rapid income convergence between countries or when we adjust visa costs for a possible upward bias. Our quantitative analysis reveals that the effects of liberalizing migration on human capital accumulation and income are gradual and cumulative. Whatever is the size of the short-term gain, the long-run impact is 4 to 5 times greater (except under a rapid convergence in income).

Keywords: migration, migration policy, liberalization, growth, human capital, fertility, inequality

JEL Classification: O15, F22, F63, I24

Suggested Citation

Delogu, Marco and Docquier, Frédéric and Machado, Joel, Globalizing Labor and the World Economy: The Role of Human Capital (November 13, 2017). Luxembourg Institute of Socio-Economic Research (LISER) Working Paper n°2017-16. Available at SSRN: https://ssrn.com/abstract=3070213 or http://dx.doi.org/10.2139/ssrn.3070213

Marco Delogu (Contact Author)

Universite du Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Frédéric Docquier

Université catholique de Louvain ( email )

IRES
Place Montesquieu 3
Louvain-la-Neuve, 1348
Belgium

HOME PAGE: http://https://perso.uclouvain.be/frederic.docquier/

CREAM, Centre for Research on Environmental Appraisal & Management, UK

University of Newcastle
NE1 7RU Newcastle Upon Tyne
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Joel Machado

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Campus Belval – Maison des Sciences Humaines
Esch-sur-Alzette, L-4366
Luxembourg

Universite du Luxembourg - Faculty of Law, Economics and Finance ( email )

162a, avenue de la Faïencerie
Luxembourg-Limpertsberg, L-1511
Luxembourg

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