Kaldorian Disaggregation, Temporary Migration and Welfare: Theory and Calibration

29 Pages Posted: 11 May 2018

See all articles by Tao Cai

Tao Cai

Sun Yat-Sen University (SYSU)

Jennifer Lai

Guangdong University of Foreign Studies

Bharat Hazari

City University of Hong Kong (CityUHK)

Vijay Mohan

RMIT University

Date Written: May 2018

Abstract

In this paper we examine a four‐good, four‐factor model of trade with two agents: domestic residents and temporary migrants. This modelling framework has three important features: first, there are two tradable and two non‐tradable goods; second, there exists Kaldorian disaggregation in consumption; third, the structure incorporates a combination of price adjustment. The results emphasize the influence of factor accumulation at constant traded goods prices on the variable prices of non‐traded goods. We also analyse the impact of temporary migration and other structural parameters on domestic welfare. To highlight our results, our model is calibrated on a typical small open economy, Hong Kong, and a wide array of situations are presented when temporary migration and Kaldorian disaggregation can reduce domestic welfare in response to exogenous shocks.

Suggested Citation

Cai, Tao and Lai, Jennifer and Hazari, Bharat and Mohan, Vijay, Kaldorian Disaggregation, Temporary Migration and Welfare: Theory and Calibration (May 2018). Pacific Economic Review, Vol. 23, Issue 2, pp. 193-221, 2018, Available at SSRN: https://ssrn.com/abstract=3176787 or http://dx.doi.org/10.1111/1468-0106.12135

Tao Cai (Contact Author)

Sun Yat-Sen University (SYSU) ( email )

Guangzhou, Guangdong
China

Jennifer Lai

Guangdong University of Foreign Studies

Bharat Hazari

City University of Hong Kong (CityUHK) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Vijay Mohan

RMIT University ( email )

124 La Trobe Street
Melbourne, 3000
Australia

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