Discussion Paper No.1306
Abstract :
This study theoretically investigates the economy of a small country that
exports skilled labor to higher developed countries and simultaneously
imports unskilled labor from lower developed countries. Compared with the
free immigration case, if this country adopts an optimally controlled
immigration policy by imposing income tax on immigrants to maximize
national income, skills formation is negatively affected and the number of
domestic unskilled workers increases. Moreover, under certain conditions, it
can be asserted the counter-intuitive possibility that the wage rate of
domestic unskilled workers may decrease but that of skilled workers may
increase owing to the restriction of foreign unskilled workers.
Keywords : International migration, Economic integration, Skill formation.