The Immigration Surplus Revisited in a General Equilibrium Model With Endogenous Growth*

Abstract

We revisit the influential work of Borjas (1995) on the economic gain to the host population from immigration-"the immigration surplus." We develop his analysis by using a general equilibrium endogenous growth model with endogenous capital and several sectors, including an R&D sector driving growth. Skilled immigration leads to a bigger R&D sector share resulting in higher long-term growth. If skilled labor and physical capital are complements, this growth gain increases. Growth effects on the immigration surplus dominate the purely static effects of Borjas, but are not sufficient to eliminate the emergence of losers (skilled natives) within the host population. Copyright Blackwell Publishing, Inc. 2007

Growth and Welfare Effects of World Migration

“…The importance of the skill composition of migrants on growth is also emphasised by Drinkwater et al (2007). The work, through simulations on an expanding in varieties model with physical capital, general CES utility functions and Cobb-Douglas production technology confirms, in a closed economy framework, most of the analytical results in…”

“…1 Drinkwater et al (2007) revisits the Borjas study in an endogenous one-country endogenous growth model along the lines of the two-bloc model of this paper. In a European context, calculations suggest that skilled immigration can result in a utility-based immigration surplus of the order of a 4% equivalent permanent increase in consumption, but unskilled immigration results in a negative immigration surplus.…”

“…Here we review the findings in Drinkwater et al (2007) for open economies and examine the impact of changes in labour supply on both host and source countries.…”

Immigration and the Diffusion of Technology: The Huguenot Diaspora in Prussia

“…This field distinguishes three streams of research: the economic performance of the immigrants, their effect on employment opportunities and wages of the natives and the assessment of immigration policies for host countries (surveys by Borjas (1994Borjas ( , 1999; Friedberg and Hunt (1995)). The effect of immigration on natives' wages and labor market responses are certainly the most discussed while macro-economic effects from immigration lack attention in the literature (Drinkwater et al, 2007). Studies of economic benefits from migration for the host country include Ben-Gad (2004), Chiswick et al (1992) and Paserman (2008).…”

Migration, Skill Composition and Growth

“…The reason is that the East sees a reduction in its share of high tech goods which involve a price mark-up over marginal cost, and the relative wage of the unskilled workers fall. Distributional effects are summarized in Table 1. 12 In Drinkwater et al (2007) we also investigate the impact of migration on the immigration surplus for different degree of complementarities and we show that when skilled labour and capital are complements changes in asset prices can have a significant effect and that the complementarity worsens the impact of unskilled migration. One possible distribution mechanism is through remittances from migrants to their families remaining in the East.…”