Spillovers between skilled and low skilled labor migration in a multi-regional setting

Official URL: http://risc01.sabanciuniv.edu/record=b1628602 (Table of Contents)

We analyze spillover effects arising due to movements of skilled and low skilled labor in a static multi-regional model featuring three factors of production: capital, labor, and land (an immobile factor). While capital is perfectly mobile, labor from one region can migrate to another with some origin-destination specific probability (induced by the associated immigration policies) after incurring fixed costs and skill specific efficiency losses both of which are determined by the origin and destination. In this setting, we characterize not only competitive equilibrium allocations of factors of production but also the associated migration levels. Furthermore, we show that policies of host regions favoring skilled labor from one particular region may trigger movements of low skilled labor from other regions even when all the other parameters, including those concerning low skilled labor movement costs, remain the same.