Abstract
This work presents a model aiming to evaluate the impact of rural-urban migration on the aggregate stock of loanable funds and investment by the urban population. Much higher investment costs for immigrants in cities prevent their acquisition of either human or physical capital. That is the reason why immigrants self-select as net lenders and affect urban labor earnings by means of the availability of new loanable funds for investment. This reduces the local interest rates and facilitates urban aggregate investment, especially by the new generations of natives. As a result of that, the aggregate labor income of natives increases unambiguously with the size of new immigration waves.
Highlights
According to abundant analyses about many less developed countries, rural-urban migration often results in a socioeconomic marginalization of new immigrants in the urban life
Some recent empirical results uncover an insignificant, and often slightly positive, impact of higher migratory flows on the income and employment of unqualified, native urbanites
A competitive equilibrium is characterized by an interest rate and an allocation of native and immigrant workers to the skilled and unskilled occupations, such that the supply of credit is identical in every period to the demand for credit
Summary
According to abundant analyses about many less developed countries, rural-urban migration often results in a socioeconomic marginalization of new immigrants in the urban life. “the inconsistency between the theory and the empirical evidences has shaken the basis of the traditional belief that an immigrant influx should lower the wage of competing factors [...] and calls for new evidence and new explanations” [1] In this respect, our model offers a potential explanation based on a pure capital market complementarity between immigrants and natives. Our Chinese image is useful to illustrate a novel theoretical hypothesis, related to an immigration surplus enlarged by a complementarity in the capital markets. Such hypothesis is clearly different from the traditional complementarity in the labor markets, whose empirical implications were explored and popularized by Borjas [3] [4].
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