Abstract
Fears of rising income inequalities loom large in recent discussions of how globalization and in particular migration are affecting economies and societies [1]. This paper addresses the question how labor immigration is related to wage inequality by using a specific-factors trade model. We show that the impact of immigration of low or highly skilled labor on wage inequality depends mainly on the capital intensity of the industry in which labor immigrates.
Highlights
Migration has always formed a topic of serious economic interest
They find that emigration of low skilled workers increases the wage inequality if the capital’s shares is greater in the skilled-using labor sector4. Whereas those studies focus on emigration, Johannsson and Weiler [14] highlight the effect of immigration on wage inequality of natives. They find evidence that growing relative inflows of unskilled workers increase wage inequalities within the USA, and that the impact on native wage inequality is even stronger as the overall effect.They estimate that a 10 percent increase of the skill-low skill ratio between immigrants and natives leads to a 0.22 percent increase in the wage inequality ratio
This note shows that the impact of immigration of skilled or low skilled labor on the wage inequality depends on the capital intensity of the both sectors, the one in which workers immigrate and the second one on which the immigration has an downstream effect
Summary
Migration has always formed a topic of serious economic interest. the world appears to be on the edge of a new era in labor migration, since volume of migration has increased, more home and host countries have been added, and new types of labor migration have emerged. Globalization is often claimed as being one of the driving forces behind the increasing labor migration [1,3]. Decreasing transportation costs, the emergence of transnational networks and the rapid growth of communication technologies, in addition to sustained growth in international trade as well as foreign direct investment and the trend of international outsourcing, indicating integrated world markets, all that contributes to the increasing movement of both low and highly skilled workers [4]. Some studies already see a competition for the skilled between the developed countries due to demographic and economic challenges [4,7]. Various studies indicate that globalization has gone along with increasing wage inequality.
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