International Migration, Skill Choice, and Economic Growth

This paper develops a general-equilibrium dynamic growth model with heterogeneous (unskilled vs. skilled) workers and restricted international migration to analyze how changes in the probability of migration affect economic growth through changes in the quantity and quality of the labor force. When producing output, skilled labor and capital are more complementary than unskilled labor and capital. We show that the law of motion of capital per worker exhibits a convex-concave combination and that there are multiple steady states with club convergence occurring. An increase in this probability raises the ratio of skilled workers to the adult population, provided that the probability of migration is within a certain range. Such a policy change also increases the accumulation of physical capital and is beneficial to economic growth. In an economy with heterogeneous probabilities of migration for children with skilled and unskilled parents, increases in the probabilities of migration could be beneficial to economic growth, provided that the migration policies are carefully designed. If the probability of migration is endogenous with “threshold effects,” then club convergence occurs when the threshold is high; conversely, a sufficiently low threshold can help an economy get out of a poverty trap.