DP1500 International Migration, Welfare and the Provision of Public Goods

Author(s): Konstantine Gatsios, Panos Hatzipanayotou, Mike Michael
Publication Date: November 1996
Keyword(s): International Migration, Public Goods, Wages, Welfare
JEL(s): F22, h14
Programme Areas: International Trade and Regional Economics, Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1500

The objective of this paper is to highlight the importance of the ?public finance? impact of international migration on wages and welfare. To this end, we construct a general equilibrium model of a labour-exporting (source) and a labour-importing (host) country with identical consumers, producing many private traded goods and one public consumption good. Within this framework, it is shown that, contrary to existing literature, international migration may have adverse effects on wages and welfare in both countries, even if commodity prices are constant. The analysis describes and explains the conditions under which these adverse effects may occur. Furthermore, under certain conditions a conflict of interests arises among the migrating workers, the non-migrating workers, and the government seeking to maximize social welfare.