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Migration Policy in a Small Open Economy with a Dual Labor Market

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  • Tobias Müller

Abstract

The paper uses a two–sector efficiency–wage model to analyze the consequences of immigration for a small open economy with a dual labor market. Immigrants are characterized by an (exogenous) return probability. Legal regulations impose preferential hiring of natives or “old” immigrants. As a result, there is sectoral segregation between natives and immigrants, leading to discrimination of the type equal pay for equal work,but unequal “work.” In the short run (with sector–specific capital), immigration has a positive first–order impact on natives' welfare if migration policy favors segregation through high return rates or restrictive hiring practices (“guest–worker system”). In the long run, its effect is only determined by factor intensities (2 ¥ 2 model). Finally, the improved integration of migrants yields efficiency gains and improves aggregate welfare of all residents.

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  • Tobias Müller, 2003. "Migration Policy in a Small Open Economy with a Dual Labor Market," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 130-143, February.
    • Handle: RePEc:bla:reviec:v:11:y:2003:i:1:p:130-143
    DOI: 10.1111/1467-9396.00373
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    References listed on IDEAS

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    Cited by:

    1. Jean-Marie Grether & Jaime de Melo & Tobias Müller, 2015. "The Political Economy of International Migration in a Ricardo–Viner Model," World Scientific Book Chapters, in: Developing Countries in the World Economy, chapter 17, pages 411-437, World Scientific Publishing Co. Pte. Ltd..
    2. Pierre Brochu & Till Gross & Christopher Worswick, 2020. "Temporary foreign workers and firms: Theory and Canadian evidence," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 871-915, August.
    3. Qingyang Lin, 2022. "Immigration Quotas and Anti-Immigration Attitudes: An Evaluation of Swiss Migration Policy," IHEID Working Papers 05-2022, Economics Section, The Graduate Institute of International Studies.
    4. Tobias Müller & Silvio H. T. Tai, 2010. "Who Opposes Immigrants' Integration into the Labor Market? The Swiss Case," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(IV), pages 741-767, December.
    5. de Melo, Jaime & Müller, Tobias & Miguet, Florence, 2002. "The Political Economy of EU Enlargement: Lessons from Switzerland," CEPR Discussion Papers 3449, C.E.P.R. Discussion Papers.
    6. Ibrahim Mohamed Abdalla & Mohammed A. Al‐Waqfi & Nasri Harb & Rafiq H. Hijazi & Taoufik Zoubeidi, 2010. "Labour Policy and Determinants of Employment and Wages in a Developing Economy with Labour Shortage," LABOUR, CEIS, vol. 24(2), pages 163-177, June.

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