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Equipping immigrants: migration flows and capital movements in small open economies

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  • Douglas Gollin
  • Fabian Lange

Abstract

This paper explores the extent to which migration-related capital flows can explain the variation in investment rates and current and capital account imbalances in OECD countries. We begin with a general equilibrium model of a small open economy in which migration is exogenous. Migrants must be equipped with capital, and the resulting demands for capital will generate cross-border flows of capital. Next, we move to an empirical exercise in which we allow both capital and labor flows to be endogenous. We test this model using data from a panel of OECD countries. We conclude that migration flows do in fact generate substantial matching capital flows. We calculate that increased migration may have accounted for as much as one-fifth of the increase in the US current account deficit since 1960. Copyright Kiel Institute 2013

Suggested Citation

  • Douglas Gollin & Fabian Lange, 2013. "Equipping immigrants: migration flows and capital movements in small open economies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(4), pages 749-777, December.
    • Handle: RePEc:spr:weltar:v:149:y:2013:i:4:p:749-777
    DOI: 10.1007/s10290-013-0161-6
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    Cited by:

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    2. Paweł Bukowski & Filip Novokmet, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," Journal of Economic Growth, Springer, vol. 26(2), pages 187-239, June.
    3. Coulibaly, Dramane & Gnimassoun, Blaise & Mignon, Valérie, 2020. "The tale of two international phenomena: Migration and global imbalances," Journal of Macroeconomics, Elsevier, vol. 66(C).
    4. Michael A. Clemens, 2022. "Migration on the Rise, a Paradigm in Decline: The Last Half-Century of Global Mobility," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 257-261, May.
    5. Bukowski, Pawel & Novokmet, Filip, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," LSE Research Online Documents on Economics 110221, London School of Economics and Political Science, LSE Library.
    6. Dramane Coulibaly & Blaise Gnimassoun, 2022. "Emigration and Capital Flows: Do Migrants’ Skills Matter?," Working Papers of BETA 2022-31, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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    More about this item

    Keywords

    Migration; Current Account; Investment; F16; F21; F22;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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