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Skilled Emigration, Wages and Real Exchange Rate in a Globalized World

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  • Ouyang, Alice
  • Paul, Saumik

Abstract

Building on a simple analytical model, we provide cross-country empirical evidence from 67 countries that the net skilled emigration appreciates bilateral real exchange rates in source countries. Channels of causality, when Law of One Price (LOOP) holds, are through "spending effect" and "resource allocation effect", analogous to the remittance-based Dutch disease effect. Pricing-to-market model allows pass-through for both tradable and nontradable prices when LOOP is violated. Internal (relative price of tradable to nontradable) price explains about 60% of the RER appreciation, which is mostly driven by the outcomes on developing countries. The outcomes are robust across different levels of skilled emigration, alternative model specifications and withstand placebo tests with unskilled emigration.

Suggested Citation

  • Ouyang, Alice & Paul, Saumik, 2015. "Skilled Emigration, Wages and Real Exchange Rate in a Globalized World," CEI Working Paper Series 2014-11, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2014-11
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    More about this item

    Keywords

    Emigration; Exchange Rate; the Dutch Disease;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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