Two-Way Migration between Similar Countries

37 Pages Posted: 11 Dec 2015

See all articles by Udo Kreickemeier

Udo Kreickemeier

University of Tuebingen; CESifo (Center for Economic Studies and Ifo Institute); University of Goettingen (Göttingen) - Faculty of Economics and Business Administration

Jens Wrona

University of Tuebingen - Faculty of Economics and Social Sciences

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Date Written: November 16, 2015

Abstract

We develop a model to explain two-way migration of high-skilled individuals between countries that are similar in their economic characteristics. High-skilled migration results from the combination of workers whose abilities are private knowledge, and a production technology that gives incentives to firms for hiring workers of similar ability. In the presence of migration cost, high-skilled workers self-select into the group of migrants. The laissez-faire equilibrium features too much migration, explained by a negative migration externality. We also show that for sufficiently low levels of migration cost the optimal level of migration, while smaller than in the laissez-faire equilibrium, is strictly positive. Finally, we extend our model into different directions to capture stylized facts in the data and show that our baseline results also hold in these more complex modelling environments.

Keywords: international migration, skilled workers, positive assortative matching

JEL Classification: D820, F220

Suggested Citation

Kreickemeier, Udo and Wrona, Jens, Two-Way Migration between Similar Countries (November 16, 2015). CESifo Working Paper Series No. 5593, Available at SSRN: https://ssrn.com/abstract=2701717 or http://dx.doi.org/10.2139/ssrn.2701717

Udo Kreickemeier (Contact Author)

University of Tuebingen ( email )

DE-72074 Tubingen
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Goettingen (Göttingen) - Faculty of Economics and Business Administration ( email )

Platz der Goettinger Sieben 3
Goettingen, 37073
Germany

Jens Wrona

University of Tuebingen - Faculty of Economics and Social Sciences ( email )

Mohlstrasse 36
Tuebingen, Baden-Wuerttemberg 72074
Germany

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