City Research Online

Abstract

I construct a set of dynamic macroeconomic models to analyze the effect of unskilled immigration on wage inequality. The immigrants or their descendants do not remain unskilled–over time they may approach or exceed the general level of educational attainment. In the baseline model, the economy’s capital supply is determined endogenously by the savings behavior of infinite-lived dynasties, and I also consider models in which the supply of capital is perfectly elastic, or exogenously determined. I derive a simple formula that determines the time discounted value of the skill premium enjoyed by college-educated workers following a change in the rate of immigration for unskilled workers, or a change in the degree or rate at which unskilled immigrants become skilled. I compare the calculations of the skill premiums to data from the U.S. Current Population Survey to determine the long-run effect of different immigrant groups
on wage inequality in the United States.

Publication Type:	Article
Additional Information:	This article is (c) Emerald Group Publishing and permission has been granted for this version to appear here (http://openaccess.city.ac.uk/630/). Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited
Publisher Keywords:	CAPITAL-SKILL COMPLEMENTARITY, 2ND-GENERATION IMMIGRANTS, EDUCATIONAL-ATTAINMENT, FISCAL-POLICY, LABOR-MARKET, EARNINGS
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HT Communities. Classes. Races
Departments:	School of Policy & Global Affairs > Economics

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