International migration, increasing returns, and real wages.

Area of Science:

• International Trade
• Labor Economics
• Economic Growth

Background:

• Traditional economic models often suggest emigration may negatively affect wages in the source country.
• Increasing returns to scale (IRS) in production can significantly alter trade and labor market dynamics.
• The role of non-traded goods in international economic models requires specific consideration.

Purpose of the Study:

• To explore the impact of international emigration on real wages.
• To analyze this impact within a framework incorporating increasing returns to scale (IRS).
• To investigate the specific case of a non-traded good with industry-internal IRS.

Main Methods:

• Utilized a 2x2 Heckscher-Ohlin-Samuelson (HOS) model of international trade.
• Incorporated external economies of scale, internal to the industry but external to the firm.
• Focused analysis on a scenario with one traded and one non-traded good.

Main Results:

• International emigration unambiguously leads to an increase in real wages in the emigration source country.
• This finding holds true even in the presence of increasing returns to scale in production.
• The positive impact on real wages is robust across variations in underlying analytical assumptions.

Conclusions:

• Emigration can be a beneficial economic force for source countries, increasing real wages.
• The presence of increasing returns to scale, particularly in non-traded goods sectors, amplifies this positive effect.
• This research challenges the general presumption that emigration negatively impacts source country wages.