Endogenous Immigration, Human and Physical Capital Formation, and the Immigration Surplus

Abstract

We evaluate the economic consequences of endogenous immigration in a two-country, two-skill, endogenous-growth model, where human and physical capital are the productive assets. Adding physical capital to the model yields new insights about the induced-immigration effects of exogenous pull and push triggers, on the evolution of the “immigration surplus” in the short versus the long run, in destination versus source countries, and in the global economy. The policy effects we analyze include the easing of constraints affecting labor and physical capital mobility at the individual-migrant level and the role of physical capital endowments. We also analyze the origin and implications of the asymmetries in the net benefits from immigration across destination and source countries.