The Impact of International Migration on the Economy with the Assumption of Labor Heterogeneity

This study investigated the effect of international labor migration on Iran’s economy using a neo-classical growth model with the assumption of labor heterogeneity within the framework of the dynamic stochastic general equilibrium model. After solving the model, the obtained equations were linearized, and different values were assigned to the parameters according to information about Iran’s economy. The results indicated that emigration of skilled labor force reduced production, investment, and per capita consumption, increased skilled individuals’ wages, and decreased wages for unskilled individuals; however, immigration enhanced the labor force and population and reduced production, investment, and per capita consumption. On the other hand, the labor force’s wages also declined with an increase in the unskilled labor force. Furthermore, a variation in the degree of substitution between unskilled labor and capital only changed the impact of the immigration momentum and had no impact on the type of relationship. If emigration consists of a combination of the skilled and unskilled labor force, its effectiveness only changes.

Keywords:

Migration , Brain Drain , Labor Market Heterogeneity , dynamic stochastic general equilibrium