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A MACROECONOMIC ANALYSIS OF GUEST WORKER PERMITS

Published online by Cambridge University Press:  20 August 2013

Maroula Khraiche
Maroula Khraiche*
Affiliation:
Colorado College
*
Address correspondence to: Maroula Kraiche, Department of Economics and Business, Colorado College, 14 East Cache La Poudre Street Colorado Springs, CO 80903, USA; e-mail: [email protected].
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Abstract

This paper evaluates the optimality of a temporary worker permit policy from the point of view of the host country by using a two-country dynamic general equilibrium model, calibrated with data from the United States and Mexico. In the model, the decision to migrate and the corresponding decision to return are endogenous and take place within families that are heterogeneous in terms of human capital. After finding a migrant's optimal migration duration and the resulting shrinkage in the wage gap and change in interest rates, the paper derives the restriction on migrants' stay that maximizes natives' utility. It also derives the migrant length of stay that would pass a majority vote. When migration duration is restricted, the fraction of the native population made better off is maximized with a permit length of four years.

Keywords

Temporary MigrationWorker PermitsSkill Heterogeneity
Type
Articles
Information
Macroeconomic Dynamics , Volume 19 , Issue 1 , January 2015 , pp. 189 - 220
Copyright
Copyright © Cambridge University Press 2013 

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