Immigration Restrictions and Labor Market Skills Preliminary and Incomplete

Differences in income levels across countries are generally attributed to differences in productivity. In studies of internal migration (e.g. within the U.S.), it is commonly observed that skilled workers move much more than unskilled workers. The paper analyzes the implications of such differential migration, using a model in which efficiency differences are labor-augmenting, and free trade in product markets leads to factor price equalization, so that wages are equal across countries when measured in efficiency units. Relaxation of immigration restrictions increases the effective supply of labor on the world market, and differential migration implies that there may be an increase in the ratio of skilled to unskilled labor; but skill levels are relatively low in less productive countries, and the data indicate that the net effect is that free migration in fact decreases the ratio of skilled to unskilled labor on the world market. The effects on wages depend on elasticities of substitution, but these effects are in any case surprisingly small, while the income gains for migrants (net of migration costs) are very large.