Skills and immigration

In this paper, by employing a short run specific factor model, where labor is assumed to be immobile while capital is perfectly mobile in the short run within a country, and blending it with the median voter framework developed by Mayer (1984), it is shown that the liberalization of labor in the host country depends on the host country’s stock and distribution of capital, the diverse set of skills that both countries have (origin and foreign), and the variety of goods produced in both countries. In particular, I have shown that there is a polarization of the voting attitude on an immigration proposal not only between workers and capital owners, but also between skilled and unskilled workers.

However, by expanding the short run specific factor trade model with two small open economies that each have two sectors to a temporarily immobile factor trade model with two small open economies that each have more than two sectors, I was able to demonstrate theoretically the most intriguing results of this paper. The more diverse set of skills each country has, the higher the probability that the immigration proposal will pass in the host country. The wider the variety of goods each country produces in a perfectly competitive environment, the higher the probability that the immigration proposal will pass.

Using the above results, I have provided some theoretical reasoning on why some host countries apply more liberal immigration policies compared to other host countries, even though their stock and distribution of capital are similar. Also, I was able to explain theoretically why the median voter of the same host country behaves differently about immigrants who attempt to move in from different origin countries.