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Impact of human capital composition, relative wage and international migration on income distribution

FAN Zhaobin1,2

(1.International Business School of Jinan University)
(2.Institute of International Finance and Business of Jinan university)

【Abstract】As an important part of economic globalization, the influence of international migration on income inequality is examined by growing literature. This paper first builds an overlapping generation model to examine how the international migration of skilled workers influences the income distribution of host countries in the context of endogenous human capital. The results show the immigration of skilled workers not only affects the income disparity between native skilled workers and unskilled workers in host countries, which is termed “relative income effect” on human capital, but also affects the relative proportion of native skilled workers and unskilled workers in host countries, which is called “composition effect” on human capital. Therefore, the relationship between international immigration and income inequality in host countries is determined by the net effect of “relative income effect” combined with “composition effect.” Based on OECD's data from 2000 to 2011, this paper employs the dynamic panel data model to carry out system GMM estimation of the impact of immigration on income inequality in host countries. The empirical results suggest that in the short run, foreign immigration can serve to reduce the income inequality in host countries; however, in the long run, foreign immigration can increase income inequality in host countries.

【Keywords】 international migration; human capital; relative wage; income inequality; International migration; Human capital; Relative wage; Income inequality;


【Funds】 National Social Science Foundation (13BRK013) Key Research Base Project on Humanities and Social Science of Ministry of Education (HRHQ201401) National Major Project of Guangdong Province (2014GWXM004)

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This Article


CN: 11-1692/F

Vol , No. 09, Pages 14-28

September 2015


Article Outline


  • Introduction
  • 1. Basic model: no international migration exists
  • 2. International migration and income inequality
  • 3. Empirical analysis: estimation with the dynamic panel data model
  • 4. Main conclusion
  • References