Persistent Migration: Wages, Networks and Assimilation

Abstract

International migration has sometimes been described as being continuous and large in scale. However, models have typically shown how migration can lead to a reduction of the wage gap, making migration transitory or temporary. We employ the model of persistent migration by Reichlin and Rustichini (1998), make the migration and skill choice endogenous, and introduce a probability of migration to study relative wages and the relative workforce skill levels of each country. We confirm that scale effects are important with homogenous labor. We also find that the migrant-receiving country faces higher relative wages with deferred assimilation and that networks can produce higher relative wages for either country depending on the role of the network effects. With heterogenous labor, we find that skilled worker migration leads to higher skilled-to-unskilled workforce ratios for both countries and that skilled worker migration improves relative wages and the unskilled-to-skilled wage ratio in each country.