Published online by Cambridge University Press: 29 June 2018
This article analyzes the effect of migration from a less advanced economy to a more advanced economy on economic growth. The analysis is performed in a two-country growth model with endogenous fertility, in which congestion diseconomies are incorporated. The model shows that out-migration increases fertility and reduces human capital in the source economy. At the same time, in-migration reduces fertility and can increase or decrease the average level of human capital in the host economy. I show how migration affects the inter-temporal evolution of human capital in the world economy. I also demonstrate that a tax imposed on immigrants in the host economy can increase human capital accumulation in the receiving and sending economies and the world as a whole.
I would like to thank Oded Galor, Daniel Tsiddon and two anonymous referees for valuable suggestions. I also thank participants at the 8th FIW research conference “International Economics” (Vienna 2015), the 2016 CEUS workshop on International Trade, Labor Markets and Finance in Europe (Vallendar/Koblenz) and EconWorld 2017 (Rome) for their comments.