International migration, income taxes, public input, remittances and the welfare state

Abstract

This paper investigates the effect of international migration on wages andwelfare in a source country. We construct a general equilibrium model of a labor –exporting (source) country, where we examine separately the case of a one classeconomy with identical consumers and the case of a two class economy whichcomprises of two groups of identical individuals, called capitalists and workers. It isassumed that migration is from the class of workers. Within this framework it isshown among other things, that international labour mobility has positive effect onthe source country’s provision of public input and it may have a positive effect onsource country’s welfare. The latter effect is contrary to main results of theinternational migration literature. The analysis provides the sufficient conditionsunder which these results are obtained.