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IMF Fiscal Affairs Department. This paper was prepared when Ms. Mishra was in the Caribbean I Division of the Western Hemisphere Department. The author thanks Ratna Sahay, David O. Robinson, Paul Cashin, Montfort Mlachila, Jingqing Chai, Rupa Duttagupta and seminar participants at the IMF, Eastern Caribbean Central Bank, Ministries of Finance in Antigua and Barbuda, Dominica, St. Vincent and Grenadines, and the Sir Arthur Lewis Conference in Kingston, Jamaica for comments and discussions.
See Borjas (1994, 1995) and Friedberg and Hunt (1995) for surveys of the empirical literature. The theoretical literature on international movement of factors includes, for example, Bhagwati and Hamada (1974), Rivera-Batiz (1989), and Quibria (1989).
There is also substantial migration to the Persian Gulf region from many countries that has not been well documented. Sources: U.S. Census; OECD Migration Statistics; and World Bank, World Development Indicators.
The OECD member countries include industrial countries and emerging markets like Mexico and Turkey. For the complete list of OECD countries in the dataset, see Docquier and Marfouq (2005), page 13.
Davis and Weinstein (2002) simulate the welfare impact due to inflow of both labor and capital into the United States.
Davis and Weinstein (2002) look at terms of trade effects of immigration into the United States. If migration from the Caribbean results in relatively higher reduction in factor supplies and output in the export sector, thereby reducing the supply of exports on the world market, then this can result in a terms of trade gain for the region. For the terms of trade gain to be significant in magnitude for individual countries, they should be large in an economic sense i.e., their demand and supplies should affect world prices. To the extent that Caribbean countries lack market power, we can assume this effect to be of a small magnitude for these individual countries.
The Caribbean is also one of the largest sources of illegal aliens with the Dominican Republic, Haiti, and Jamaica ranking only behind Mexico (Carlson, 1994).
There is anecdotal evidence of a reasonable amount of intra-Caribbean migration, but it has not been systematically documented.
Hawala is defined as an informal transfer system that operates outside the formal banking or financial channels.
In the calculations, the assumed skilled labor share of GDP is 0.3. This follows from the assumption that the highly educated belong to the top 20 percent of the income earners. The average income share of the top 20 percent is about 0.4 as estimated by Dollar and Kraay (2002). Consequently, the assumed share of skilled labor in GDP is: overall labor share in GDP *0.4 = 0.7*0.4=0.28.