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Prepared by Prachi Mishra.
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).
Davis and Weinstein (2002) simulate the welfare impact due to inflow of both labor and capital into the U.S.
Davis and Weinstein (2002) look at terms of trade effects of immigration into the U.S. If migration from the Caribbean results in relatively greater 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.
There is anecdotal evidence of a reasonable amount of intra-Caribbean migration, but it has not been systematically documented.
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 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.
Also, the U.S. census allows the calculation of adjusted emigration rates by restricting the sample to migrants only above a certain age at migration, to filter out those migrants who are likely to have received their education in the source country.