A General Equilibrium Model with Labor-Leisure and Domestic-Abroad Choice for Assessment of Labor Migration in a Small Open Economy

Bahalou, Marziyeh and Haqiqi, Iman (2016): A General Equilibrium Model with Labor-Leisure and Domestic-Abroad Choice for Assessment of Labor Migration in a Small Open Economy.

Abstract

This paper studies the macroeconomic and sectoral impacts of labor migration. We employ LMGE, a multi-sector, multi-labor Computable General Equilibrium model. We have distinguished between “skilled-labor” and “unskilled-labor” which may be employed in the domestic labor market or abroad. Labor supply is determined endogenously by leisure decision. The Household’s optimization behavior determines the demand functions for commodities and leisure. Finally, time allocation between leisure and work determines the labor supply. The model is calibrated based on the 2001 Labor Micro Consistent Matrix (L-MCM) of the Iranian Economy. The L-MCM is a modified Social Accounting Matrix (SAM) which includes 147 commodities and 99 production activities. We find that labor inflow increases GDP as well as the consumption of households. But, employment may not rise in some sectors. Skilled labor migration increases the employment of unskilled labors in Agriculture, Oil and Gas, and Energy, while it decreases unskilled employment in other sectors. We also find that the labor category with the highest population has a stronger effect on GDP and consumption. Our sensitivity analysis proves the robustness of the results.

• Item Type: MPRA Paper
• Language: English
• Keywords: Migration; Employment; General Equilibrium
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models; F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration

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Other Related References:

Haqiqi, I., & Bahalou, M. (2015). A General Equilibrium Analysis of Unskilled Labor Entry and Skilled Labor Exit in Iran, MPRA Paper 95781, University Library of Munich, Germany.

Haqiqi, I., & Manzoor, D. (2012). Environmental Impacts of Phasing out Energy Subsidies, MPRA Paper 95688, University Library of Munich, Germany, revised 2016.

Haqiqi, I., & Mortazavi Kakhaki, M. (2012). The Impact of Redistribution of Opportunities on Income Inequality: A CGE Approach, MPRA Paper 95819, University Library of Munich, Germany.

Haqiqi, I., Aghanazari, H., & Sharzei, G. (2013). Natural Resources Revenue Allocation: A Dynamic General Equilibrium Approach, MPRA Paper 95785, University Library of Munich, Germany.

Haqiqi, I., Manzoor, D., & Aghababaei, M. (2013). Impacts of Electricity Efficiency Improvements on Factors Market: A Computable General Equilibrium Approach, MPRA Paper 95825, University Library of Munich, Germany.

Manzoor, D., & Haqiqi, I. (2012). Impact of Energy Price Reform on Environmental Emissions; A Computable General Equilibrium Approach, MPRA Paper 95818, University Library of Munich, Germany.

Manzoor, D., Aghababaei, M., & Haqiqi, I. (2011). Rebound Effects Analysis of Electricity Efficiency Improvements in Iran: A Computable General Equilibrium Approach, MPRA Paper 95810, University Library of Munich, Germany.

Manzoor, D., Haqiqi, I. & Aghababaei, M. (2012). Decomposing Electricity Demand Elasticity in Iran: Computable General Equilibrium Approach, MPRA Paper 95817, University Library of Munich, Germany.

Manzoor, D., Haqiqi, I., & Aghababaei, M. (2013). Economic Impacts of Investment in the Electricity Industry: A CGE Comparison of Regulated and Free Markets, MPRA Paper 95823, University Library of Munich, Germany.

Manzoor, D., Haqiqi, I., & Aghababaei, M. (2012). Modeling Dutch Disease in the Economy of Iran: A Computable General Equilibrium Approach, MPRA Paper 95821, University Library of Munich, Germany.

Manzoor, D., Shahmoradi, A., & Haqiqi, I. (2010). An Assessment of the Impact of Reducing Implicit and Explicit Energy Subsidies in Iran; Using a Computable General Equilibrium Model Based on a Modified Micro Consistent Matrix, MPRA Paper 95808, University Library of Munich, Germany.

Shahmoradi, A., Haqiqi, I., & Zahedi, R. (2011). Impact Analysis of Energy Price Reform and Cash Subsidy Payment in Iran: A CGE Approach, MPRA Paper 95809, University Library of Munich, Germany.