"Endognous Growth and International Labor Migration:
The Case of a Small, Open Economy"

Kar-yiu Wong, University of Washington

forthcoming in Dynamics, Economic Growth, and International Trade, edited by Bjarne S. Jensen and Kar-yiu Wong, Ann Arbor: University of Michigan Press, 1997.

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Two of the major economic issues facing developing countries are economic growth and emigration of workers, especially the outflow of skilled workers. In the literature, growth and labor emigration are usually analyzed separately. This approach has limitations: It generally ignores the effects of labor emigration on growth, and it provides only static analysis on international labor migration.

This paper examines the relationship between economic growth and international labor migration. It begins with an economy in which workers are allowed to inherit past human capital and can acquire more human capital by devoting some of their time to education and training. For a closed economy, growth is determined endogenously by human capital accumulation and some government policies.

When international labor migration is allowed in a two-country model, individuals have the options of working and training either in the source country or in the host country. Depending on when and for how long individuals migrate, three different types of migration can be distinguished: (voluntary) temporary migration, permanent migration and brain drain. Instead of analyzing these three types of migration separately and treating them exogenously, as is usually done in the existing literature, this paper argues that they should be determined endogenously by the individuals, based on the economic conditions and government policies in the host and source countries.

This paper then examines how economic growth of the host country may affect the amount and the type of international migration, and the effects international migration may have on the growth and welfare of the host country. This paper also argues that international labor migration is a channel through which technology and knowledge can be transferred from one country to another.

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