We argue that the narrative of variety-induced gains from trade in differentiated goods needs revision. If producing differentiated varieties of a good requires differentiated skills and if the work force is heterogeneous in these skills, then firms are likely to have monopsony power. We show...

We develop a model that combines monopolistic competition on goods markets with skill-type heterogeneity on the labor market to analyze the effects of trade and migration on welfare and inequality. Skill-type heterogeneity and partial specificity to firms' endogenously chosen skill requirements...

This paper explores the effects of high skilled immigration to a host country with unionized low skilled labor and an unemployment insurance scheme. We show that such immigration can create a negative immigration surplus due to adverse effects on low skilled employment, provided that fiscal...

We analyse how institutional and political decisions are intertwined. Citizens who differ in their mobility and ability vote first on labour market integration and afterwards on education policy. The institutional decision on integration influences the succeeding education policy. More...

The pay-as-you-go social security system, which suffers from dwindling labor force, can benefit from immigrants with birth rates that exceed the native-born birth rates in the host country. Thus, a social security system provides effectively an incentive to liberalize migration policy. The paper...

This paper examines the interaction between migration policies of the host and source countries in the context of a model of guest-worker migration. For the host, the objective is to provide low-cost labor for its employers while avoiding illegal immigration. It optimizes over these objectives...

Recent European legislation on immigration has revealed a particular paradox on migration policies. On the one hand, the trend of recent legislation points to the increasing closure of frontiers (OECD 1999, 2001,2004), trying to limit the immigrants' stock. On the other hand, there is an...