The economic impact of a general increase in skilled immigration

People and Place

Volumn 14, Issue 3, 2006, Pages 48-63

  Giesecke, James ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

COMPUTABLE GENERAL EQUILIBRIUM ANALYSIS; ECONOMIC IMPACT; IMMIGRATION; MIGRANT WORKER; SKILLED LABOR;

EID: 33845794024     PISSN: 10394788     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (25)

1. The paper is based on a report commissioned by the Productivity Commission for input to their recent commissioned study Economic Impacts of Migration and Population Growth, 2006. The views expressed in this paper are mine, and do not necessarily reflect those of the Commission. The original report is available on the Productivity Commission's website at 〈www.pc.gov.au/study/migrationandpopulation/consultancy/ monashmodel/index.html〉.
2. Graham Cuxson (Productivity Commission) and Tony Meagher (Centre of Policy Studies) calculated the impacts of this policy on labour-force participation rates, hours worked per worker, the share of the population of working age, and labour supply by skill type in the base and policy cases. This paper discusses the results of inputting the results of Cuxson and Meagher's calculations into MONASH. For details on Cuxson's calculations, see appendix F of Productivity Commission, Economic Impacts of Migration and Population Growth, Commonwealth of Australia, 2006.
3. For details on Meagher's calculations, see section A of J. Giesecke and T. Meagher, 'Modelling the economic impacts of migration and population growth', General Working Paper No. G-157, Centre of Policy Studies, Monash University, June 2006
4. The basecase includes a business-as-usual level of immigration. Hence the term 'incumbents' refers to the population present in 2005 and their descendents plus basecase 2005-2025 immigrants and their descendents.
5. Full details of MONASH's theoretical structure are described in P.B. Dixon and M.T. Rimmer, Dynamic general equilibrium modelling for forecasting and policy analysis, a practical guide and documentation of MONASH, Contributions to Economic Analysis 256, North-Holland Amsterdam, 2002.
6. The model is solved with the GEMPACK economic modelling software: see W.J. Harrison and K.R. Pearson 'Computing solutions for large general equilibrium models using GEMPACK', Computational Economics, vol. 9, 1996, pp. 83-127
7. The short-run relates to the first one to three years of the policy. The long-run effects of the policy begin to become apparent after around seven years.
8. In the basecase, the intake under the skilled immigration program is held at its 2004-05 level (78,000 persons per annum).
9. The employment rate (one minus the unemployment rate) is determined exogenously to reflect the acclimatisation path of the new arrivals. Broadly, skilled immigrants begin with employment rates slightly to below average, but over time, their employment rate rises slightly above average. See Productivity Commission, 2006, Computational Economics op. cit., p. 290
10. The 81 occupations are the Australian Bureau of Statistics'Australian Standard Classification of Occupations minor groups. Examples of these are occupations such as building and engineering professionals, medical practitioners, school teachers, printing tradespersons, plumbers, and structural construction tradespersons.
11. This is implemented via skill-specific CET (constant elasticity of transformation) functions.
12. Via industry-specific CES (constant elasticity of substitution) functions.
13. The qualification levels in Figure 4 correspond to the broad groups in Australian Bureau of Statistics, Australian Standard Classification of Education (ASCED), Commonwealth of Australia 2001
14. Defined as the ratio of the average capital rental rate to the investment price deflator.
15. Defined in Figure 7 as the ratio of the average rental price of capital to the gross domestic product (factor cost) deflator.
16. The residual term is the product of two ratios: the ratio of the gross national expenditure (ONE) deflator to an index of the GNE deflator calculated using gross domestic product (GDP) weights; and, the ratio of the GDP at-market prices deflator to the GDP at factor cost deflator. See Gieseeke and Meagher, 2006, Computational Economics op. cit., pp. 58-59
17. The deviation path for imports lies above the real GDP deviation throughout the simulation period because investment (the deviation in which is greater than the deviation in real GDP) is relatively import-intensive.
18. See B. Parmenter, 'The economics of immigration', Economic Papers, vol. 9, no. 2, 1990, pp. 39-50.
19. See M. Peter and G. Vcrikios, 'The effect of immigration on residents' incomes in Australia: some issues reconsidered', Australian Economic Review, vol. 2, 1996, pp. 171-188.
20. The measure subtracts from the policy scenario value of average per capita GNP (an average of the incomes of both the basecase population and the new arrivals) the basecase scenario value of average per capita GNP (the income of the basecase population only). Hence it compares the average incomes of two different populations, ' when, from a policy perspective, only the incomes of the basecase (incumbent) population matter.
21. Of the total value of the contributions to real GNP made by factors acting only to increase real GNP per capita, the participation rate accounts for 24 per cent of the total in 2005 and 54 per cent of the total in 2025.
22. The deviation in per capita rental income begins to peak slightly later than the peak in the rate of return deviation, for two reasons. First, the deviation in land rents grows throughout the simulation. Second, the deviation in net incumbent income is positive for the first sixteen years of the simulation. This allows an initial positive deviation in net incumbent savings which, in turn, adds to incumbent capital ownership in the policy case relative to the basecase.
23. B.G. Heady, G. Marks and M. Wooden, 'The structure and distribution of household wealth in Australia', Melbourne Institute Working Paper No. 12/04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, July 2004
24. B.G. Heady, G. Marks and M. Wooden, 'The structure and distribution of household wealth in Australia', Melbourne Institute Working Paper No. 12/04, ibid.
25. In Figure 3 the deviation in employment (wage-weighted) is approximately eight per cent higher than the deviation in employment (hours).