International Migration, Profit-Sharing and National Welfare

Abstract

We develop a two-country model of international migration with unemployment in order to examine the welfare effects of a profit-sharing scheme implemented in the host country. Assuming the absence of international capital mobility, our results show that an increase in the rate of profit-sharing has the following effects. (1) It reduces the wages of domestic and migrant workers who compete with each other for employment; (2) it increases the number of immigrants in the host country; (3) it lowers unemployment rates in both countries; (4) it raises the profits of domestic firms; and (5) it increases domestic and foreign welfare.