A Pure Capital Market Complementarity between Immigrants and Natives

Adolfo Cristóbal Campoamor

Department of Economics, Loyola University in Andalusia, Sevilla, Spain.

DOI: 10.4236/me.2015.612118                

Abstract

This work presents a model aiming to evaluate the impact of rural-urban migration on the aggregate stock of loanable funds and investment by the urban population. Much higher investment costs for immigrants in cities prevent their acquisition of either human or physical capital. That is the reason why immigrants self-select as net lenders and affect urban labor earnings by means of the availability of new loanable funds for investment. This reduces the local interest rates and facilitates urban aggregate investment, especially by the new generations of natives. As a result of that, the aggregate labor income of natives increases unambiguously with the size of new immigration waves.

Keywords

Rural-Urban Migration, Investment Costs, Loanable Funds

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	Meng, X. and Zhang, D.D. (2010) Labor Market Impact of Large Scale Internal Migration on Chinese Urban “Native” Workers. Discussion Paper No. 5288, IZA, Bonn.
[2]	Huang, Y. (2010) Urbanization, Hukou System and Government Land Ownership: Effects on Rural Migrant Workers and on Rural and Urban Hukou Residents. Background Paper for the Global Development Outlook 2010, Shifting Wealth: Implications for Development. OECD Development Centre, Paris.
[3]	Borjas, G.J. (1995) The Economic Benefits from Immigration. The Journal of Economic Perspectives, 9, 3-22. http://dx.doi.org/10.1257/jep.9.2.3
[4]	Borjas, G.J. (2003) The Labor Demand Curve Is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market. Quarterly Journal of Economics, 118, 1335-1374. http://dx.doi.org/10.1162/003355303322552810
[5]	Lucas, R. (2004) Life Earnings and Rural Urban Migration. Journal of Political Economy, 112, 2.
[6]	Galor, O. and Zeira, J. (1993) Income Distribution and Macroeconomics. Review of Economic Studies, 60, 35-52. http://dx.doi.org/10.2307/2297811
[7]	Becker, G. and Tomes, N. (1979) An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility. Journal of Political Economy, 87, 1153-1189. http://dx.doi.org/10.1086/260831
[8]	Fan, C.S. and Stark, O. (2008) Rural-to-Urban Migration, Human Capital and Agglomeration. Journal of Economic Behavior & Organization, 68, 234-247. http://dx.doi.org/10.1016/j.jebo.2008.04.003
[9]	Vendryes, T. (2011) Migration Constraints and Development: Hukou and Capital Accumulation in China. China Economic Review, 22, 669-692. http://dx.doi.org/10.1016/j.chieco.2011.08.006
[10]	Heckman, J. (2005) China’s Human Capital Investment. China Economic Review, 16, 50-70. http://dx.doi.org/10.1016/j.chieco.2004.06.012
[11]	Naughton, B. (2007) The Chinese Economy: Transitions and Growth. MIT Press, Cambridge.