Optimal capital requirements for admission of business immigrants in the long run

Abstract

The Solow‐Swan neoclassical growth model is used to analyse the long‐run effect of business immigration on a host country. Business immigration is treated as increasing both labour and capital of the host country. The optimal immigration rate which maximizes steady‐state per capita consumption is derived. We investigate how the optimal rule is affected by the economy's structural parameters and how it changes under the Golden Rule of Accumulation. The policy implications are that labour unions should support business immigration if the government practices optimal immigration policy and the saving rate is exogenous. However, they should object to business immigration if the government optimizes with respect to the saving rate alone or together with the immigration rate.

Notes

School of Economics and Finance, University of Hong Kong, and Department of Economics, University of Canterbury.