Francisco L. Rivera-Batiz

Increasing Returns, Monopolistic Competition, and Agglomeration Economies in Consumption and Production

Abstract This paper models agglomeration economies endogenously, showing explicitly the origins of the external effects involved. The emphasis is on how variety within the urban service sector is determined, within a market structure of monopolistic competition, and on how this diversity generates agglomeration economies. Through the consumption side, the urban agglomeration of households is shown to raise the number of consumer services locally available, shifting upwards household utility in the presence of tastes toward product diversity. Through the production side, an agglomeration of industrial producers raises the derived demand for producer or business services, increasing the scope for specialization and division of labor among these. This augments, in turn, the productivity of the industrial base, giving rise to external economies of scale.

Undocumented Workers in the Labor Market: An Analysis of the Earnings of Legal and Illegal Mexican Immigrants in the United States

Abstract. This paper studies the differences in earnings between Mexican legal and illegal immigrants in the United States. The analysis includes a cross-sectional examination of the wage differences between legal and undocumented workers as well as a longitudinal analysis examining the impact of legalization on the earnings of previously-undocumented workers. It is shown that the average hourly wage rate of male Mexican legal immigrants in the United States was 41.8% higher than that of undocumented workers while female legal immigrants earned 40.8% more. Though illegal immigrants have lower education and English proficiency, and a shorter period of residence in the United States, than legal immigrants, it is shown that differences in the observed characteristics of legal and illegal immigrants explain only 48% of the log-wage gap between male legal and illegal workers and 43% of the gap for women. An analysis of undocumented immigrants legalized after the 1986 U.S. immigration policy reform shows significant wage growth in the four years following legalization. These gains are due mostly to the change in legal status itself, not to changes in the characteristics of immigrants over time.

English language proficiency and the economic progress of immigrants

Abstract This paper studies the impact of English language proficiency on the wages of immigrants and second-generation persons in the U.S. using a data set providing test-based measures of English reading proficiency. The results indicate that English reading proficiency is a major factor constraining the wage rates received by immigrants.

The effects of direct foreign investment in the presence of increasing returns due to specialization

Abstract This paper studies the external effects generated by foreign capital inflows in a small open economy, modeling explicitly the nature of the increasing returns involved. The focus is on the role played by specialized, differentiated business services in manufacturing production and how foreign investment - through its ability to increase the extent of the market and induce greater specialization in producer services - enhances the productivity of nationally-owned industry and raises national welfare. The gains yielded by foreign capital inflows within this context are shown to operate whether the economy is at full-employment or under unemployment. In the latter case, it turns out to be critical that one consider not only the direct industrial employment created by foreign investment but also the induced secondary employment generated in the service sector.

Foreign capital and the contractionary impact of currency devaluation, with an application to Jamaica

Abstract This paper analyses the effects of currency devaluation in a small open economy host to foreign capital. Using a short-run macroeconomic model of the Krugman-Taylor (1978) type, it is shown that the presence of foreign capital provides devaluation with an additional contractionary mechanism, besides those already identified in the literature. The mechanism has its basis on the redistribution of income from wages to profits creasted by devaluation, which raises the foreign component of domestic income and tends to reduce GNP and GDP. The role of taxation policy in this context is examined. Finally, estimates of the relevant effects are offered for Jamaica, a small mineral exporter, showing that an expansionary effect of devaluation must rely on a relatively high value of the supply elasticity of non-mineral exports.

Unemployment and Attitudes Towards Foreigners in Germany

Germany has a long history of attracting immigrants. This is reflected in the substantial portion of the population accounted for by immigrants. In 1989, foreigners constituted between 7.3% and 7.9% of the population in West Germany.2 This figure, however, underestimates the inflows of population: In the German statistics, foreigners do not include foreign-born who are ethnic German or foreign-born who have received a German passport. In addition to the inflow of “foreigners,” there has been a large migration of ethnic Germans to West Germany since World War II (before 1950 the inflow was more than 12 million; between 1950 and 1988 it was 4.8 million; and between 1989 and 1990, 0.779 million). Therefore, the number of foreign-bora persons in Germany is comparatively high.3 This was conscious policy choice. Germany has a “law of return” for “ethnic” Germans and a long history of actively attracting “guestworkers.”4

Labor market effects of immigration in the United States and Europe

This paper examines the impact of immigrants on the income of various groups of resident workers in the United States and Europe. Our approach features the use of a production technology incorporating education, experience, and unskilled labor as inputs. This contrasts with the assumption used in earlier studies that native-born and immigrant labor are distinct inputs into production. We find that in both United States and European production, education, unskilled labor and experience are complementary inputs. Based on these results, simulations of the impact of immigration on residents are carried out. The absolute magnitude of these effects is found to be very small.

International Financial Liberalization, Corruption and Economic Growth

This paper examines the effects of capital account liberalization on the long-run growth of a developing economy. A general-equilibrium, endogenous growth model is constructed in which corruption forms an integral part of the governance system of the country. By undermining the profitability of innovations, corruption lowers the rate of return to capital and reduces the rate of technological change. The impact of international financial liberalization on long-run growth in this model can be either positive or negative. A drop in growth is obtained when the level of corruption is high enough to cause domestic rates of return to capital before liberalization to drop below those in the rest of the world. In this case, liberalization generates capital outflows, which act as a constraining force on innovation, reducing the rate of technological change and lowering output growth. On the other hand, if the level of corruption is sufficiently low, the capital account liberalization will serve as a boost to the countrys technical change and growth. Copyright 2001 by Blackwell Publishing Ltd.

EUROPE 1992 AND THE LIBERALIZATION OF DIRECT INVESTMENT FLOWS: SERVICES VERSUS MANUFACTURING

The following sections are included:IntroductionThe Industrial Sector and Specialization EconomiesThe Producer Services SectorThe Effects of Direct Foreign InvestmentConclusionsReferences

Economic Strain, Education and Attitudes Towards Foreigners in the European Union

Surveys carried out by the Eurobarometer survey series show a sharp increase in the negative attitudes of European citizens towards foreigners between 1988 and 2003, but a noticeable reversal of this trend between 2003 and 2008. This paper provides a statistical analysis of the determinants of attitudes towards foreigners and analyzes the factors associated with changes in anti‐foreigner sentiment among European citizens. The paper concludes that while rising racial prejudice accounts for a substantial portion of the trend in anti‐foreigner sentiment, economic conditions also matter, with economic strain leading to more negative attitudes. At the same time, educational attainment is shown to be a strong antidote to anti‐foreigner attitudes. Both rising average schooling and more positive attitudes towards foreigners by the highly educated have led to a reversal of the climbing anti‐immigrant sentiments in Europe. The paper discusses policy implications and the potential effects of the European economic collapse since 2008.