Essays on Migration, Remittance, and Welfare

This dissertation is comprised of two essays. The first essay analyzes the aggregate income shocks absorbing and welfare improving roles of remittances in emerging economies. I develop a model to derive testable implications for aggregate remittance behavior. Using a panel data set of 102 developing countries from 1975 to 2013 and the generalized method of moments estimator, I find that remittances respond to fluctuations in GDP and exchange rates in a manner consistent with income smoothing implications of the model. Using a variance-decomposition framework, I find that remittances, on average, absorb about 3.5 percent of fluctuations in GDP in all 102 countries, but about 6.1 percent of such fluctuations in Africa countries. To assess the welfare gains from remittances, I use a utility-based framework that allows for level-, growth-, and volatility-effects of remittances on income. Using country-level data, I find that the average welfare gains to a representative agent are equivalent to a 1.9 percent increase in consumption. About 15 percent of these gains arise from less volatile income and the rest arises from higher income and growth. Using household data from five countries, I find that the gains for poor households are about eleven-fold larger than the gains for rich households.

In the second essay, I examine the effects of immigration on the wages of U.S. native workers at the national level. Following a general equilibrium approach and exploiting the variation in labor supply shifts across industry, education, and experience specific skill-groups of workers, I find that immigrant workers are indeed imperfect substitutes for native workers. Using my estimates of the elasticity of substitution between workers of different skill groups, I find that immigration had much smaller negative effects on the wages of unskilled native workers than what is reported in Borjas (2003) and Ottaviano and Peri (2012). Immigration (1990-2014) reduced the wages of native workers with no high school degree by about 0.3 percent while it increased the wages of average native workers by about 0.6 percent. In the paper, I document the importance of consideration of industry (occupation) specific skill groups of workers in addition to conventionally used education and experience groups while estimating the substitutability between immigrant and native workers and, thus, evaluating the effects of immigration on wages of native workers.