A Small Open Economy Analysis of Migration
The standard small-open-economy framework is extended to incorporate migration and job search. The model has a dynamic optimization setup with migration costs, where a simple mechanism of job search interacts with the migration decision. The balanced-growth population size is undetermined in this model. However, when conditioned on the current population size, the expected long-run population is finite. The developed framework is used to analyze, both theoretically and quantitatively, the effects of the ongoing immigration influx to Israel from the C.I.S., treated as exogenous. The outcome of the model is a set of paths for endogenous emigration, domestic population size, and unemployment.