Geoscience Reference
In-Depth Information
additional number of new immigrants admitted in the Chicago region is not
sufficient to lower the tax rate, meaning that the increase in the number of local
immigrants beyond the national average does not generate the additional benefits
arising from tax cut that might be possible from a nation-wide increase in immigra-
tion. Instead, the welfare cost arising from smaller wages increase as more local
immigrants are newly admitted. Of course, there still exits the welfare benefits for
local residents because more immigrants generally stimulate higher economic
growth. However, as long as the share of local immigration is higher than national
average, this benefit is necessarily dominated by welfare cost.
However, the policy implications become complicated when immigration, pen-
sion reform, changing retirement age and skill acquisitions of the immigrant
children are considered—as well as the effects of differential in-migration rates
for Chicago and the Rest of the US. This is an area of research that needs far more
attention—especially for the development of optimal policies.
Endogenous Investment in Human Capital
6
11.4
The previous sections have highlighted an economy in which endowments of
human capital are assumed to remain fixed. In the Chicago case studies, one of
the strong assumptions was that the immigrants, while contributing to ameliorating
the negative impacts of an ageing population in the short and medium term present
problems in the longer term absent significant investment in human capital. A
complementary perspective might ask whether enhanced investment in the human
capital of the resident (non-immigrant) population might also contribute positively
to reducing the negative impacts of population ageing. The idea here is that a more
productive, albeit smaller workforce, could stem some of the anticipated decline in
gross product (see Fig.
11.7
for example) by increasing per capita and potentially
total output. In this section, some alternative strategies focused on Korea and the
Midwest of the US will be used to illustrate some of the options available, their
anticipated outcomes and the types of policy initiatives that might be required.
11.4.1 The Interregional CGE Model of Korea
An Interregional CGE Model of Korea (ICGE) was developed to analyze three
industrial sectors of two major Korean regions: the Seoul Metropolitan Area (SMA)
and the rest of Korea (ROK). The industrial sectors under consideration have
been classified as primary (i.e., agriculture, forestry, fishing, and mining),
manufacturing, and service industries. As to the regions, the SMA accounted for
roughly 47 % of the national population and over 80 % of all major enterprise
headquarters, while only accounting for 12 % of Korea's territory. The ICGE model
accounts for the behaviors of the economic agents of six producers, two regional
6
This section draws on Kim et al. (
2013
) and Kim and Hewings (
2013a
,
b
,
c
).
