International Migration, Increasing Returns, and Real Wages.

The present paper makes an exploratory attempt to investigate the impact of emigration on real wages in the presence of increasing returns to scale in production. The problem has been posed in the context of 2 by 2 model of international trade, where one of the commodities is a non-traded good and is subject to a type of increasing returns to scale that are external to the firm but internal to the industry. Analysis indicates that, in this instance, international emigration unambiguously increases real wages in the source country. This result, which seems to be at odds with the general presumption in this area, is quite robust to variations in the underlying assumptions behind the analysis.