Selective immigration policy and its impacts on Canada's native-born population: A general equilibrium analysis

This paper analyzes the effects of skilled immigration on the wage inequality between different education groups and the welfare of the incumbent population. I use a heterogenous agent overlapping generations model with endogenous discrete college education choice and calibrate it to match the features of 1981 Canadian economy. My quantitative analysis suggests that reducing the skilled immigration rate generates a rise in the growth rate of the wage inequality between college-educated and non-college workers. As skilled immigrants are admitted at a lower rate, more natives opt for college education in the economy. My welfare analysis shows that the incumbent young and college-educated population benefits more from a reduction in the skilled immigration rate. On the other hand, young generations with below college education face welfare losses. My results suggest that skilled immigration contributes positively to the overall welfare in the economy.