Does Immigration Promote the Investment of the Monopolistic Firm?

In the present paper, we examine the effect of increasing uncertainty of immigrants’ growth on the optimal timing of investment of a firm that has a monopolistic power over the labor market. It is revealed that when the uncertainty of immigrants’ growth is more than a threshold level, increasing uncertainty of immigrants’ growth accelerates the optimal timing of firms’ investment and enhances the economic growth, even if the uncertainty of immigrants’ growth is formulated by the geometric Brownian motion, which is in sharp contrast to the standard result that an increase in the uncertainty postpones the optimal timing.
With an increase in the immigrants over the past ten years, workforces in the host countries have been growing significantly to the extent that the immigrants represent 70% of the increase in the workforce in Europe, and 47% in the United States as OECD indicates.
In the present paper, we attempted to investigate the effect of increased uncertainty caused by the growing number of immigrants on the economic growth by combining the optimal stopping theory with the standard market theory. Our result is: When the uncertainty of immigrants’ growth is more than a threshold level, increasing uncertainty of immigrants’ growth accelerates the optimal timing of firms’ investment and enhances the economic growth.

Article by Yasunori Fujita from Keio University, Japan

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