Analytical solutions for the growth effects of wage taxes are compared for finite and infinite horizon versions of the neoclassical growth model. The notion that growth effects with long, but finite horizons are well approximated by infinite horizons is shown to be invalid, except in special cases. Generically, the assumptions made in the literature lead to a systematic overstatement of growth effects. Illustrative numerical results suggest that the discrepancies may be large. The economic performance of U.S. immigrants differs substantially from that of natives.
Immigrants cluster geographically and are often employed together.
Immigrant earnings differ by origin and time spent in the U.S., even after controlling for education and experience. A large fraction of immigrants eventually returns home, even to low-wage countries. This paper develops a theoretical framework consistent with these observations. If worker skills are complementary in production but not perfectly observable by firms, it is optimal to match workers by origin which serves as an indicator of skill. An important implication is that wages and the incentives for skill upgrading depend on the average skill level of a worker's ethnic group.