2013).<sup>7</sup> The modified model accounts for labor supply that is not only differentiated by skill level, but also by country of origin, and that also considers remittance flows. This modified model has been earlier used for analyses of global migration (World Bank 2006; van der Mensbrugghe and Roland-Holst 2009).

Household demand behavior is modeled using the Constant Difference of Elasticities (CDE) demand system. Bilateral trade flows among the model regions are governed by a two-level Armington specification, differentiating between domestically produced goods and services and imports, and then between imports from different sources. Output is produced by different production streams differentiated by capital vintage. The model takes a vintage approach to capital in production so that production can occur with either ‘old capital’ or ‘new capital.’ The key difference being that ‘new capital’ is slightly more substitutable (or slightly less complementary) with skilled labor than ‘old capital’. Each production stream has an identical production structure based on a multi-nested Constant Elasticity of Substitution functional form, but with different technological parameters and substitution elasticities. At the top of the nest, a value-added bundle is combined with an intermediate inputs bundle under the Leontief technology assumption. Each component of the intermediate bundle is differentiated by place of production. That is, for a given type of intermediate input, there is imperfect substitutability between domestic and imported inputs, and then again between imported inputs from different source countries. The value added bundle is made up of unskilled labor being slightly substitutable with a capital and skilled labor bundle. Skilled labor and capital are complements.

Labor demand is by region of origin and adopts a three-level nesting structure following World Bank (2006) and van der Mensbrugghe and Roland-Holst (2009). At the top level, region _r_ ’s demand for composite labor of skill type _l_ in sector _i_ (Lr,l,i) is derived from cost-minimizing behavior subject to the technology constraints and is thus a function of output level and the relation of the top-level wage indices (Wr,l,i dual to Lr,l,i) to other relevant factor prices.

The Lr,l,i aggregates are CES composites of two second-level labor aggregates LOr,l,i,s, s  { _ntc, fbn_ }. The _ntc_ composites comprise native workers and international migrant workers classified as relatively close substitutes for native workers, while the _fbn_ composite comprises international migrant workers classified as less close substitutes for domestic labor. Specifically, for highincome host regions, migrants from other high-income regions are grouped together with native labor in the _ntc_ (native and close substitutes) nest, while the _fbn_ (other foreign-born) nest comprises migrants from other regions of origin – and vice versa for low- and middle-income host regions. For composite model regions, native workers are the native workers of the corresponding subregions while intra-region migrants are treated as a separate category in the same _ntc_ nest.

> 7 The standard model was most recently seen in Devarajan et al. (2015) and Ahmed et al. (2016).

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